Form 10-QSB for AMERICAN ACCESS TECHNOLOGIES, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[XX] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly period ended
June 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to ________________
* * * * * * * * * * * * * * * * * * * * * *
Commission File No. 000-24575
AMERICAN ACCESS TECHNOLOGIES INC.
A Florida corporation
(Exact name of registrant as specified in charter, and state incorporated)
* * * * * * * * * * * * * * * * * * * * * *
Employer Identification No. 59-3410234
37 Skyline Drive, Suite 1101, Lake Mary, Florida 32746
(Address of principal executive offices of registrant)
(407) 333-1446
(Registrant's telephone number, including area code)
* * * * * * * * * * * * * * * * * * * * * *
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X]. NO [ ].
The number of shares of AMERICAN ACCESS TECHNOLOGIES INC. Common Stock (Par
Value $0.001) outstanding at June 30, 2000 was 4,721,051
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<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------ June 30, 2000
UNAUDITED December 31,1999
--------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,304,244 $ 714,109
Investments, including restricted cash of $300,000 -- 833,344
Accounts receivable, net of allowance 940,258 1,014,913
Notes receivable 357,188 585,615
Notes receivable, related parties 320,000 --
Inventories 739,948 570,594
Prepaid expenses and other current assets 59,972 62,307
----------------------------
Total current assets 3,721,610 3,780,882
Property, Plant and Equipment, net of accumulated depreciation 2,728,669 2,547,483
Goodwill 331,245 407,686
Patent Costs & Domain Name 187,561 62,561
----------------------------
Total assets $ 6,969,085 $ 6,798,612
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Line of credit $ -- $ 73,812
Accounts payable and accrued expenses 409,639 465,792
Compensation due to officers/directors/stockholders -- 66,394
Retirement plan -- 75,000
----------------------------
Total current liabilities 409,639 680,998
----------------------------
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 converted
into 505,515 shares of common stock) -- 1,060,000
Common stock, $.001 par value; authorized 30,000,000 and 10,000,000
shares; issued and outstanding 4,721,051 and 4,094,239 shares 4,721 4,094
Additional paid-in capital 11,914,281 9,144,508
Deficit (3,946,048) (3,208,875)
----------------------------
7,972,954 6,999,727
Treasury stock, 63,500 and 136,100 shares, at cost (207,639) (881,843)
Stockholder notes receivable, net of allowance (1,205,869) (270)
----------------------------
Total stockholders' equity 6,559,446 6,117,614
----------------------------
Total liabilities and stockholders' equity $ 6,969,085 $ 6,798,612
============================
</TABLE>
See notes to consolidated financial statements.
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<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales
Formed metal $ 1,841,271 $ 2,210,820 $ 789,332 $ 1,256,511
Zone cabling termination cabinet 1,056,153 714,747 597,676 378,894
--------------------------------------------------------
2,897,424 2,925,567 1,387,008 1,635,405
--------------------------------------------------------
Costs and Expenses:
Cost of sales 1,420,822 1,239,478 664,668 737,701
Selling, general and administrative 1,942,854 1,534,940 1,073,547 858,365
--------------------------------------------------------
3,363,676 2,774,418 1,738,215 1,596,066
--------------------------------------------------------
Income (Loss) Before Other Income (Expense) (466,252) 151,149 (351,207) 39,339
--------------------------------------------------------
Other Income (Expense)
Interest income 27,810 152,457 7,842 72,214
Interest expense (1,698) (13,374) (49) (7,764)
Other income 39,210 36,835 37,210 19,436
Pre-development costs-B2B (200,000)
--------------------------------------------------------
(134,678) 175,918 45,003 83,886
--------------------------------------------------------
Net Income (Loss) before Income Taxes (600,930) 327,067 (306,204) 123,225
Income Tax (Benefit) (15,170) (15,170)
--------------------------------------------------------
Net Income (Loss) $ (600,930) $ 342,237 $ (306,204) $ 138,395
========================================================
Basic Net Income (Loss) Per Common Share $ (0.14) $ (0.05) $ (0.07) $ .02
========================================================
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Six Six
Months Months
Ended Ended
June 30, 2000 June 30, 1999
-----------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (600,930) $ 342,237
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 225,026 150,244
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 74,654 (447,927)
Inventories (169,353) (41,803)
Prepaid expenses and other assets 2,335 (64,456)
Costs in excess of contract sales -- (229,679)
Increase (decrease) in:
Compensation due to officers/directors/stockholders -- (111,235)
Accounts payable and accrued expenses (312,547) (6,736)
--------------------------
Net cash provided (used) by operating activities (780,815) (409,355)
--------------------------
Cash Flows from Investing Activities:
Proceeds from (acquisition of ) investments 833,344 (625,560)
Decrease in note receivable 248,427 --
Acquisition of property and equipment (net of sales and retirements) (329,498) (132,275)
Loans to officers (340,000)
Purchase of domain name (10,000) --
Costs for building under construction (543,035)
--------------------------
Net cash provided (used) by investing activities 402,273 (1,300,870)
--------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 1,573,884 1,668,939
Payments on loans and capital lease obligations (73,812) (9,098)
Purchase of treasury stock (531,395) --
--------------------------
Net cash provided (used) in financing activities 968,677 1,659,841
--------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 590,135 (50,384)
--------------------------
Cash and Cash Equivalents, Beginning 714,109 637,776
--------------------------
Cash and Cash Equivalents, Ending $ 1,304,244 $ 587,392
==========================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 1,698 $ 13,374
==========================
Non cash financing and investing transactions
Conversion of preferred stock to common stock $ 1,060,000 --
Loan of Treasury stock to related party 1,205,599 --
Purchase of domain name in exchange for note payable 115,000 --
</TABLE>
See notes to consolidated financial statements.
