SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN ACCESS TECHNOLOGIES INC.
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(Name of small business issuer in its charter)
Florida 3661 59-3410234
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(State of Incorporation) (Primary Standard Industrial (IRS Employer I.D. Number)
Classification Number)
37 Skyline Drive, Suite 1101, Lake Mary FL 32746 (407) 333-1446
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(Address and telephone number of principal executive offices)
37 Skyline Drive, Suite 1101, Lake Mary FL 32746 (407) 333-1446
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(Address of principal place of business)
John Presley, President
American Access Technologies, Inc.
37 Skyline Drive, Suite 1101
Lake Mary, FL 32746
(407) 333-1446
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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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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================================
Title of each class of Amount of shares to Proposed maximum offer Proposed maximum Amount of
securities to be registered be registered price per unit (1) aggregate offering price registration fee
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<S> <C> <C> <C> <C>
Common stock 5,085,404 $3.50 $17,798,914 $4698.91
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</TABLE>
(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 May 26, 2000.
Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered such indeterminate number of additional shares of common stock
as may be issuable upon the exercise of the common stock purchase warrants
described herein pursuant to the anti-dilution provisions thereof.
American Access hereby amends the registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Acts of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- - - - - - - - - -
[GRAPHIC OMITTED] | The date of this |
| Prospectus is |
| June 6, 2000 |
- - - - - - - - - -
American Access common
stock is traded on the
NASDAQ Small Cap Market under
the symbol AATK
5,085,404 Shares of Common Stock
These shares of common stock are being offered by Crescent International Ltd.,
one of our current shareholders. We issued the shares, or reserved the shares
for issuance, to Crescent in connection with investments made in American Access
in May 2000.
The selling shareholder may sell the shares covered by this Prospectus on the
Nasdaq Stock Market and in ordinary brokerage transactions, in negotiated
transactions or otherwise, at prevailing market prices at the time of sale or at
negotiated prices, and may engage a broker or a dealer to sell the shares. For
additional information, you should refer to the Plan of Distribution section of
this Prospectus. The selling shareholder may be deemed to be an underwriter
within the meaning of the Securities Act in connection with the sale of its
shares. We will not receive any proceeds from the sale of the shares, but will
bear the costs relating to the registration of the shares.
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Investing in the common stock involves a high degree of risk. You
should consider carefully the risk factors beginning on Page 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
Our company
American Access manufactures, develops and sells products that place
telecommunications equipment in office buildings, hospitals, convention centers,
schools, and any building in need of an efficient system to route information.
Our zone cabling termination cabinets are used to house and mount
telecommunications equipment in ceilings, floors and in modular office
furniture. Cables and wires that allow computers, telephones and fax machines to
work are also plugged into this cabinet, saving users over time up to 70% of the
cost to install, move, add and change the office layout. Our wholly-owned
subsidiary, Omega Metals, Inc. is a metal fabricating company with the
capabilities for fine finish work, such as powder coating. We are building a
Business-to-Business e-commerce site to market telecommunications products on
the Internet.
RISK FACTORS
Except for historical information, the information in this
prospectus and in our SEC reports contains forward-looking statements about our
expected future business and performance. Our actual operating results and
financial performance may prove to be very different from what we might have
predicted as of the date of this prospectus.
We have a short operating history by which you can evaluate our
business and prospects
We were incorporated in October 1996 and have a limited operating
history from which to evaluate our business and prospects. Our operating results
in the future will be subject to all of the risks and uncertainties inherent in
the development and maturation of a business. We have only owned Omega Metals
since we acquired it in November 1998.
Our products may not be commercially successful
To date, we have only sold limited amounts of our products in the
commercial marketplace. To be successful, we will have to sell more of our
products. However, for several reasons, we may not be able to generate
increasing sales. Potential customers may not be able to see the advantage of
using our products over the traditional way of cabling telecommunications
products. Our competitors could introduce products that are more economical to
use, or that have better features, making them more attractive to buyers.
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Our competitors may be better able to market their products
The markets for our products are highly competitive and subject to
rapid change. These markets are sensitive to the introduction of new products
and the enhancement of existing ones. Industry participants also aggressively
market their products.
Competitors may be developing technologies or products which may be
similar or superior to ours. These competitors may have a better ability to
market their products.
In order to effectively compete, we need to make our business grow .
By generating greater revenues, we will have the resources to develop new
products in response to new technology. We will be able to meet customer
demands, and to sell products in a broad distribution channel. We cannot assure
that we will be able to grow sufficiently to compete effectively in this
marketplace.
We have had a history of operating losses and this may continue to be the case
Our expenses are currently greater than our revenues. Our ability to
operate profitably depends on increasing our sales and achieving sufficient
gross profit margins. We cannot assure you that we will operate profitably.
If we lose our key personnel, our business and prospects may be adversely
affected
We only have a few key officers and directors. If any of them should
leave our company, this could have an adverse effect on our business and
prospects.
Competitors may copy our products
Although we have received patents in the United States on aspects of
our products, competitors may not be prevented from developing products
substantially equivalent to ours. Patent litigation entails high costs and can
take a long time. Therefore, our patent position may not prevent competition.
Additional shares could depress our stock price
If our stockholders sell substantial amounts of our common stock in
the public market (including shares issued upon the exercise of outstanding
warrants and shares sold in our May 2000, stock purchase agreement) , the market
price of our common stock could fall.
The arrangement with the selling shareholder could cause dilution of existing
shareholders
As described in "The Selling Shareholder", we have entered into a
Stock Purchase Agreement with Crescent International Ltd. under which we can, at
our option, issue shares of our Common Stock to Crescent for a total purchase
price of $15,000,000. The purchase price per share under the Agreement is equal
to 92% to the average of the lowest three consecutive bid prices of our Common
Stock during the 22 trading days preceding the date of issuance. To date, we
have issued 406,278 shares under this Agreement, for a total purchase price of
$1,900,000.
In addition to the built-in discount, the transaction may be
dilutive of existing shareholders if the market price of the Common Stock
decreases, because the purchase price under the Stock Purchase Agreement
decreases as well. For example, if the market price were to fall to $3.00 per
share, and the Company were to elect to issue additional shares under the
Agreement, the purchase price per share would be $2.76 per share, and the
maximum number of shares issuable for the remaining would be 4,746,377.
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In addition, Crescent International Ltd. holds two warrants issued
in connection with the Stock Purchase Agreement. The first is a five-year
"incentive warrant" that permits Crescent International Ltd. to purchase up to
128,000 shares at an exercise price of $7.0149 per share. The other warrant, an
"early put warrant", permits Crescent to purchase shares at $.01 per share if
the market price of the Common Stock is less than $4.6766 per share on the date
the Registration Statement (of which this prospectus is a part) is declared
effective by the Securities and Exchange Commission. The number of shares
issuable under the early put warrant is based on a formula designed to ensure
that the value of the 406,278 shares issued under the Stock Purchase Agreement
when increased by the value of any shares issuable upon exercise of the warrant,
equals $1,900,000 on the date the Registration Statement (of which this
prospectus is a part) is declared effective by the Securities and Exchange
Commission. Thus, for example, if the market price of the Company's Common Stock
were to decline by 25% from the original $4.6766 purchase price, to a market
price of $3.507 per share, the warrant would be exercisable to purchase 135,496
shares. (See "The Selling Shareholder").
Under the terms of the Stock Purchase Agreement, the Selling
Shareholder may not acquire more than 9.9% of our outstanding shares of Common
Stock. The issuance of additional shares of Common Stock to Crescent
International, Ltd., as well as subsequent sales of shares of Common Stock in
the open market, may cause the market price of the Commons Stock to fall; and
might impair our ability to raise additional capital through sales of equity or
equity-related securities.
Potential lack of liquidity
Our common stock trades on the Nasdaq Small Cap Stock Market. Small
cap stocks generally attract a smaller number of investment bankers and a less
active public market, and may be subject to significant volatility
USE OF PROCEEDS
The shares being sold with this prospectus are being sold by selling
security holders. American Access will not receive the proceeds of any sales.
MARKET FOR SECURITIES
American Access' common stock is traded on the Nasdaq Stock Market,
under the symbol AATK. Prior to April 13, 1999, the company's common stock was
traded in the over-the-counter market included in the NASD Electronic Bulletin
Board under the symbol AATK.
The following is the range of high and low bid prices for the
company's common stock for the periods indicated:
<TABLE>
<CAPTION>
High Low High Low High Low
Year Ending Year Ending Year Ending
December 31, 1998 December 31, 1999 December 31, 2000
------------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $12.25 $11.00 $21.50 $17.25 $17.00 $5.75
2nd Quarter $18.50 $12.25 $22.75 $17.5625 *
3rd Quarter $21.50 $19.00 $18.875 $ 6.00 *
4th Quarter $20.50 $17.75 $ 8.25 $ 4.25 *
</TABLE>
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The above represents inter-dealer quotations which do not include
retail mark-ups, markdowns, or commissions, and do not necessarily represent
actual transactions. About 2,350 investors were record holders of American
Access common stock on May 15, 2000.
DIVIDEND POLICY
American Access has not paid any dividends on its common stock, and
it is not anticipated that any dividends will be paid in the foreseeable future.
The Board of Directors intends to follow a policy of retaining earnings, if any,
to finance the growth of the company. The declaration and payment of dividends
in the future will be determined by the Board of Directors in light of
conditions then existing, including the company's earnings, financial condition,
capital requirements and other factors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Overview
American Access was formed in October 1996 to acquire the assets of Vic
Murray and Associates, Inc. American Assets purchased VMA to obtain the pending
patent for the Zone Cabling Termination Cabinet, which the company has since
developed and marketed.
Shortly after the acquisition of VMA, American Access decided to
discontinue the operations and business activities of VMA, which was a
manufacturer's representative of various products. Today, we develop, design,
and manufacture products for the telecommunications industry. Our cabling
cabinets store and efficiently distribute the wiring for computer, telephone,
and television systems installed in office buildings, hospitals, schools,
conventions centers, and any building that needs an efficient system to route
information.
In November 1998, American Access acquired Omega Metals, Inc., a
precision sheet metal fabrication operation, which has and will continue to
provide product prototyping, manufacturing, assembling and packaging operations
to the company. Omega operates as a wholly owned subsidiary with independent
sales and manufacturing . The company for $80,000 acquired six acres adjacent to
Omega's north Florida site for a plant expansion to 67,500 sq. ft. The capital
cost of $450,000 to complete this expansion, was funded from cash flows and
working capital.
The company also acquired in August, 1999 the assets of Genco, Inc., a
manufacturer of generator covers. A powder coating system was added at the
expanded plant, to facilitate custom coating jobs.
The company also in January 2000 entered into a letter agreement with
Vulcan Microsystems, Inc. for a joint venture in which Vulcan would contribute
its expertise in building a state-of-the-art Business to Business e-commerce
portal, which would facilitate the distribution of zone cabling products and
other manufacturers' products used in telecommunications projects. The terms of
the agreement are the subject of ongoing negotiation. The Company has utilized
other available resources to maintain the project schedule, in which the site
debuts in summer, 2000.
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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 report.
RESULTS OF OPERATIONS
Fiscal 1999 compared to Fiscal 1998
Revenues
Revenues for the year ended December 31, 1999 increased by $311,479 to
$5,247,683 as compared to $4,936,204 for the year ended December 31, 1998. Sales
of zone cabling termination cabinets more than doubled in 1999.
Costs and Expenses
Direct costs for the year ended December 31, 1999 represented 43.8% of
revenues. For the year ended December 31, 1998 these costs represented 45.7% of
revenues.
Compensation and related benefits expenses decreased by $280,971 to
$1,134,502 for the year ended December 31, 1999. These costs totaled $1,415,473
for the year ended December 31, 1998. There was an increase in staff and related
expenses, but this was more than offset by the reduction of year end bonus paid
to the former owner of Omega Metals Inc. of $782,300 in 1998.
Selling, general and administrative expenses for the year ended
December 31, 1999 amounted to $2,701,705. This was an increase of $1,040,226
over the December 31, 1998 amount of $1,661,479. This increase was a result of
the company's continuing effort to market and sell its products. Marketing,
trade shows, commissions and sales representative costs increased approximately
$300,000. The office facilities and operations were also expanded in 1999. This
expansion increased office rent, insurance and office supplies by approximately
$225,000. There were also increased costs of approximately $325,000 in legal and
accounting, amortization, shop supplies and freight.
Stock-based compensation was $616,000 for the year ended December 31,
1999. Notes 13 and 14 to the consolidated financial statements provide a
detailed explanation of this item. The company did not have any stock-based
compensation in 1998.
Quarter ended March 31 2000 compared to quarter ended March 31, 1999
Revenues for the three months ended March 31, 2000 increased by
$220,354 or 17.1% to $1,510,416 as compared to $1,290,062 for the three months
ended March 31, 1999. American Access Technologies Inc. and Omega Metal Inc.
both had increases in revenues in the first quarter ended March 31, 2000.
COSTS AND EXPENSES
Direct costs represent the cost incurred by the Company to have its
products manufactured and assembled. These costs represented 50.06% of revenues
for the three months ended March 31,2000, and 38.9% of revenues for the three
months ended March 31, 1999. The increase in the direct costs is mainly
attributed to sales of generator enclosures representing 45% of the parent's
revenues in the first quarter. These sales were for fulfillment of the previous
owner Genco Inc. commitments and quotes. Future sales of these enclosures should
result in greater profit margins.
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Selling, general and administrative expenses increased by $391,035 to
$1,067,611 for the three months ended March 31, 2000 compared to $676,576 for
the three months ended March 31, 1999. This increase was the result of costs
associated with the continued development growth of the company including
marketing and promotion, management costs, and professional fees associated with
the required filings. Approximately $200,000 of this increase was for consulting
costs in connection with the development of a business- to-business e-commerce
Internet portal. The site is being developed under a joint venture arrangement
with Vulcan Microsystems, which is further discussed in Part II, Other
Information.
LIQUIDITY AND CAPITAL RESOURCES
Net cash [used] by operating activities was [$1,201,041] and [$391,889]
for the years ended December 31, 1999 and 1998 respectively. Net cash [used] by
operating activities during the year ended December 31, 1999 primarily consisted
of net losses, increases in accounts receivables, inventories and prepaid
expenses, offset by depreciation and amortization, common stock and warrants
issued for services, realized/unrealized losses on investments and increases in
accounts payable. Net cash [used] by operating activities during the year ended
December 31, 1998 primarily consisted of net losses, increase in accounts
receivable, offset by depreciation and amortization, gains on sales of
investments and equipment, decrease in income tax refund receivable and
decreases in inventories.
Net cash provided by investing activities for the year ended December
31, 1999 was $408,407. Funds provided mainly consisted of sales of investments
of $1,791,871 less amounts used for the acquisition of property and equipment
totaling $1,354,610. In the preceding year ended December 31, 1998, net cash
[used] by investing activities was [$3,285,999]. The company used $85,635 to
purchase equipment, $4,281,803 for the acquisition of investments and $500,000
in notes receivable, offset by funds provided from the sale of investments of
$1,450,073.
Net cash provided by financing activities was $868,967 for the year
ended December 31, 1999, and $3,677,531 for the year ended December 31, 1998. In
the year ended December 31, 1999, the company received proceeds of $1,973,000
from the sale of common stock. The company utilized $222,190 to reduce the line
of credit and $881,843 for the purchase of treasury stock. For the year ended
December 31, 1998, the company received proceeds of $480,000 from the sale of
common stock, $4,262,180 from the sale of preferred stock, $296,002 from the
line of credit. The company utilized $100,000 to reduce notes payable,
$1,256,625 in payments on capital lease obligations, which eliminated high
interest rates up to 14%, and the remaining amounts were used to finance the
company's business operations and investing activities.
The company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, 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, in addition to bank
borrowing, the exercise of warrants and the purchase of common stock, will be
sufficient to meet its basic capital and liquidity needs for the next 12 months,
but additional capital is being sought to fund the operations of new projects,
such as the joint venture the company entered in January for the construction
and maintenance of a B2B portal. The company also believes that cash required to
fulfill purchase orders will be available through bank borrowing or factoring,
if required. The company's primary customers are substantial corporations with
credit ratings that will support such credit arrangements.
Quarter ended March 31 2000 compared to quarter ended March 31, 1999
The Company's operating activities utilized cash of $547,358 during the three
months ended March 31, 2000 as compared to utilizing cash of $48,212 during the
three months ended March 31, 1999.
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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 a
source of funds for operating activities. The Company believes that revenues in
addition to existing cash and cash equivalents from proceeds of its May 2
private offering, will be sufficient to meet its capital and liquidity needs for
the next 12 months. The Company also believes that cash required to fulfill
purchase orders will be available through bank borrowings or factoring, if
required. The company's primary customers are substantial corporations with
credit ratings that will support such credit arrangements.
Management's plans include the following:
o Although sales of zone cabling products more than doubled in 1999, over
1998, the company posted a net loss in 1999 that we attribute to three
factors: an inadequate sales and marketing effort; a training school
that would ultimately prove to be unprofitable; a system of
compensation by stock and warrants for services that is not the most
beneficial to the company or to the employee. We have already made
changes in operations to rectify our net loss.
o The company has revamped its sales strategy. We have replaced a costly
campaign that was based solely on channel distribution. Our new team of
regional managers and project managers, coordinated by a vice president
of sales, spend more field time working as support for our
distributors, Value Added Resellers, and end-users. We determined that
our distributors and end-users knew little about the value of using our
products, so we put a premium on educating our team and our
representatives in the merits of zone cabling. We realize that our
competition is actually `the old way of doing things'. Part of our new
strategy is education about the benefits of zone cabling over
traditional home run cabling.
o We will also market through our B2B e-commerce portal, currently under
construction.
o Our President and Vice President of Sales continue to meet with Herman
Miller Inc. to ensure a smooth and effective rollout of our joint
marketing project.
o The company has streamlined bookkeeping procedures and taken its loss
in 1999 for endeavors that may have been good ideas, but that we do not
think would be ultimately profitable, such as the BICSI training
school.
o The company completed all capital expenditures in 1999. We have moved
from an acquisition and expansion phase into one of focused growth for
sales and revenue. Our purchase and expansion of Omega Metals, our
acquisition of the assets of Genco, Inc., our implementation of a
powder coating system all are in place. We remain virtually debt free
and have the capacity for the manufacture of American Access products
and other metal fabricating jobs with potential revenues three times
our current revenues. The combined operation provides a greater
diversification of facilities and equipment
o American Access in 2000 implemented a Qualified Stock Option Incentive
Plan for Employees and Directors. The plan must be approved by
shareholders at the 2000 annual meeting. The plan eliminates some
audited treatment of stock warrants that contributed to our loss in
1999. It is also more beneficial to the employee as incentive to make
the company grow profitably.
o The company has entered into a Stock Placement Agreement through which
it can acquire additional working capital as needed. Between October 1,
1998 and December 10, 1998 the company entered a $5 million private
placement of its Series A 10% Senior Convertible Preferred Stock. All
shares as of April 11, 2000 have been converted to common stock and
sold on the open market. 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
young companies in general.
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SUBSEQUENT EVENTS
During the first quarter of 2000, the company entered into a joint
venture arrangement with Vulcan Microsystems for the creation of a
business-to-business e-commerce Internet site. The terms of the agreement are
subject to ongoing negotiation, but the Company is utilizing other resources to
ensure that the site is up according to schedule.
OUR BUSINESS
Our background
American Access founder, Victor E. Murray, began working in the
electrical, cable and industrial supply business in 1945, forming strong
relationships with electrical engineers, electrical contractors, municipalities,
power companies and distribution companies, eventually opening his own company
in 1977.
Murray seized an opportunity to evaluate industry needs after the
break-up of the AT&T monopoly, when thousands of technology, service and
equipment companies began to develop revolutionary telecommunications products
and services. Simultaneously, the computer industry rapidly evolved, creating
even more opportunities.
Murray decided to specialize in 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 telecommunications. American Access is gaining a
reputation as an innovator in the field of wire management, having consulted on,
designed and supplied product for a wide range of building projects..
We acquired the assets of Omega Metals, Inc., in November 1998. Omega
is a wholly-owned subsidiary that manufactures our zone cabling cabinets along
with independent metal fabricating jobs.
In August, 1999, we purchased the assets of Genco, Inc., a generator
cover manufacturer.
In January 2000, American Access expanded its traditional marketing
focus by entering into a joint venture with Vulcan Microsystems, Inc. to create
a Business to Business e-commerce portal. We plan to market telecommunications
systems on the Internet, as a distributor for companies that manufacture
products related to cabling infrastructure. On our site, AATK.com, architects,
engineers, and systems designers eventually should be able to facilitate many
telecommunications projects. Our plan included the ability for contractors to
bid jobs. Systems, which may or may not include zone cabling, would be able to
be ordered from our B2B site, building more profit into our company. A
preliminary site is scheduled to debut in June 2000.
Our powder coating system has been operational since March 2000, and is
expanding our customer base by allowing us to offer a state-of-the-art finish to
metal fabricating jobs.
We have a partnership agreement with Herman Miller, Inc., a leading
manufacturer of modular office furniture systems. We developed zone cabling
solutions encased in select units of Herman Miller furniture. Herman Miller
sells the concept of zone cable distribution to markets it developed over the
past 30 years, which is an immediate entrance for American Access into the
boardrooms of the Fortune 1000 companies. The roll-out with Herman Miller began
April 12, 2000.
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Industry leaders are now addressing the need for new and faster cabling
methods and equipment. These companies, industry associations and individual
experts have joined together to create revolutionary standards. Companies such
as Lucent Technologies, Sun Microsystems, Ortronics, AT&T, Krone, Belden,
Siecor, Hubbell, Leviton Telcom, and American Access Technologies, Inc., have
joined with various organizations that set industry standards. Together they are
developing and introducing innovations in wire/cabling design and routing. This
partnership is providing for efficient transmission of telecommunication signals
into the zone in which it is needed. The method of zone cabling is called Open
Office Architecture.
Open Office Architecture is endorsed under Telecommunications Systems
Bulletin 75, by the American National Standards Institute, the Telephone
Industry Association and the Electrical Industry Association. The purpose of
this design is to locate the bundled cables closer to the individual
workstations.
Background for product development
Until now, wire management systems have not evolved as rapidly as
the telecommunications industry. Industry leaders began to realize that with the
advent of technologically advanced equipment, systems, new methods of
conveyance, and the demand for connection to the Internet the established
methods of wiring and wire management were outdated.
Telecommunication wiring originates outside the building and is
routed into the building through either an underground, direct buried or aerial
facility. The wiring is then distributed to each floor of a building through
areas known as telecommunications closets. From the closets, all wiring is
sorted and distributed as needed to all the workers' stations on that floor.
Every workstation, where phones, computers and fax machines are located, is
required to have two horizontal cables running from it to the telecommunications
closet. This traditional method of wiring is called star topology. It provides
very little flexibility when wires and cables need to be rerouted as additions
or changes are made at a workstation.
The telecommunications closet is located in a common area within
each floor. The cables distributed from it could be as far as 295 ft. (90
meters) away from each workstation. For voice wiring, the maximum main cable
length is 800 meters. This illustrates that a massive amount of wire is required
for telecommunications. It is not unusual for a 40-story building to have
200-300 miles of wiring. To meet the many industry standards and regulations,
the old method of cable distribution in an office environment requires very
expensive modular furniture to help route the miles of wires. In some
applications, even modular furniture may not meet industry guidelines. American
Access products meet industry standards and are specially designed solutions to
cabling problems.
Today, we all rely on staying in touch. People communicate more with
computers, phones and fax machines. To accommodate the growing
telecommunications industry, more cables and wires must be run to carry voice,
data, and video images faster, cheaper, cleaner, in longer runs, and using less
space. At the same time, future additions and changes to a system must be
considered. Old methods of wiring require that a new line of cable be run from
the user's desk, or workstation, back to the telecommunications closet for each
and every change. Our enclosure, the Zone Cabling Termination Cabinet,
eliminates the need for those new lines by placing the telecommunications
equipment close to the workstation and in an inconspicuous location.
Industry leaders have realized the need for new cabling methods and
equipment. These companies, industry associations, and individual experts have
joined to create revolutionary standards. Companies such as Lucent Technologies,
Ortronics, AT&T, Krone, Belden, Siecor, Hubbell, Leviton Telcom, Superior
Modular Products and American Access Technologies, Inc. have joined with various
organizations that set industry standards. Together we are developing and
introducing innovations in wire/cabling design and routing. This partnership
provides for efficient transmission of telecommunication signals into the zone
in a building where it is needed. This zone cabling is called Open Office
Architecture.
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Zone cabling is used in open office areas, hotels, convention
centers, entertainment and theme parks, hospitals, government buildings,
schools, industrial complexes, data centers, banks, and any other area where a
flexible cable layout is required to support a changing or growing network for
communicating information.
AMERICAN ACCESS PRODUCTS
The American Access product line capitalizes on the need for zone
cabling solutions. Our cabinets provide efficiency and flexibility, and are the
only fire-rated and Underwriter's Laboratories approved systems in the industry.
In 1996, we consulted with many of the leading telecommunications
specialists and engineers. All were in agreement. No one had developed a device
that met all of the industry standards and could effectively and efficiently be
used to house and route telecommunications cables and wires. However, some sort
of device was absolutely required to complete the Open Office Architecture
design. American Access researched and verified that no such enclosure existed.
In fact, our research revealed that no one was even developing such a device.
We designed an enclosure to house and distribute telecommunications
wiring and equipment in buildings. This enclosure is called a Zone Cabling
Termination Cabinet. We currently hold a patent pending for this cabinet that
may be installed in the ceiling, above the ceiling, on or in the wall or in the
floor structure. The ceiling unit fits into the suspended ceiling, providing
easy access to the wires and cables running to each workstation. Less cable is
used. Installation is easier and quicker, causing fewer disruptions and down
time for office workers. The floor and modular furniture units provide the same
solution as our ceiling unit installations. Our modular furniture unit is named
EthoCom.
We believe that our products are the only enclosures manufactured
that can efficiently house telecommunications cables, distribute wiring to
workstations, and store unused cabling until it is needed, while complying with
all industry and government guidelines, standards and regulations. The cabinets
can be used for all low voltage wiring systems, including voice, data, video,
building controls, security, and fire/life/safety wiring systems. The cabinet
was designed to accommodate all manufacturers' equipment.
Product application
The zone cabling cabinet will reduce the amount of wire running from
the workstation to the telecommunications closet. The wiring will now run from
the workstation to our cabinet, which is readily accessible through the ceiling
grid system, the floor, or through the modular furniture. The cabinet is
designed to accommodate all of the newly developed Open Office Architecture
wiring equipment. This ceiling enclosure is mounted in a standard 2ft. x 4ft.
ceiling grid system, but is physically attached to the building structure to
support the weight of the equipment installed within the enclosure. The
equipment is reached through a door that opens from below the ceiling for easy
maintenance, installations and changes. Specially trained, highly-paid
technicians will be required for far fewer hours to make those changes when
systems grow or are reconfigured. The new equipment just plugs in, creating less
down time and less loss of productivity. Cables are easily re-routed and reused.
Less cable is used, reducing the cost of materials and labor. Money is saved
with the initial installation and when systems are changed.
The cabinets make better use of telecommunications closets, reducing
the mass of cables to be run throughout the building. Building owners are then
provided more usable space that generates rent.
13
<PAGE>
Product standards
The standards, regulations and various industry association
guidelines are very specific. They address the components of the product, the
product itself, the installation, and every aspect that may affect the safety of
people or property, including:
o wire and cable lengths and widths, the minimum and maximum allowed. For
example, to wire for a telephone system, the maximum main cable length is
800 meters;
o ability of the product to withstand heat and fire damage;
o markings. Each enclosure must be marked with the manufacturer's name,
trademark, or other descriptive marking. An enclosure may also be
designated with environmental ratings, such as rainproof, watertight,
corrosion resistant and dust-tight;
o number of cables needed to run from the telecommunications closet to the
workstation;
o voltage and grounding concerns; and
o the ability of the product to function as advertised.
American Access believes its Zone Cabling Termination Cabinet is
the only product that meets the standards and requirements of the
telecommunications industry, including Building Industrial Consulting Services
International, National Electric Code regulations NEC 300-22 B & C, American
National Standards Institute/Telephone Industry Association/Electrical Industry
Association publication 568 A, as well as the zone cabling guidelines as
specified in the newly released Telecommunications Systems Bulletin - TSB 75.
This product is the only product that has been tested by Underwriters
Laboratories for this application. Therefore, Underwriters Laboratories has
assigned this product to a new category listing. This listing is identified as
UL 1863, telecommunications cabinets. In conducting product tests, Underwriters
Laboratories lists, classifies, or recognizes products for their ability to
perform as designed. A UL listing is the highest category a product can achieve,
implying that as tested, all components of the product work as expected. Our
products achieved this highest level after testing.
MARKETING
Our efforts indicate that the telecommunications industry is beginning to
promote zone cabling as a means to distribute fiber and short runs of enhanced
copper, which are used as a conductor for telecommunications signals from
outside lines into buildings and to telephones, fax machines and computers. This
new cabling architecture provides broader band width, which means increased
Internet speeds, and reduces costs associated with moves, adds, and changes
(MACs) in an office setting.
Although our previous marketing strategy had focused on "channel
distribution" whereby distributors entered partnership programs to stock
products in regional warehouses and to promote that product through the
distribution channel, we have expanded this focus to include our own regional
managers in the development of sales through independent rep firms. Our three
regional managers, now in place, are making joint calls with the independent rep
agencies on Value Added Resellers, corporate accounts and the Herman Miller
sales staff. Based on feedback from the field, training and support can be
tailored for the sales force as needed.
We have begun to add project managers to our marketing plan.
They will orchestrate the weekly calls of the regional managers with the vice
president of sales. The regional managers are working planned calls in their
respective geographic areas. Project managers coordinate all literature and
required samples sent in advance. Sales training involves hands on approaches
covering all segments of the market, with the ultimate objective being to close
sales in the company of the rep agency and/or Herman Miller representatives so
that they may duplicate all sales techniques and product information for more
sales and projects.
Concurrently, Omega Metals, Genco and our powder coating process
utilize two manufacturers' representatives, who are independent contractors, and
who sell our products in the Eastern United States. Omega's
14
<PAGE>
vice president of sales coordinates the rep-driven system, and with our reps
makes calls on the end users of metal fabrication. Some accounts, which have
been developed in house, have been retained by Omega.
We are constructing an Internet portal to serve as our Business to
Business e-commerce site, whereby the infrastructure designer or engineer can
plan a project and log on to order a portion of, or all of a system at a price
allowing a competitive edge in presenting the plan to an end-user. This expands
our presence in the marketplace for those designers that would prefer to "do it
themselves" rather than order through a traditional distributor.
.
American Access has developed a comprehensive informational CD, which
is sent to engineers, reps, consultants, project designers and anyone in the
telecommunications industry with an interest in our products. The CD can also be
shown on a laptop computer by our managers and reps presenting our products to a
prospective customer. We also use several brochures to assist in marketing.
These pieces range from one page to an eight page full color product and
application brochure. We also maintain a World Wide Web site for the casual
visitor, telecommunications expert, and the investor. All of these
marketing/media materials provide company information, product information,
engineering specifications, drawings, application for use, installation
instruction, and 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 company is participating in telecommunications trade shows and
hospitality suites. Also, the company individually participates 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 end users of our products contract with specialized, Building
Industry Consulting Services International Certified Registered Communications
Distribution Designers (RCDD), qualified engineers and contracting firms. These
specialists 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.
Distribution and Sales
American Access Technologies maintains authorized distributors that are
providers of integrated cabling and network solutions that support business
information and network infrastructure requirements. These distributors team
with customers to implement network solutions by combining a variety of
customized pre- and post-sale services and products from the world's leading
manufacturers. Our authorized distributors include: Accutech, Anicom, Anixter,
Best Communications, Branch Datacom, CED Electric, Coleman's, Communications
Supply Corp., Core Data Comm, Energy Electric, Englewood Electric, GE Supply,
Graybar, Hughes Supply, Kent Datacom, LiteComm Supply, Madison Electronics,
Platt, RESOURCElectronics, Rexel/CCW, State Electric, Southern Distribution and
WESCO Distribution.
American Access Technologies has an agreement with modular furniture
giant Herman Miller, Inc. for distribution of the Ethospace zone cabling unit
housed in select Herman Miller modular office furniture systems. The agreement
provides entrance into the corporate offices of current and future Herman Miller
clients, giving
15
<PAGE>
Herman Miller a competitive advantage and a product differentiator. The
multi-city rollout for the project began the week of April 11, 2000.
Competition
The market for telecommunications products is highly competitive and
subject to rapid technological change, regulatory developments and emerging
industry standards. We believe that the principal competitive factors in our
markets are conformance to standards, reliability, safety, product features,
price, performance and quality of customer support. There can be no assurance
that American Access will compete successfully in the future with respect to
these or other factors.
MANUFACTURING/OMEGA METALS, INC.
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 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 contract 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 CSX Railroad and the U.S. military.
Omega Metals, Inc. operates from its 67,500 sq. ft. manufacturing
facility situated on 8 1/2 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, assembling, 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.
In August, 1999, we acquired the assets of Genco, Inc., a manufacturer
of generator covers. In March, 2000, our new powder coating system began
operations with $1,500,000 in booked orders. The powder coating system imparts
the highest quality finish to fabricated metal. 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.
The manufacturing capability is not limited to only precision metal
fabrication. On site state of the art high-tech surface coatings such as
iridizing, powder coating, silk screening and specialized production painting
are also available.
Omega will continue to operate as a wholly owned subsidiary with
independent sales and manufacturing . The company acquired 6 acres adjacent to
Omega's site and by the end of 1999, had completed a plant expansion of 37,500
sq. ft to supplement assembly capabilities, add a clean room powder coating
operation and expand office space. The capital cost to complete this expansion
was funded from cash flows and working capital. Omega markets its services
through two sales representatives who are independent contractors covering the
Eastern United States. Omega's vice president of sales works in the field,
calling on and developing accounts.
16
<PAGE>
FUTURE PRODUCT DEVELOPMENT
As the company identified the specific product needs of the
telecommunications industry, products were developed to meet these needs. The
products assist equipment manufacturers in marketing their own products. We
continue to customize our zone cabling termination cabinets to meet the needs of
our customers. We are developing new enclosures that further streamline the
cable path for fiber optic and copper wiring. There can be no assurance that any
new products will be successfully developed or marketed.
INTELLECTUAL PROPERTY
The company on September 24, 1996 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 utility patent application contained approximately 67 various
claims associated with zone cabling techniques. On April 26, 1998, the Patent
and Trademark Office approved the patent for the cabling termination cabinet.
Patent No. 5,911,661 was issued on June 15, 1999. On June 5, 1998 the company
was informed that the patent was approved for a communication cable
interconnection apparatus and associated method for Open Office Architecture.
Patent No. 5,842,313 was issued on December 1, 1998.
American Access has made a formal filing under the Patent Cooperation
Treaty, Paris, France. The National Phase Entry is completed. The company has
applied for and our Patent is pending for our Communications Cable
Interconnection Apparatus and Associated Method for an Open Office Architecture
in Australia, Canada, China, Europe, Mexico and Japan.
GOVERNMENT REGULATION - INDUSTRY STANDARDS
Our products and those in the telecommunications industry must meet
governmental and industry standards. In the U.S., our products must comply with
various regulations established by the Federal Communications Commission and
Underwriters Laboratories, as well as standards established by Bell
Communications research and local building codes. Our cabinet has been approved
by Underwriters Laboratories for low voltage communications. It meets or exceeds
the national electrical code requirements. We belong to trade organizations such
as the Telecommunications Industry Association, International Association of
Electrical Inspectors and Building Industrial Consulting Services International.
EMPLOYEES
American Access is managed by working directors and key personnel at
its corporate headquarters in Lake Mary, Florida and its manufacturing site in
Keystone Heights, Florida. Approximately 8 full-time employees staff the
corporate office in management, sales and administration.
. Omega employs approximately 50 persons, including 5 in management,2 in
marketing and sales, 3 in engineering and 40 in production and distribution.
LITIGATION
The company is a involved in litigation that could potentially develop
into a class action filing precipitated by the fall of the price of common stock
in August, 1999. The suit was filed in United States District Court, Eastern
17
<PAGE>
District of New York, originally filed on September 22, 1999, and amended in
February 2000. Plaintiffs Rachel Bass, Yuri Gurarity, Sol Gingold, Don Nagy,
Marily Lesser-Gale and John Guida allege in the amended complaint that the
defendants, primarily Capital International Security Group and its principals,
GroveGate Capital Parnters, LLC, and its principals, Bridge Bank and its
principals and American Access Technologies, Inc., and its principals
participated in a conspiracy to inflate the price of the Company's common stock
for the purpose of allowing "insiders" to enrich themselves by selling personal
holdings at the inflated price. Plaintiffs believe they were injured in an
amount in excess of $30 million and seek treble their general damages and
special compensatory damages with interest. The Company denies not only any
wrongdoing, but most of the material factual allegations as well, and intends to
vigorously defend this case. . Our attorneys are currently drafting two motions
for filing in this case, and will begin depositions in the near future. To date,
the Company has paid for legal services as incurred, and retaining our attorneys
has not included the advancing of any additional legal fees for indemnification
of defendants who are principals of the CompanyHowever, there is no guarantee
that expenses for indemnification of Company principals will not occur in the
future. Company defendants have signed Conflict Waivers and Undertaking to Repay
Expenses for Defense for indemnification under Florida Statutes Section
607.0850(6).
FACILITIES
The company maintains offices at 37 Skyline Drive, Suite 1101, Lake
Mary, FL 32746. The 10,472 square feet of office space is leased for 4 years,
expiring May 30, 2003, at a rent of $9,599.33 per month.. Managementof the
company believes that the terms of its lease are at least as good as may be
obtained from another party.
Omega Metals operates from its 67,500 sq. ft. manufacturing facility
situated on 8 1/2 acres of land that it owns in Keystone Heights, midway between
Jacksonville and Gainesville.
MANAGEMENT
The directors and executive officers of the Company are as follows:
Name Age Position
John Presley 61 President, Director
Bobby E. Story 58 Sec/Treasurer, Director
John W. Cooney 63 Director
Erik Wiisanen 53 Director, VP Marketing, Omega Metals, Inc.
Oscar de la Guardia 42 Director
Ray Kirk 53 Vice President of Sales
JOHN PRESLEY, Director of the company since November 1998, and
President since April 12, 1999, Presley 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.
Omega became a wholly-owned subsidiary of American Access in November, 1998.
18
<PAGE>
BOBBY E. STORY, secretary/treasurer, CFO and director, has been a
former practicing CPA and real estate developer during the past 30 years. From
1970 to 1973, he worked for Arthur Young & Company CPA (now Ernst & Young, LLP),
and was Treasurer for Condev Corporation an international developer located in
Winter Park, Florida, from 1973 to 1980. He directed the real estate operations
in Florida for Drexel Burnham Lambert & Company from 1980 to 1987. He functions
as the Chief Financial Officer for the corporation. Employment history for the
past five years is:
October 1996 to May 1999 and September 1999 to Present: Sec/Treasurer,
CFO and Director - 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 since February 15, 1997, 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 years is:
January 1987 to Present: Operates J. W. Cooney, CPA as a sole
proprietorship.
ERIK WIISANEN, Vice-President-Marketing of Omega.
Mr. Wiisanen was elected a director in December, 1999. He graduated
from Cornell University in 1965. He worked in Banking as a Vice President of
Barnett Bank until 1970 and was a representative for shipping interests until
helping to found Omega Metals in 1981. He was co-founder and President of the
Board of Directors for a private kindergarten. He has been vice president in
charge of sales for Omega since 1981.
OSCAR de la GUARDA, Director
Mr. De la Guardia was elected to the Board of Directors in December,
1999. He is Executive Vice President and general counsel of RT21 Radiation
Systems Corp., a development stage company involved in the international
development of cancer treatment centers. He was Senior Vice President and
General Counsel to Quality Oncology, Inc. and for American Disease Management,
Inc. He was also an executive with Physician Corporation of America, and an
attorney in private practice specializing in corporate mergers and acquisitions.
RAY KIRK, Vice President of Sales
Mr. Kirk has been vice president of sales for American Access since
October 1, 1999. He graduated from the University of Missouri School of
Business, and after a brief stint as a Field Artillery officer, began his career
marketing commercial office furniture systems. Throughout his career he has
developed corporate, state and GSA contracts. He has represented companies such
as Herman Miller, Alma Desk, Corry-Hiebert, and Knoll International.
19
<PAGE>
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.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Other Annual Other Annual
Name and Position Year Total Income Bonus Compensation
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Victor E. Murray, 1997 $60,000 -0- -0-
President
---------------------------------------------------------------------------------------------------
Victor E. Murray, 1998 $60,000 $30,000 -0-
President
---------------------------------------------------------------------------------------------------
John E. Presley, 1999 $175,000 -0- -0-
President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
The following information sets forth the individual grants of stock
options and freestanding SARs to the Company's Chief Executive Officer in the
last fiscal year.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Name Number of Securities Percent of Total Options/SARs Exercise Expiration
Underlying Options/SARs Granted to Employees in Fiscal Price Date
Granted Year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Presley, 150,000 20% $22.00 July 1, 2004
President
----------------------------------------------------------------------------------------------------------------
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR and FY-END OPTIONS/SAR
VALUES
The following table sets forth the number of stock options and
freestanding SARs exercised by the only named executive officer in the above
table during the last completed fiscal year.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Name Shares Value Number of Unexercised Value of Unexercised In-The-
Acquired On Realized Securities Underlying Money Options/SARs At FY-
Exercise Options/SARs at FY-End End
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John Presley, --0-- --0-- 150,000 --0--
President
------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
DIRECTOR COMPENSATION
Directors are paid $500 for meetings attended at our corporate
headquarters and $250 for telephonic meetings. All travel and lodging expenses
associated with directors' meeting(s) are reimbursed by the company.
On January 10, 2000, the Board of Directors voted to implement a 2000
Directors Stock Option Plan as incentive for continued and future service. Each
director will be awarded 50,000 options to purchase American Access stock at the
January 10 closing price, automatically renewable each year on the anniversary
date of the Board decision. Directors also are authorized to receive 10,000
options for serving as a Board committee chairman and 5,000 for serving as a
member of a board committee.The plan must be approved by shareholders at the
2000 annual meeting. The Board allocated 300,000 shares to the plan.
EMPLOYMENT AGREEMENTS
On November 11, 1998 two officers of Omega Metals, Inc. entered into
employment agreements with Omega Metals, Inc. The individuals and their titles
are as follows:
John Presley Director, President, Omega
Erik Wiisanen Secretary/Treasurer, V.P. Marketing, Omega
Each officer is authorized a salary of $125,000 per year plus a
profit participation of 10% of Omega's net profits in excess of $1,200,000 per
year. The term of the agreements is for two (2) years, ending November 14, 2000.
They may be terminated by action of the Board of Directors for cause on 30 days
prior notice.
INDEMNIFICATION
Florida Business Corporation Act
Subsection (1) of Section 607.0850 of the Florida Business
Corporation Act empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including an employee benefit plan), against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
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.
21
<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.
Who we indemnify
Article 4 of American Access Articles of Incorporation provides that
the company shall indemnify those persons entitled to be indemnified, to the
fullest extent permitted by law.
Indemnification against public policy
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the company, the company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Erik Wiisanen, a director for American Access Technologies, Inc. and
vice president of sales for Omega Metals, Inc. is the brother-in-law of John
Presley, President and Director of American Access. Both men are founders of
Omega Metals, our wholly-owned subsidiary.
Director John Cooney was also a director for Universal Beverages
Holding Corp., to which the Company loaned $500,000. Upon default, the Company
in February, 2000 began an action for foreclosure of its security interest. In
April, 2000, the note receivable plus 15% interest, of which approximately
$63,000 at December 31, 1999 was unpaid, was sold without recourse for a total
of $575,000. The purchaser paid an initial cash payment of $250,000, with the
balance of $325,000 due on October 31, 2000, with 15% interest. The note is
guaranteed by a third party. Mr. Cooney resigned from the Board of Universal in
May, 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 3, 2000, the beneficial
ownership of American Access common stock, based upon 4,314,773 shares
issued or 4,159,673 outstanding by:
o the only persons who own of record or are known to own, beneficially, more
than 5% of the company's common stock;
o each director and executive officer of the company; and
o all directors and officers as a group.
22
<PAGE>
--------------------------------------------------------------------------------
Common Stock
--------------------------------------------------------------------------------
Name and Address Number of Percent of
Shares Class
--------------------------------------------------------------------------------
Victor E. Murray 251,000 5.81%
105 Foxridge Run
Longwood, Fl
--------------------------------------------------------------------------------
Richard A Murray 233,375(1) 5.31%
356 Cypress Landing Dr.
Longwood, Fl 32779
--------------------------------------------------------------------------------
Bobby E. Story 682,850(1) 15.45%
164 Golf Club Dr.
Longwood, Fl 32779
--------------------------------------------------------------------------------
John Presley 473,235(1) 10.47%
6689 Shands Road
Keystone Heights, FL 32656
--------------------------------------------------------------------------------
John W. Cooney 143,500(1) 3.36%
2901 Collins Ave.
Seville Beach Hotel
Lower Lobby
Miami Beach, FL 33140
--------------------------------------------------------------------------------
Erik Wiisanen 168,235(1) 3.99%
6689 Shands Road
Keystone Heights, FL 32656
--------------------------------------------------------------------------------
Oscar de la Guardia 60,000(1) *
Miami, FL 33131
--------------------------------------------------------------------------------
Stephen Albee -0- *
Miami, Florida
--------------------------------------------------------------------------------
Bridge Bank Ltd. 437,000 10.51%
Nassau Bahamas
--------------------------------------------------------------------------------
Crescent International Ltd. 457,056(1) 9.9%
84 Av. Louis Casai
Geneva Switzerland
--------------------------------------------------------------------------------
Ray Kirk 101,500(1) 2.4%
37 Skyline Dr.
Lake Mary, Florida 32746
--------------------------------------------------------------------------------
All directors and officers 1,065,585(1) 22.88%
as a group (6 persons)
--------------------------------------------------------------------------------
*less than 2%
(1) Includes options or warrants to purchase common stock as follows:
23
<PAGE>
<TABLE>
<CAPTION>
NAME $7 warrants $8 warrants $22 warrants $5.67 options
<S> <C> <C> <C> <C>
Bobby E. Story * 100,000 100,000 60,000
John Presley * 150,000 150,000 60,000
John W. Cooney * 20,000 20,000 60,000
Erik Wiisanen * * * 55,000
Ray Kirk * 50,000 50,000 *
Richard Murray * 133,375 100,000 *
Oscar de la Guardia * * * 60,000
Crescent International Ltd. 43,278 * * *
</TABLE>
DESCRIPTION OF SECURITIES
Common stock
American Access is authorized to issue 10,000,000 shares of common
stock with $.001 par value. The holders of the common stock are entitled to one
vote per each share held and have the sole right and power to vote on all
matters on which a vote of stockholders is taken. Voting rights are
non-cumulative. The holders of shares of common stock are entitled to receive
dividends when, as and if declared by the Board of Directors, out of funds
legally available therefore and to share pro-rata in any distribution to
stockholders. The company anticipates that any earnings will be retained for use
in its business for the foreseeable future. Upon liquidation, dissolution, or
winding up of the company, the holders of the common stock are entitled to
receive the net assets held by the company after distributions to the creditors.
The holders of common stock do not have any preemptive right to subscribe for or
purchase any shares of any class of stock. The outstanding shares of common
stock and the shares offered hereby will not be subject to further call or
redemption and will be fully paid and non-assessable.
SELLING SHAREHOLDER
In May of 1999 we entered into a Stock Purchase Agreement with Crescent
International Ltd., a Bermuda-based investment company. Under the Stock Purchase
Agreement, we can, at our option from time to time, require Crescent
International Ltd. to purchase shares of the Company's Common Stock at prices
determined in accordance with a formula, up to a maximum amount of $15,000,000.
However, we may not require Crescent to purchase shares if, after giving effect
to the purchase, Crescent would beneficially own more than 9.9% of our
outstanding shares.
Upon execution of the Stock Purchase Agreement Crescent purchased
406,278 shares of Common Stock at a purchase price of $1,900,000. As provided in
the Stock Purchase Agreement, the purchase price was determined by applying 92%
to the average of the lowest three consecutive bid prices during the preceding
22 trading days.
The shares remaining available under the Stock Purchase Agreement, with
an aggregate purchase price of $13,100,000, may be issued by the Company in
maximum increments of $1,150,000 at minimum 22-day intervals for a period ending
in August 2001 (maximum of $20,000 increments if the closing bid price of out
common stock does not equal or exceed $6.00 on each of the seven trading days
immediately preceding the issuance date). The ability of the Company to issue
shares under the Stock Purchase Agreement is subject to a number of conditions
(none of which are within the control of
24
<PAGE>
Crescent), including requirements that (i) the average daily trading value of
the Common Stock for the 22 days preceding the issuance must be $600,000 or
more, and (ii) the resale of the shares must have been registered under the
Securities Act of 1933. The purchase price per share for these issuances is
determined by the same formula as the original draws, applying 92% to the
average of the lowest three consecutive bid prices during the 22 trading days
immediately preceding the issuance.
As part of the transaction, the Company also issued two warrants to
Crescent. The Early Put Warrant is a warrant to purchase an indeterminate number
of shares at an exercise price of $.01 per share. The number of shares is
determined by reference to the market price of the Company's Common Stock on the
date the registration statement of which this Prospectus is a part is declared
effective, as compared to $4.6766 per share, the purchase price for the shares
acquired by Crescent in May 2000. Thus, if the market price on the date this
Registration Statement becomes effective exceeds $4.6766 per share, no shares
are issuable upon exercise of the warrant. The purpose of this Warrant is to
protect Crescent against decreases in the market value of the shares between the
dates the shares were acquired and the date the Registration Statement is
declared effective, although it remains subject to liquidity risks associated
with the relatively low trading volume of the Company's Common Stock, and risks
of bankruptcy or insolvency due to the Company's history of operating losses. If
the market price of the Company's Common Stock were to fall below $4.6766 on the
date the Registration Statement is declared effective, the effect of this
Warrant would be dilutive to existing shareholders, as it would involve the
issuance of shares of Common Stock at $.01 per share, provided that the issuance
does not increase Crescent's beneficial ownership of the Company's Common Stock
above 4.9% at the time of issuance.
The Incentive Warrant is a warrant to purchase up to 128,000 shares at
an exercise price of $7.0149 per share. This exercise price is subject to
adjustment under certain circumstances in the event of stock splits, stock
dividends, recapitalizations, reclassifications, and similar events.
The Company is also required to register the resale of all of the
shares issuable under the Stock Purchase Agreement, including the shares
issuable upon exercise of the Warrants.
The Company had no prior dealings with Crescent International Ltd.
Crescent has also advised us that at the time the Shares were acquired it had no
understandings or arrangements to dispose of the Shares.
The following table sets forth certain information as of May 18, 2000,
regarding the ownership of the common stock by the selling shareholder and as
adjusted to give effect to the sale of the shares offered in this prospectus.
<TABLE>
<CAPTION>
Shares owned prior Shares which may be Number of shares to be
Name to this offering offered under this prospectus owned after the offering
---- -------------------- ----------------------------- ------------------------
<S> <C> <C> <C>
Crescent International Ltd. 7,500 5,085,404 7,500
</TABLE>
25
<PAGE>
The Selling Shareholder and its officers and directors have not held
any positions or office or had any other material relationship with the Company
or any of its affiliates within the past three years.
--------------------------------------------------------------------------------
(1) The number of shares is an estimated one, based on 200% and 150% of portions
of the shares of Common Stock which may be issued to Crescent International Ltd.
under the Stock Purchase Agreement , plus shares issuable upon exercise of a
Warrant. The additional shares are intended to cover shares issuable upon
exercise of a separate warrant in which the number of shares issuable is based
upon a formula relating to the market price of the Common Stock.
26
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock are being offered on behalf of the selling
shareholder, and we will not receive any proceeds from the offering. The shares
of common stock may be sold or distributed from time to time by the selling
shareholder, or by pledgees, donees or transferees of, or other successors in
interest to, the selling shareholder, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agent or may acquire such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be subject to
change. The sale of the shares of common stock may be effected through one or
more of the following methods: (i) ordinary brokers' transactions; (ii)
transactions involving cross or block trades or otherwise on the NASDAQ Stock
Market; (iii) purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this prospectus;
(iv) "at the market" to or through market makers or into established trading
markets, including direct sales to purchasers or sales effected through agents;
and (v) any combination of the foregoing, or by any other legally available
means. The selling shareholder also may enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
shares of common stock, which shares of common stock may be resold thereafter
pursuant to this prospectus. We cannot be certain that all or any of the shares
of common stock will be sold by the selling shareholder.
Brokers, dealers, underwriters or agents participating in the sale of
the shares of common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the selling shareholder and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). The
selling shareholder and any broker-dealers or other persons who act in
connection with the sale of the common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission they receive and
proceeds of any sale of such shares may be deemed to be underwriting discounts
and commissions under the Securities Act. Neither the Company nor the selling
shareholder can presently estimate the amount of such compensation. The Company
knows of no existing arrangements between the selling shareholder and any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock.
The selling shareholder and any other persons participating in the sale
or distribution of the common stock will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the common stock by the
selling shareholder or any other such persons. The foregoing may affect the
marketability of the common stock. We will pay substantially all of the expenses
incidental to the registration, offering and sale of the
27
<PAGE>
common stock to the public, other than any commissions or discounts of
underwriters, broker-dealers or agents. We and the selling shareholder have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon
for the company by Joel Bernstein, Esq. P.A., Miami, Florida.
EXPERTS
The financial statements appearing in this Prospectus and
Registration Statement have been audited by Rachlin Cohen & Holtz, CPA's,
independent certified public accountants, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Additional information
For further information with respect to American Access and the
securities hereby offered, reference is made to the exhibits filed as part of
this registration statement, which may be inspected and copied at the public
reference facilities of the commission in Washington D.C., and at the
Commission's regional offices at:
o 500 West Madison Street, Chicago, IL 60604;
o 7 World Trade Center, New York, NY 10048;
o and 5757 Wilshire Boulevard, Los Angeles, CA 90034;
o and copies of such material can be obtained from the Public Reference
Section of the Commission, 450 5th Street, N.W., Washington, D.C. 20549,
at prescribed rates and
o are available on the World Wide Web at : http://www.sec.gov.
------------------
28
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) F-2
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) F-3
CONSOLIDATED BALANCE SHEETS F-4
NOTES TO FINANCIAL STATEMENTS F-5 - F-6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-7
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-8
Statements of Operations F-9
Statements of Stockholders' Equity F-10
Statements of Cash Flows F-11
Notes to Financial Statements F-12 - F-30
F-1
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar. 31, 2000 Mar. 31, 1999
------------- -------------
<S> <C> <C>
Net Sales
Formed metal $ 1,051,939 $ 954,309
Zone cabling termination cabinets
and generator enclosures 458,477 335,753
----------- -----------
Total Net Sales 1,510,416 1,290,062
----------- -----------
Costs and Expenses:
Cost of sales 756,155 501,777
Selling, general and administrative 1,067,611 676,576
----------- -----------
Total Cost and Expenses 1,823,766 1,178,353
----------- -----------
Net Operating Income (Loss) (313,350) 111,709
----------- -----------
Other Income (Expense):
Interest income 19,969 80,243
Interest expense (1,649) (5,610)
Other income 304 17,399
----------- -----------
Total Other Income (Expense) 18,624 92,032
----------- -----------
Net Income Before Taxes (294,726) 203,741
Income Taxes (Benefit) -- (15,170)
----------- -----------
Net Income $ (294,726) $ 218,911
=========== ===========
Net Income Per Common Share $ (.07) $ (.11)
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (294,726) $ 218,911
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 104,172 74,402
Changes in operating assets and liabilities:
Decrease in:
Accounts receivable (84,476) (76,072)
Inventories (122,178) (33,154)
Prepaid expenses and other assets (19,126) (9,056)
Costs in excess of contract sales - (118,777)
Increase (decrease) in:
Accounts payable and accrued expenses (131,024) (104,466)
---------- ---------
Net cash used in operating activities (547,358) (48,212)
---------- ---------
Cash Flows from Investing Activities:
Proceeds from investment changes 833,344 2,825,177
Acquisition of property and equipment (net of sales and retirements) (159,926) (165,466)
---------- ---------
Net cash provided by investing activities 673,418 2,659,711
---------- ---------
Cash Flows from Financing Activities:
Acquisition of treasury stock (109,074) -
Proceeds from issuance of stock 40,000 -
Payments on loans and capital lease obligations (73,812) (7,972)
---------- ---------
Net cash used in financing activities (142,886) (7,972)
---------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (16,826) 2,603,527
Cash and Cash Equivalents, Beginning 714,109 637,776
---------- ---------
Cash and Cash Equivalents, Ending $ 697,283 $3,241,303
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,649 $ 5,610
============ ============
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS Mar. 31, 2000
------ UNAUDITED Dec. 31, 1999
-------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 697,283 $ 714,109
Investments -- 833,344
Accounts receivable, net of allowance 1,099,389 1,014,913
Note receivable, related party 602,917 585,615
Inventories 692,772 570,594
Prepaid expenses and other current assets 64,131 62,307
------------ ------------
Total current assets 3,156,492 3,780,882
Property, Plant and Equipment 2,641,458 2,547,483
Goodwill 369,465 407,686
Patent Costs 62,561 62,561
------------ ------------
Total assets $ 6,229,976 $ 6,798,612
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable 283,807 375,788
Retirement plan 75,000 75,000
Line of credit -- 73,812
Compensation due to officers/directors/stockholders -- 66,394
Accrued expenses 117,085 90,004
------------ ------------
Total current liabilities 475,892 680,998
------------ ------------
Stockholders' Equity:
Series A 10% Senior Convertible Preferred stock, $.001 par value; authorized
1,000,000 shares; issued and
outstanding 50,000 shares at liquidation value -- 1,060,000
Common stock, $.001 par value; authorized 10,000,000
shares; issued and outstanding 3,265,470 shares 4,314 4,094
Additional paid-in capital 10,380,803 9,144,508
Deficit (3,639,846) (3,208,875)
------------ ------------
Total stockholders' equity 6,745,271 6,999,727
Treasury stock, 155,100 and 136,100 common shares at cost (990,917) (881,843)
Stock subscription receivable, net of allowance (270) (270)
------------ ------------
Total Stockholders Equity 5,754,084 6,117,614
------------ ------------
Total liabilities and stockholders' equity $ 6,229,976 $ 6,798,612
============ ============
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 Unaudited
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements at March
31, 2000 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of financial position as of March 31, 2000 and
results of operations for the three months ended March 31, 2000 and 1999 and
cumulative. All adjustments are of a normal recurring nature. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for a full year. The statements should be read in conjunction with
the consolidated financial statements and footnotes thereto for the year ended
December 31, 1999 included in the company's Form 10-KSB.
2. Nature of Business and Summary of Significant Accounting Policies.
BUSINESS
American Access Technologies, Inc. develops specialized products for the
telecommunications industry. The company manufactures and distributes several
models of Zone Cabling Termination Cabinets (the "Product") to the
telecommunications industry. The Product helps manage and route wiring and
cabling used in voice, computer and data transmission systems throughout the
world.
Omega Metals, Inc. ("Omega"), a wholly-owned subsidiary of the Company, shears
and molds metal and manufactures metal-formed product for customers principally
in Florida and Georgia. Omega manufactures the Company's Product. The Company
also acquired the assets of Genco, Inc. a generator enclosure manufacturer, in
August 1999.
In January 2000, American Access entered into a joint venture arrangement with
Vulcan Microsystems for the construction of a Business to Business e-commerce
Internet portal. Subsequently, Vulcan's owners, Bill Wetmore and Erik Gray were
retained as consultants for the project. The joint venture, AATK.com, will act
as distributor of its own, and for other telecommunications manufacturing
companies' products featured on the Internet site. The site is scheduled for
completion during the third quarter of 2000. The Company owns a 76% interest in
AATK.com, a limited liability company.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" which requires the presentation of both basic and
diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the periods. The
shares of common stock issued in connection with the stock split effected in
February 1997, have been considered outstanding for all periods. In addition,
the shares of common stock issued to a Director in February 1997, prior to an
initial registration of the Company's common stock and at a price at that time
have been treated as outstanding during the entire period, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins. The computation
of earnings per share is reflected in the following schedule:
<TABLE>
<CAPTION>
Computation of Net Loss Per Common Share Three Months ended Three Months ended
Mar. 31, 2000 Mar. 31, 1999
<S> <C> <C>
Net Income (Loss) (294,726) 218,911
Cumulative Preferred Stock (14,631) (125,000)
F-5
<PAGE>
Beneficial Conversion Preferred Stock Dividend 0 (468,750)
--------- ----------
$(309,357) $ (374,839)
--------- ----------
Total Weighted Average Number of Common Shares and Equivalents 4,237,934 3,265,470
---------- ----------
Net Loss per Common Share $ $
---------- ----------
(.07) (.11)
---------- ----------
</TABLE>
3. Contingencies and Commitments
LEASES
Pursuant to forming AATK.com,, the joint venture with Vulcan
Microsystems, Inc. for the creation of a Business-to-Business e-commerce portal,
the Company guaranteed payment for the lease of the Sun Microsystems server to
be used to power the portal site. The equipment acquisition cost was $186,229
with lease payments made to Imperial Bank in the amount of $6,350.41 per month
for 36 months.
LEGAL PROCEEDINGS
The company is involved in litigation that could potentially
develop into a class action filing precipitated by the fall of the price of
common stock in August, 1999. The suit was filed in United States District
Court, Eastern District of New York. Plaintiff alleges in the Amended Complaint
that the defendant participated in a conspiracy to inflate the price of the
Company's common stock for the purpose of allowing "insiders" to enrich
themselves by selling personal holdings at the inflated price. Then Company
denies not only any wrongdoing, but most of the material factual allegations as
well, and intends to vigorously defend this case. To date, the Company has paid
for legal services as incurred, and dealings with our attorneys have not
included the advancing of any legal fees for indemnification of defendants who
are principals of the Company. However, there is no guarantee that expenses for
indemnification of Company principals will not occur in the future. Company
defendants have signed Conflict Waivers and Undertaking to Repay Expenses for
Defense for indemnification under Florida Statutes Section 607.0850(6).
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 as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years ended December 31, 1999. 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, 1999, and the results of
their operations and their cash flows for each of the two years ended December
31, 1999, in conformity with generally accepted accounting principles.
RACHLIN COHEN & HOLTZ LLP
Fort Lauderdale, Florida
March 15, 2000
F-7
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current Assets:
Cash and cash equivalents $ 714,109
Investments, including restricted cash of $300,000 833,344
Accounts receivable, net of allowance 1,014,913
Notes receivable, related parties (including accrued interest) 585,615
Inventories 570,594
Prepaid expenses and other current assets 62,307
-----------
Total current assets 3,780,882
Property, Plant and Equipment 2,547,483
Goodwill 407,686
Patent Costs 62,561
-----------
Total assets $ 6,798,612
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable 375,788
Retirement plan 75,000
Line of credit 73,812
Compensation due to officers/directors/stockholders 66,394
Accrued expenses 90,004
-----------
Total current liabilities 680,998
-----------
Commitments, Contingencies, Other Matters and Subsequent Events --
Stockholders' Equity:
Series A 10% Senior Convertible Preferred stock,
$.001 par value; authorized 1,000,000 shares; issued and
outstanding 10,600 shares at liquidation value (subsequently 1,060,000
converted into 215,534 shares of common stock)
Common stock, $.001 par value; authorized 10,000,000
shares; issued 4,094,239 shares 4,094
Additional paid-in capital 9,144,508
Deficit (3,208,875)
-----------
6,999,727
Treasury stock, 136,100 common shares at cost (881,843)
Stock subscription receivable, net of allowance (270)
-----------
6,117,614
-----------
Total liabilities and stockholders' equity $ 6,798,612
===========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net Sales
Formed metal $ 3,882,841 $ 4,344,118
Zone cabling termination cabinet 1,364,842 592,086
----------- -----------
5,247,683 4,936,204
----------- -----------
Costs and Expenses:
Cost of sales 2,298,923 2,257,169
Selling, general and administrative 2,701,705 1,661,479
Compensation and related benefits 1,134,502 1,415,473
Stock-based compensation 616,000 --
----------- -----------
6,751,130 5,334,121
Loss Before Other Income (Expense) (1,503,447) (397,917)
----------- -----------
Other Income (Expense):
Interest income 250,822 89,731
Interest expense (18,594) (139,527)
Abandoned project development costs (352,531) --
Realized and unrealized loss on investments (200,627) --
Other income 77,794 158,346
Lease termination costs -- (239,447)
----------- -----------
(243,136) (130,897)
Loss before Income Taxes (1,746,583) (528,814)
Income Tax (Benefit) (69,000) (36,000)
----------- -----------
Net Loss $(1,677,583) $ (492,814)
=========== ===========
Basic Net Loss Per Common Share $ (.59) $ (.43)
=========== ===========
Weighted Average Common Shares Outstanding 3,638,983 3,218,970
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Capital
Preferred Stock Common Stock in
--------------- ------------ Excess
Shares Amount Shares Amount of Par
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 -- $ -- 3,196,470 $ 3,196 $ 989,264
Year Ended December 31, 1998:
Sale of preferred stock in private placement, 50,000 5,000,000 -- -- (737,820)
net of related costs
Exercise of warrants -- -- 60,000 60 479,940
Dividend related to beneficial conversion feature -- -- -- -- 781,250
of preferred stock
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 50,000 5,000,000 3,256,470 3,256 1,512,634
Year Ended December 31, 1999:
Purchase of 136,100 shares of treasury stock -- -- -- -- --
Issuance of common stock for services -- -- 9,000 9 179,991
Conversion of preferred stock to common stock, (39,400) (3,940,000) 289,981 290 4,131,146
including dividends
Purchase of Genco assets -- -- 22,163 22 443,234
Warrants granted for services -- -- -- -- 436,000
Exercise of warrants:
Cash -- -- 246,625 247 1,972,753
Notes receivable, net of allowance -- -- 270,000 270 --
Dividend related to beneficial conversion feature of -- -- -- -- 468,750
preferred stock
Net loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 10,600 $ 1,060,000 4,094,239 $ 4,094 $ 9,144,508
=========== =========== =========== =========== ===========
</TABLE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Stock
Subscription Treasury
Receivable Stock Deficit Total
---------- ----- ------- -----
<S> <C> <C> <C> <C>
Balance December 31, 1997 $ -- $ -- $ 402,958 $ 1,395,418
Year Ended December 31, 1998:
Sale of preferred stock in private placement, -- -- -- 4,262,180
net of related costs
Exercise of warrants -- -- -- 480,000
Dividend related to beneficial conversion feature -- -- (781,250) --
of preferred stock
Net loss -- -- (492,814) (492,814)
----------- ----------- ----------- -----------
Balance, December 31, 1998 -- -- (871,106) 5,644,784
Year Ended December 31, 1999:
Purchase of 136,100 shares of treasury stock -- (881,843) -- (881,843)
Issuance of common stock for services -- -- -- 180,000
Conversion of preferred stock to common stock, -- -- (191,436) --
including dividends
Purchase of Genco assets -- -- -- 443,256
Warrants granted for services -- -- -- 436,000
Exercise of warrants:
Cash -- -- -- 1,973,000
Notes receivable, net of allowance (270) -- -- --
Dividend related to beneficial conversion feature of -- -- (468,750) --
preferred stock
Net loss -- -- (1,677,583) (1,677,583)
----------- ----------- ----------- -----------
Balance, December 31, 1999 $ (270) $ (881,843) $(3,208,875) $ 6,117,614
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,677,583) $ (492,814)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 299,164 256,159
Common stock and warrants issued for services 616,000 --
Realized and unrealized losses on investments 199,962 6,553
Gain on sale/abandonment of assets -- (137,238)
Provision for doubtful accounts 89,000 28,000
Deferred income taxes (69,000) (36,000)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (403,697) (270,624)
Income tax refund receivable -- 137,899
Inventories (273,154) 97,967
Prepaid expenses and other assets (87,456) (18,229)
Increase in accounts payable and accrued expenses 105,723 36,438
----------- -----------
Net cash used in operating activities (1,201,041) (391,889)
----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of investments 1,791,871 1,450,073
Acquisition of investments -- (4,281,803)
Increase in notes receivable -- (500,000)
Acquisition of property and equipment (1,354,610) (85,635)
Proceeds from sale of equipment -- 145,000
Patent costs (28,854) (13,634)
----------- -----------
Net cash provided by (used in) investing activities 408,407 (3,285,999)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from sale of preferred stock -- 4,262,180
Proceeds from exercise of warrants 1,973,000 480,000
Payments on capital lease obligations -- (1,256,625)
Repayment of note payable -- (100,000)
Proceeds (repayments) from line of credit (222,190) 296,002
Payments on loans -- (4,026)
Acquisition of treasury stock (881,843) --
----------- -----------
Net cash provided by financing activities 868,967 3,677,531
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 76,333 (357)
Cash and Cash Equivalents, Beginning 637,776 638,133
----------- -----------
Cash and Cash Equivalents, Ending $ 714,109 $ 637,776
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
American Access Technologies, Inc. ("Company") was incorporated on
October 21, 1996, under the laws of the State of Florida. The
Company's Articles 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.
On October 2, 1998, the previously amended Articles of
Incorporation were further amended to provide for the issuance of
60,000 shares of Series A 10% Senior Convertible Preferred stock.
The amendment provided, among other things, that the holders of the
Series A Preferred stock shall be entitled to voting rights equal
to the votes that would be cast by the holders of the number of
shares of common stock into which the Series A Preferred stock
could be converted immediately prior to the taking of such votes,
including any shares which would be issuable in payment of accrued
and unpaid dividends. In addition, so long as the Series A
Preferred stock is outstanding, the holders of at least a majority
of the shares of then outstanding Series A Preferred stock shall be
entitled to elect two directors, and five directors shall be
elected by the holders of common and Series A Preferred stock,
voting together as a single class.
The Series A Preferred has a liquidating preference equal to the
greater of $100.00 per share plus an amount equal to all accrued
and unpaid dividends or an amount equal to the property to be
distributed to the holders of Common Stock. The holders of the
Series A Preferred stock shall be entitled to receive cumulative
dividends at a rate of 10% payable in cash or common shares. If
dividends are declared on the common shares, the Series A Preferred
stock holders shall be entitled to receive the dividend as if the
Series A Preferred stock were converted into common shares
immediately prior to the record date.
The holders of the Series A Preferred stock shall have the right,
at their option, to convert any and all Series A Preferred shares
into common shares at the lower of $17.00 per share or eighty
percent of market value at any time on or after the earlier of the
four month anniversary of the earliest issuance date or the first
date upon which the shelf registration statement registering the
underlying common stock is declared effective by the Securities and
Exchange Commission.
During 1999, holders of the Series A Preferred stock converted
39,400 of the Series A Preferred shares into 289,981 common shares.
Subsequent to December 31, 1999, the remaining 10,600 shares of
Series A Preferred were converted into 215,534 shares of common
stock.
F-12
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business
American Access Technologies, Inc. ("AAT") develops specialized
products for the telecommunications industry. The Company has
introduced its first proprietary product, a Zone Cabling
Termination Cabinet (the "Product") which is manufactured and
distributed to the telecommunications industry. The Product is a
device that is used in voice, computer and data transmission
systems throughout the world.
Omega Metals, Inc. ("Omega"), a wholly-owned subsidiary of the
Company, shears and molds metal and manufactures metal-formed
products for customers principally in Florida and Georgia.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All
material intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these
estimates are based on management's knowledge of current events and
actions it may undertake in the future, they may ultimately differ
from actual results.
Revenue Recognition
The Company recognizes revenue from product sales at the time the
product is shipped to the customer. The Company does not generally
grant return privileges to customers.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable.
Cash and Cash Equivalents
The Company maintains deposit balances at financial institutions
that, from time to time, may exceed federally insured limits. At
December 31, 1999, the Company had deposits in excess of federally
insured limits of approximately $714,000. The Company maintains its
cash with high quality financial institutions, which the Company
believes limits these risks.
F-13
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of Credit Risk (Continued)
Cash and Cash Equivalents (Continued)
In addition, the Company maintains an investment account with a
financial institution which is not insured by the FDIC. These
funds, which were invested primarily in money market instruments
and mutual funds at December 31, 1999, may be subject to insurance
by SPIC, Securities Investor Protection Corporation, subject to
various limitations. At December 31, 1999, approximately $519,000
was held in this account.
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.
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.
Investments
The Company classifies its investment securities in one of three
categories: trading, available for sale, or held to maturity.
Trading securities are bought and held principally for the purpose
of selling them in the near term. Held-to-maturity are those
securities in which the Company has the ability and intent to hold
the security until maturity. All other securities not included in
trading or held-to-maturity are classified as available for sale.
Trading and available for sale securities are recorded at fair
value. Held-to-maturity securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums and
discounts. Investment securities at December 31, 1999 consist of
mutual funds, which are classified as trading.
Unrealized holding gains and losses on trading securities, net of
the related tax effect, are included in earnings. Realized gains
and losses from the sale of trading securities are determined on a
specific identification basis. Dividend and interest income are
recognized when earned.
F-14
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories, which are primarily composed of raw materials, parts,
supplies and certain product components, are stated at the lower of
cost or market, with cost determined using an average cost method.
Inventory costs for finished goods and work-in-process include
material, labor, production overhead, and outside services.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated,
using the straight-line method over the estimated useful lives of
the assets. Gain or loss on disposition of assets is recognized
currently. Repairs and maintenance are charged to expense as
incurred. Major replacements and betterments are capitalized and
depreciated over the remaining useful lives of the assets.
Patent
The Company has capitalized certain incremental costs incurred
related to acquiring two patents on the Company's products. In
1998, one of the patents was finalized and issued by the United
States Patent Department. The Company then began amortizing the
cost of the patent over the patent's life, 18 years. Another patent
is still pending at December 31, 1999 and, therefore, amortization
of this patent has not commenced.
Product Development Costs
Costs in connection with the development of the Company's product
are comprised of design, production, consulting and other related
professional fees. These costs are charged to expense as incurred.
Advertising
Advertising costs are charged to expense as incurred. Advertising
costs incurred for the year ended December 31, 1999 were
approximately $43,000 and were not material for the year ended
December 31, 1998.
Income Taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the
recognition of deferred tax liabilities and assets for temporary
differences, operating loss carryforwards, and tax credit
carryforwards existing at the date of the financial statements. An
effective tax rate of 37% was used to calculate the deferred income
taxes.
F-15
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
A temporary difference is a difference between the tax basis of an
asset or liability and its reported amount in the financial
statements that will result in taxable or deductible amounts in
future years when the asset is recovered or the liability is
settled. Deferred taxes represent the future tax return
consequences of these differences.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income" and No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No.
130 establishes standards for reporting and displaying
comprehensive income, its components, and accumulated balances.
SFAS No. 131 establishes standards for the way that public
companies report information about operating segments in annual
financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to
the public. Both SFAS No. 130 and SFAS No. 131 are effective for
periods beginning after December 15, 1997. The Company adopted
these new accounting standards in 1998, and their adoption had no
effect on the Company's financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of the gain
or loss recognition on the hedging derivative with the recognition
of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss
is recognized in income in the period of change. SFAS No. 133, as
amended by SFAS 137, is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives
contracts to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new
standard on January 1, 2000 to affect its financial statements.
Reclassifications
Certain amounts in prior year financial statements have been
reclassified for comparative purposes to conform with the
presentation in the current year financial statements.
F-16
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2. STOCK SUBSCRIPTION RECEIVABLE
During June, 1999, an individual affiliated with the preferred stock
private placement agent exercised options to purchase 270,000 shares of
Company common stock at $8.00 per share for a total of $2,160,000. The
Company accepted as payment for these shares three notes receivable
totaling $2,160,000. The notes receivable, as amended, are due on
December 31, 2001, bear interest at 10% and are collateralized by a 5%
interest in the newly created joint venture AATK.com (see Note 20). The
Company can require the notes be paid in full sooner if the Company
stock price equals or exceeds $35 (the market price of the Company's
common stock was $5.13 at December 31, 1999).
The Company has recorded the exercise of these warrants, net of an
allowance, by increasing common stock outstanding and increasing stock
subscriptions receivable, a separate component of stockholders' equity,
as follows:
Notes receivable $ 2,160,000
Accrued interest receivable 119,978
------------
2,279,978
Less allowance 2,279,708
------------
$ 270
============
The interest earned on the notes receivable has been recorded as an
increase in stockholders' equity rather than included in operations,
because the transaction giving rise to the notes was an equity
transaction.
NOTE 3. INVESTMENTS
Gross
Unrealized Fair
Cost Loss Value
---- ---- -----
Mutual funds $543,769 $25,177 $518,592
Certificate of deposit 314,752 -- 314,752
-------- ------- --------
$858,521 $25,177 $833,344
======== ======= ========
Gross unrealized loss on the trading securities portfolio amounted to
$25,177 in 1999, and is included in other income in the accompanying
consolidated statement of operations, together with realized losses
incurred in 1999 on the trading securities portfolio.
F-17
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4. ACQUISITIONS OF ASSETS AND GOODWILL
Genco, Inc.
In August 1999, the Company acquired selected property and
equipment, outstanding sales agreements, and goodwill from a
customer, Genco, Inc. for a total of $584,838. The purchase price
was allocated as follows:
Property and equipment $126,191
Goodwill 458,647
--------
$584,838
========
The selected property and equipment is being depreciated over the
useful lives, 3 - 5 years. Goodwill is being amortized over three
years. Depreciation and amortization on these assets were $11,410
and $50,961, respectively, for the year ended December 31, 1999.
Payment was made by forgiveness of accounts receivable, assumption
of a debt, and the issuance of 22,163 shares of Company common
stock, as follows:
Accounts receivable forgiveness $106,744
Loan payable 34,838
Common stock 443,256
--------
$584,838
========
NOTE 5. NOTES RECEIVABLE, RELATED PARTY
Note receivable, interest at 15%; due March 3, 1999, as extended;
secured by a chattel mortgage on certain equipment owned by the debtor
company and guaranteed by a stockholder of the debtor company who is
also a major stockholder of the Company $500,000
Notes receivable, stockholder, interest at 10%, interest and
principal due December 31, 2001 as extended 20,000
Accrued interest 65,615
--------
$585,615
========
On April 4, 2000, the note receivable in the amount of $500,000 plus
15% interest, of which approximately $63,000 at December 31, 1999 was
unpaid, was sold without recourse for a total of $575,000. The
purchaser paid an initial cash payment of $250,000, with the balance of
$325,000 due on October 31, 2000 with interest at 15%. The new note has
been guaranteed by a third party. The chattel mortgage and the personal
guarantee previously in place were released by the Company (see Note
15).
F-18
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6. INVENTORIES
Raw materials $448,830
Work-in-process 121,764
--------
$570,594
========
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
Estimated Useful
Lives (Years)
-------------
Land - $103,860
Building and improvements 30 367,736
Machinery and equipment 5-7 2,673,941
Vehicles 3-5 31,415
Tools 3-5 28,065
Construction-in-progress - 1,078,150
----------
4,283,167
Less accumulated depreciation 1,735,684
----------
$2,547,483
==========
Depreciation expense for the years ended December 31, 1999 and 1998 was
$246,948 and $254,902, respectively.
NOTE 8. OBLIGATIONS UNDER CAPITAL LEASES
In December 1998, the Company satisfied in full the obligations under
various capital leases, which had original terms extending to various
years through 2005, and which provided for implicit interest rates
ranging from approximately 10.5% to 14.5%. The aggregate sum paid was
approximately $1,284,000, of which approximately $239,000 represented
prepayment penalties.
NOTE 9. LINE OF CREDIT
The Company has available a bank line of credit for $300,000, with
interest at 7.75%. The line is collateralized by a $300,000 certificate
of deposit.
F-19
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 10. PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan covering all non-leased
employees who meet minimum length of service and age requirements.
Employer contributions are made at the discretion of management, and
were $75,000 for each of the years ended December 31, 1999 and 1998.
Employees are vested for purposes of the contribution as follows:
Years of Service Percentage
---------------- ----------
Less than 1 0%
1-2 20
2-3 40
3-4 60
4-5 80
5 or more 100
NOTE 11. INCOME TAXES
The Company accounts for income taxes under the provision of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. SFAS No. 109 is an asset and liability approach for computing
deferred income taxes.
The provision for income taxes was computed on a consolidated return
basis for the year ended December 31, 1999. For the year ended December
31, 1998, the Company was not eligible to file a consolidated return
with Omega. Therefore, the income tax provision for 1998 has been
computed on a separate return basis.
A reconciliation of income tax computed at the statutory federal rate
to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Tax provision at the statutory rate of 34% $ (445,000) $ (180,000)
State income taxes, net of federal income tax (15,000) (10,000)
Change in valuation allowance 325,000 226,000
Stock options not exercised 66,000 -
---------- -----------
$ (69,000) $ (36,000)
========== ==========
</TABLE>
As of December 31, 1999, the Company had consolidated net operating
loss carryforwards for federal income tax reporting purposes amounting
to approximately $1,854,000, which expire in varying amounts to the
year 2019.
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 net
operating loss carryforwards.
F-20
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11. INCOME TAXES (Continued)
The components of the deferred tax asset at December 31, 1999 were as
follows:
Net operating loss carryforward $ 687,000
Stock-based compensation 67,000
Allowance for collectibility 33,000
Depreciation and amortization (69,000)
Less valuation allowance (718,000)
---------
Net deferred tax asset $ -
=========
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.
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 12. PREFERRED STOCK
In November, 1998, the Company completed a $5,000,000 private placement
of 50,000 shares of its Series A 10% Senior Convertible Preferred
Stock, par value of $.001 per share, at $100.00 per share. The costs
associated with the completion of the private placement, $737,820, have
been recorded as a reduction of additional paid-in capital.
Additionally, the placement agent received warrants to purchase 100,000
shares of common stock at $25.00 per share, which expire October 14,
2003. The Series A Preferred are valued at $100.00 per share
("liquidation value"), and, if converted, the Series A Preferred shall
be converted into common shares (See Note 1) at the price per share
equal to the then applicable Conversion Price. This conversion feature
results in a discount between the market value of the common shares
that would be issued if the conversion option were exercised, and the
liquidation value of the preferred shares surrendered upon that
conversion. The resulting dividend has been amortized over the period
up to the date that exercise of the conversion feature was first
possible. As a result, $781,250 of the total $1,250,000 dividend was
recognized in 1998; the balance has been recognized in the accompanying
1999 financial statements.
During 1999, preferred stockholders owning 39,400 shares of preferred
stock elected to convert those shares, including cumulative dividends
of $191,436 into shares of Company common stock. The conversion price,
which varied based upon date of conversion, ranged from $5.10 to
$15.03. As a result of these conversions, the Company issued 289,981
shares of Company common stock.
F-21
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. PREFERRED STOCK (Continued)
The preferred stockholders representing the remaining 10,600 preferred
shares elected to convert those shares, including cumulative dividends,
in 2000. These conversions resulted in the issuance of 215,534 shares
of Company common stock.
Dividends in arrears on the Series A Preferred Stock amounted to
$121,884 as of December 31, 1999.
NOTE 13. COMMON STOCK
Issuance of Common Stock for Services
In January, 1999, the Company issued 9,000 shares of Company common
stock to certain employees as an incentive for services rendered.
This resulted in a charge to compensation expense of approximately
$180,000 in 1999.
NOTE 14. STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation cost for stock
options and warrants, if any, is measured as the excess of the
estimated market price of the Company's common stock at the date of
grant, over the amount the recipient must pay to acquire the common
stock.
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," established accounting and
disclosure requirements using a fair-value-based method of accounting
for stock-based employee compensation plans. The Company has elected to
retain its current method of accounting as described above, and has
adopted the disclosure requirements of SFAS No. 123.
Warrants
On January 1, 1998, the Company had outstanding 570,000 warrants to
purchase Company common stock at $8.00.
During 1998, warrants to purchase 60,000 shares of Company common
stock were exercised at $8.00 per share. During 1999, warrants to
purchase a total of 516,625 shares of Company common stock were
exercised, 246,625 for a total of $1,973,000 in cash and 270,000 in
exchange for three notes receivable (see Note 2).
F-22
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 14. STOCK-BASED COMPENSATION (Continued)
During 1999, the Company issued 750,000 warrants to employees and
officers/directors to purchase Company common stock for $22 per
share. Also during 1999, the Company issued 60,000 warrants to
outside directors to purchase Company common stock for $25 per
share, 115,000 warrants in connection with services provided to the
Company with exercise prices ranging from $6.375 to $28.875 and
329,000 warrants in connection with equity transactions with
exercise prices of $11.00 and $23.00.
As of December 31, 1999, the Company has remaining outstanding
1,307,375 warrants to purchase common stock at exercise prices
ranging from $6.375 to $28.875, 843,375 of which warrants are
outstanding to officer/directors.
The granting of the 1999 warrants to consultants resulted in a
charge to consulting fees in the amount of $436,000 representing
the fair value of the 115,000 warrants issued. The warrants issued
in connection with the conversion of preferred stock and the
negotiation of the proposed sale of common stock (see Note 20),
which have a fair value of $3,269,000 represent an increase and a
decrease to additional paid-in capital and have been netted in the
accompanying financial statements.
Fair Value Disclosures
Had compensation cost for the 810,000 warrants issued to employees
and directors been determined based on the fair value at the grant
date consistent with SFAS No. 123, the Company's net loss would
have been as follows:
Net Loss:
As reported $ (1,677,583)
============
Pro forma $(11,547,583)
============
Loss Per Share:
Basic:
As reported $ (.59)
============
Pro forma $ (3.17)
============
The Company used the Black-Scholes option pricing model to
determine the fair value of grants made in 1999. The following
assumptions were applied in determining the pro forma compensation
cost:
Risk Free Interest Rate 6.00%
Expected Dividend Yield -
Expected Option Life 5 years
Expected Stock Price Volatility 85%
F-23
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Former Consultant
As of December 1997, the Company was involved in litigation with a
former officer/stockholder of the Company in connection with a
modified consulting agreement with the Company (see Note 14)
whereby he surrendered 200,000 shares of common stock and cancelled
70,000 stock warrants previously held. The former
officer/stockholder sought rescission of the consulting agreement
he signed with the Company in August 1997, declaratory judgment
regarding the consulting agreement, damages for breaching the
consulting agreement and damages for fraud. The plaintiff was
seeking damages of $150,000 plus costs.
On March 17, 1999, a formal settlement agreement was reached on the
above matter. Under this settlement, the consulting agreement dated
August 28, 1997 was amended to provide, among other things, that
the former officer/stockholder was not required to provide any
consulting services and the Company was not required to compensate
the former officer/stockholder. The consulting agreement, as
amended, provides for, among other things, a term of five years,
and additional compensation in the form of an option to purchase
40,000 shares of common stock on the last day of each year of the
consulting term, exercisable for three years from date of issue, at
an exercise price of 125% of the closing price of the common stock
on the date of issue. In addition, under the terms of the
settlement agreement, the former officer/stockholder was granted a
warrant to purchase 15,000 shares of common stock at an exercise
price of $28.875 per share, exercisable on or before March 11,
2004.
Pending Litigation
The Company has been named as a defendant in litigation that could
potentially develop into a class action filing. In this potential
class action, the Plaintiff alleges in the Amended Complaint that
the defendants participated in a conspiracy to inflate the price of
the Company's common stock through market manipulation, making
material misrepresentations and omissions, and other wrongful
conduct for the purpose of allowing "insiders" to enrich themselves
by selling their personal holdings at the inflated price. The
Company denies not only any wrongdoing, but most of the material
factual allegations as well and intends to vigorously defend this
case. The recently filed Amended Complaint and preliminary
investigations of facts appear to support the Company's position.
However, no discovery has yet occurred nor has there been any
information as to the position being taken by various
co-defendants. The Company believes the allegations are baseless,
and that it has no material exposure with respect to the matter,
and intends to defend its position vigorously.
Note Receivable Foreclosure
The Company is a Plaintiff in a lawsuit against the maker and
guarantors of a $500,000 promissory note. This is an action for
foreclosure of a security interest. The lawsuit was first filed in
February, 2000. In April 2000, the Company settled this lawsuit and
the promissory note was purchased by another party (see Note 5).
F-24
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Major Customers
The Company's subsidiary (Omega) has two customers which purchased
products that represented approximately 25% of sales of formed
metal products for the year ended December 31, 1999.
The Company relies on two distributors for a large portion of gross
revenues. These distributors generated approximately 75% of sales
for each of the years ended December 31, 1999 and 1998,
respectively.
Major Vendors
The Company purchases sheet metal from a vendor that represented
approximately 53% and 77% of purchases for each of the years ended
December 31, 1999 and 1998, respectively.
Employment Contracts
The Company entered into employment agreements with two members of
management of Omega. These agreements are for a term of two years
commencing in November 1998. The agreements provide, among other
things, for total annual compensation of $250,000 plus profit
participation equal to 10% of the net profits of Omega, as defined,
in excess of $1,200,000 annually.
Contracts With Distributors
During 1997, the Company entered into 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. During
1999, the Company entered into additional Distributor Agreements
with five distributors. The prices for the products covered by the
agreements are based upon the intention of the distributors to
purchase a minimum number of units as specified in the agreements.
Revenue is 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 terminated by
either party, and contain, among other things, a warranty effective
for one year after the date of sale.
Co-Marketing Alliance Agreement
On August 3, 1999, the Company entered into a Co-Marketing Alliance
Agreement with a leading manufacturer of modular office furniture
systems (the Manufacturer). The companies jointly promote the use
of products in Herman Miller Ethospace and Systems Bridge products.
The agreement is for a term of two years, commencing June 1, 1999,
and is to be automatically renewed unless terminated by either
party. In conjunction with this agreement, the Company agrees to
pay the manufacturer an alliance fee equal to 5% of qualifying net
sales, as defined.
F-25
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Co-Marketing Alliance Agreement (Continued)
If, during the period of this agreement, the Company proposes to
enter into any agreement or transaction which will result in a
change in control of the Company, as defined, the Company shall
give the Manufacturer the right to enter into such transaction on
the same terms, but for a consideration equal to or higher than the
proposed transaction.
Consulting Agreement
In December 1998, the Company entered into a consulting agreement
to acquire technical expertise in developing and marketing
products. The agreement was for a term of one year, commencing
January 1999, and was to be automatically renewed unless terminated
by either party. Annual fees were to be $80,000 in cash payable
semi-monthly, plus $40,000 in Company common stock, measured at
market. The common stock was to be distributed on or before
December 31 of each year the contract is in force.
This agreement was terminated on April 1, 1999. As a result of this
termination, there was no common stock issued in relation to this
agreement.
Land Purchase
The Company entered into an agreement to purchase six acres of land
adjacent to the Omega manufacturing plant. The transaction, which
closed during the first quarter of 1999 at a cost of approximately
$80,000, has allowed the Company to build a manufacturing facility
of approximately 30,000 square feet to supplement the assembly
facilities. This facility, when completed, is expected to cost
approximately $846,000, substantially all of which had been
incurred as of December 31, 1999.
Lease Commitments
The Company subleases approximately 10,000 square feet of
office/warehouse space in Lake Mary, Florida. The lease, which
commenced in April, 1999, provides for monthly rent of
approximately $9,600 and expires May 30, 2003.
Future minimum operating lease commitments are approximately as
follows:
Year ending December 31:
2000 $115,000
2001 115,000
2002 115,000
2003 48,000
--------
$393,000
========
Rent charged to operations amounted to approximately $121,000 in
1999 and $45,000 in 1998.
F-26
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. NET LOSS PER COMMON SHARE
The Company computes earnings (loss) per common share in accordance
with the provisions of 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 number of common shares issued in connection with the
acquisition of Omega (226,470) have been considered outstanding shares
for all periods. The number of shares used in the computation were
3,638,983 and 3,218,970 for the years ended December 31, 1999 and 1998,
respectively. Diluted net loss per common share, assuming exercising of
the warrants granted and convertible preferred stock, is not presented
as the effect of conversion is anti-dilutive.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net Loss $(1,677,583) $ (492,814)
Cumulative Preferred Stock Dividend (17,717) (104,167)
Beneficial Conversion Preferred Stock Dividend (468,750) (781,250)
----------- ------------
Net Loss Allocated to Common Stockholders $(2,164,050) $ (1,378,231)
=========== ============
</TABLE>
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair value. These instruments include
cash and cash equivalents, accounts receivable, line of credit and
accounts payable. Fair values were assumed to approximate carrying
values for these financial instruments since they are short-term in
nature and their carrying amounts approximate fair values or they are
receivable or payable on demand.
NOTE 18. SEGMENT INFORMATION
The Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in 1998 which changes the way the
Company reports information about its operating segments.
The Company has two reportable segments, zone cabling products and
formed metal products. As discussed in Note 1, American Access, the
parent company, markets zone cabling products which are manufactured by
Omega. Omega manufactures formed metal products of varying designs for
customers, including American Access.
F-27
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 18. SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
1999 1998
---------------------------------------- ------------------------------------
Zone Formed Zone Formed
Cabling Metal Cabling Metal
Products Products Total Products Products Total
-------- -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $1,364,842 $3,882,841 $5,247,683 $592,086 $4,344,118 $4,936,204
Intersegment revenue - 580,787 580,787 - 234,496 234,496
Investment revenue 250,822 - 250,822 89,731 - 89,731
Interest expense 18,595 - 18,595 2,110 376,864 378,974
Depreciation and amortization 95,324 203,840 299,164 14,701 241,458 256,159
Income tax expense (credit) - (36,000) (36,000)
Segment profit (loss) (2,305,304) 558,271 (1,746,583) (350,533) (142,281) (492,814)
Segment assets $4,148,925 $2,649,687 $6,798,612 $3,858,092 $2,618,319 $6,476,411
</TABLE>
NOTE 19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash paid during the year for:
Interest $ 19,260 $ 139,257
========== ===========
Income taxes $ $ 25,500
========== ===========
Non-Cash Investing and Financing Activities:
Purchase of Genco assets (see Note 4) $ 443,256 $ -
========== ===========
Conversion of 39,400 shares of preferred stock to
common (see Note 12) $3,940,000 $ -
========== ===========
Exercise of 270,000 warrants in exchange for notes
receivable (see Note 2) $2,160,000 $ -
========== ===========
</TABLE>
NOTE 20. SUBSEQUENT EVENTS
Joint Venture Agreement
On January 26, 2000, the Company entered into a Joint Venture
Agreement with Vulcan Microsystems and Grovegate Capital Partners,
LLC. The Joint Venture was organized for the purpose of entering
into the business of developing and marketing an e-based value
added distributor of communications equipment.
Pursuant to the Joint Venture agreement, the Company is obligated
to provide the following in exchange for a 76% ownership interest
in the Joint Venture.
o Provide $395,000 of cash to fund operating costs within the
first sixty days.
o Issue 135,000 shares of Company common stock to Vulcan upon
successful alpha testing.
F-28
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 20. SUBSEQUENT EVENTS (Continued)
Joint Venture Agreement (Continued)
o Guarantee any contracts or obligations for ongoing commitments
in connection with technology or management, not to exceed
$25,000 per month.
o Issue to Vulcan 1,000,000 three-year warrants to purchase
Company common stock at $25 per share upon acceptance of the
alpha site.
Vulcan has the right to convert its 19% interest in the Joint
Venture into Company common stock at any time through January 2005.
Immediately following the Joint Venture agreement, the Company
entered into a twelve-month technology consulting agreement with
two principals of Vulcan, whereby they receive warrants to purchase
200,000 shares of Company common stock. These warrants are
exercisable for cash only, at an exercise price of $10 per share
for the first 180 days and an exercise price of $15 for the
remainder of the one-year life, up to January 26, 2001.
Proposed Equity Financing
In 2000, the Company entered into a letter of understanding,
whereby it has agreed to sell up to $15,000,000 of Company common
stock in exchange for cash payments in monthly allotments of up to
$1,150,000 with an initial allotment of $2,250,000. The sales price
will be the lowest three day average bid price during the
twenty-two days preceding the sales, less a discount of 8%.
The Company will pay a 1% fee on the total at the initial purchase.
In addition, there will be a 1% fee on each sale. The Company will
pay all legal fees in excess of $10,000 and due diligence fees not
to exceed $15,000.
Stock Option Plan
In February 2000, the Board of Directors of the Company (the
"Board") authorized the 2000 Employee Stock Option Plan (the "Stock
Option Plan") for those employees, consultants, and advisors (the
"Participants") of the Company who, in the judgment of the Company
are or will become responsible for the direction and financial
success of the Company. The adoption of the Stock Option Plan has
not yet been ratified by the stockholders. The purpose of the Stock
Option Plan is to provide the Participants with an increased
incentive to make significant contributions to the long-term
performance and growth of the Company.
F-29
<PAGE>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 21. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
<TABLE>
<CAPTION>
<S> <C>
Unadjusted net loss $ 281,000
----------
Record stock-based compensation 616,000
Expense abandoned project development costs 352,000
Reclassify interest on stock subscription receivable to equity 120,000
Deferred tax benefit (69,000)
Reverse demo units/samples included in sales 52,000
Record allowance for bad debts 61,000
Record amortization of goodwill 51,000
Correct cost of sales 73,000
Other adjustments 141,000
----------
Total 4th quarter adjustments 1,397,000
----------
Adjusted net loss $1,678,000
==========
</TABLE>
F-30
<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 .................................................
Selling Shareholder
Plan of Distribution/Selling Security Holders .............................
Legal Matters .............................................................
Experts ...................................................................
Additional Information ....................................................
Index to Financial Statements .............................................
UNTIL ____________, 2000 (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.
<PAGE>
PROSPECTUS
--------------------------------------------------------------------------------
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 $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Printing Expenses $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Legal Fees and Expenses $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Accounting Fees and Expenses $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Blue Sky Fees and Expenses $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Transfer Agent Fees and Expenses $
----------------------------------------------------------------------
----------------------------------------------------------------------
Estimated Misc. $
----------------------------------------------------------------------
----------------------------------------------------------------------
Total $
----------------------------------------------------------------------
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 during the last three
years.
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.
During October-December 1998, the Company issued 50,000 shares of 10%
Series A Senior Convertible Preferred Stock with net proceeds of approximately
$4,262,180. The securities underlying the Preferred shares were registered on
April 6, 1999, File No. 333-68791 under Rule 424(e). As of April 31, 2000, all
preferred shares have been converted and sold in the open market.
II-1
<PAGE>
On April 10, 1999 the company issued 750,000 stock purchase warrants to
officers of the company. The warrants are exercisable at $22 per share and
expire July 1, 2004. Also on April 10, the Company issued 104,000 warrants
exercisable for common stock at $23 per share, and issued in conjunction with a
settlement negotiated with holders of Preferred shares pursuant to a transaction
by the Company. 100,000 warrants at $25 per share that had been issued to
Merrill Weber & Co., for its involvement in the private placement for preferred
shareholders, were reduced to $23 for assisting in negotiations in the above
matter. These warrants expire June 3, 2004. Also on April 10, the Board
authorized 85,000 warrants at an exercise price of $25, to be awarded to outside
directors and investment bankers and to expire July 1, 2004.
The Company on September 8, 1999 issued 100,000 $11 warrants to
purchase common stock to investment bankers M.S. Farrell & Co., and which expire
September 8, 2004. On May 26, 2000, the warrants issued were repriced at $4.75.
Gunn Allen Financial was issued 100,000 three-year warrants on November
15, 1999. The exercise prices are 5,000 shares at $6.375; 15,000 shares at $7.20
per share; 50,000 shares at 9.50 per share; and 30,000 shares at $11.25 per
share.
On January 10, 2000, the company authorized a directors' stock option
plan and an employees' stock option plan. Shares under the plan are calculated
at the closing price on that day, which was $5.67. The employee plan includes
500,000 shares to be dispensed by the Compensation Committee. The directors'
plan includes 300,000 set aside to award directors 50,000 each year plus 10,000
for chairing a Board committee and 5,000 for serving on a committee. In 2000,
295,000 options were awarded to directors. Both plans are awaiting shareholders'
approval.
On January 26, 2000 the company issued 200,000 warrants to purchase
common stock to Erik Gray and Bill Wetmore, as consultants in connection with
the services related to assessing the company's e-business opportunities. The
warrants are exercisable at $10 per share up to and including 180 days from
issuance and thereafter at $15 per share until expiration one year from the date
of issuance. The securities underlying the warrants were subsequently registered
with the Securities and Exchange Commission on a Form S-8.
On May 2, 2000, the Company entered into a Stock Purchase Agreement
with Crescent International Ltd We issued 406,278 shares of common stock for
$1,900,000 and two (2) warrants to purchase common stock pursuant to Rule 506 of
Regulation D under the Securities Act of 1933. ..
On May 26, 2000 the Company renewed its agreement for investment
banking services with M.S. Farrell & Co., agreeing to issue 300,000 warrants to
purchase the company's common stock at exercise prices of $4.75, $ 6.00 and
$10.00.
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
---------- -----------
3.1 Restated Article of Incorporation 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).
3.2 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).
II-2
<PAGE>
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).
5.1 Opinion of counsel *
o 8.1 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 1 to Registrant's Registration
Statement on Form SB-2 - File No. 333-43589).
o 8.2 Composite Exhibit of Management Agreements with Vic Murray and Sons,
Steve R. Jones, Steven K. Robinson and Nacex, Inc. Inc (Incorporated by
Reference to Exhibit 8.5 to Amendment No. 1 to Registrant's Registration
Statement of Form SB-2 - File No. 333-43589).
o 8.3 Consulting Agreement dated August 28, 1997 between Registrant and
Steve R. Jones. (Incorporated by Reference to Exhibit 8.6 to Amendment 1
to Registrant's Registration Statement of Form SB-2 - File No. 333-43589).
o 8.4 Management Termination Agreement dated December 9, 1997 between Steven
K. Robinson and Registrant. (Incorporated by Reference to Exhibit 8.7 to
Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No.
333-43589).
o 8.5 Purchase Agreement dated October 21, 1996 between Registrant and
Victor E. Murray. (Incorporated by Reference to Exhibit 8.8 to Amendment 1
to Registrant's Registration Statement of Form SB-2 - File No. 333-43589).
o 8.6 Promissory Note dated December 2, 1996. (Incorporated by Reference to
Exhibit 8.9 to Amendment 1 to Registrant's Registration Statement of Form
SB-2 - File No. 333-43589).
o 8.7 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 10QSB for the Quarter ended September 30,
1998.)
o 8.8 Employment Agreements between Omega Metals, Inc. and John Presley and
Erik Wiisanen. (Incorporated by Reference to Exhibit 8.12 to Amendment 1
to Registrant's Registration Statement of Form SB-2 - File No. 333-68791).
o 8.9 Letter of Intent to Purchase additional land from Troy Fornshell and
Anna Fornshell. (Incorporated by Reference to Exhibit 8.13 to Amendment 1
to Registrant's Registration Statement of Form SB-2 - File No. 333-68791).
o 8.10 Consulting Agreement with Erik Gray and Bill Wetmore. (Incorporated
by Reference to Form 8-K as filed on February 11, 2000.)
o 8.11 Joint Venture Letter Agreement with Vulcan Microsystems.
(Incorporated by Reference to Form 8-K as filed on February 11, 2000.)
o 8.12 Employee 2000 Stock Option Plan.
o 8.13 Directors 2000 Stock Option Plan.
o 8.14 Stock Purchase Agreement, dated May 2, 2000 between Registrant and
Crescent International, Ltd. ((Incorporated by reference to the Company
Form 10-KSB for fiscal year 1999, filed May 16, 2000)
o 8.15 Early Put Warrant, dated May 2, 2000 between Registrant and Crescent
International, Ltd. ((Incorporated by reference to the Company Form 10-KSB
for fiscal year 1999, filed May 16, 2000)
o 8.16 Incentive Warrant, dated May 2, 2000 between Registrant and Crescent
International, Ltd. ((Incorporated by reference to the Company Form 10-KSB
for fiscal year 1999, filed May 16, 2000)
o 8.17 Registration Rights Agreement, dated May 2, 2000 between Registrant
and Crescent International, Ltd. ((Incorporated by reference to the
Company Form 10-KSB for fiscal year 1999, filed May 16, 2000)
II-3
<PAGE>
11.1 Statement Re: Computation of Net Loss per Common Share. (Incorporated by
reference to the Company Form 10-KSB for fiscal year 1999, filed May 16,
2000)
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
10-KSB for fiscal year 1999, filed on April 20, 2000 and Form 10-QSB for
the quarter ended March 31, 2000 filed on May 15, 2000).
* to be filed by amendment.
Item 26. Undertakings.
1.) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
o To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
o To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
o To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
o To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2.) That for the purpose of determining any liability under the Securities Act
of 1935, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bonafide offering thereof.
3.) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Lake
Mary and State of Florida on May 22, 2000.
AMERICAN ACCESS TECHNOLOGIES, INC.
By /s/ John Presley
------------------------------------------
President/ principal executive officer
II-5
<PAGE>
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By /s/ John Presley President and Director, Principal May 22, 2000
--------------------------------------- Executive Officer
John Presley
By /s/ John Cooney Director May 22, 2000
----------------------------------------
John Cooney
By /s/ Bobby E. Story Treasurer, Principal Accounting May 22, 2000
---------------------------------------- Officer, Director
Bobby E. Story
By /s/ Erik Wiisanen Director May 22, 2000
----------------------------------------
Erik Wiisanen
By/s/ Oscar de la Guardia Director May 22, 2000
----------------------------------------
Oscar de la Guardia
</TABLE>
II-5