4
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AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 Unaudited
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements at June
30, 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 June 30, 2000 and
results of operations for the six months ended June 30, 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. is a telecommunications network solutions
provider that manufactures and distributes several models of patented Zone
Cabling Termination Cabinets (the "Product"). The Product helps manage and route
both copper and fiber optic wiring and cabling used in voice, video, computer
and data transmission systems for telecommunications networks. The cost savings
over time for moves, adds and changes to networks using our products, averages
up to 70 percent.
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.
The Company developed an in-house Information Technology department to build its
Business-to-Business e-commerce web presence as a wholly-owned subsidiary,
Zonecabling.com, Inc. Initial strategic alliances for distribution of the
Company's proprietary products and other products in support of
telecommunications networks, such as infrastructure design, include General
Electric's GE Capital IT Solutions, which among other functions, designs
telecommunications network infrastructure. Other GE divisions that can be of
service may also be made available to the network design end-user. Our strategy
would have contractors specify a zone cabling solution, for which we can provide
a complete package of equipment and design through our alliances.
The B2B was launched on July 14, 2000 with several weeks of testing remaining
before becoming fully operational. Initial joint venture plans with Miami-based
Vulcan Microsystems, Inc. have been terminated, and Vulcan's principals will not
be paid 1 million shares of American Access common stock, due if they had
delivered the web portal. American Access' initial $200,000 contribution to the
joint venture, AATK.com, was expensed as pre-development costs in the first
quarter of 2000.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" which requires the presentation of both basic and
diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the periods. The
computation of earnings per share is reflected in the following schedule:
5
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<CAPTION>
Computation of Net Loss Per Six Months ended Six Months ended Three Months ended Three Months ended
Common Share June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ (600,930) $ 342,237 $ (306,204) $ 138,395
Cumulative Preferred
Stock Dividend 0 (61,195) 0 (61,195)
Beneficial Conversion 0 (468,750) 0 0
----------- ----------- ----------- -----------
Preferred Stock Dividend $ (600,930) $ (187,708) $ (306,204) $ 77,200
----------- ----------- ----------- -----------
Total Weighted Average 4,411,777 3,450,539 4,585,625 3,633,575
----------- ----------- ----------- -----------
Net Loss per Common Share $ (.14) $ (.05) $ (.07) $ .02
----------- ----------- ----------- -----------
</TABLE>
NOTES RECEIVABLE RELATED PARTIES
In May and June 2000, the Company authorized loans to three directors, who also
are officer-employees of American Access or its subsidiaries, and who secured
the loans with personal assets unrelated to these transactions. The secured
loans were to enable these directors to cover margin calls precipitated by a
drop in the price of the Company's common stock. On May 31, 2000 Director and
Company President John Presley and Director Erik Wiisanen each executed a
promissory note and security agreement for $60,000, payable to the Company on or
before December 31, 2000, with interest at the rate of 10 percent paid in
arrears. On June 8, 2000, Director and Chief Financial Officer Bobby Story
executed two promissory notes and a security agreement for a total of $260,000,
payable to the Company on or before December 31, 2000, with interest at the rate
of 10 percent paid in arrears. Although the Company agreed to loan $260,000,
ultimately $200,000 was required.
LOAN OF TREASURY STOCK TO RELATED PARTY
The Company on June 14, 2000 loaned 197,600 share of restricted Treasury stock
to Officer and Director Bobby Story to cover a margin call. This loan is also
secured with personal assets. The shares are to be returned to the company at
the earlier of the date the common stock price reaches $15 or June 14, 2001.
These transactions were approved by disinterested directors in accordance with
the Florida Business Corporation Act. This transaction is included in
stockholder notes receivable, a component of stockholders' equity.
STOCK SUBSCRIPTION RECEIVABLE
During June 1999, an individual affiliated with the 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 theses
shares three notes receivable totaling $2,160,000. The notes receivable, as
amended, are due on December 31, 2001, and bear interest at 10%. The Company can
require the notes to be paid in full sooner if the Company stock price equals or
exceeds $35.
The Company has recorded the exercise of these warrants, net of an allowance, by
increasing common stock outstanding and increasing stockholder notes receivable,
a component of stockholders' equity.
6
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3. Contingencies and Commitments
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. The Company
denies not only any wrongdoing, but most of the material factual allegations as
well, and intends to vigorously defend this case. We have filed a motion to
dismiss with the New York Courts. 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).
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
REVENUES
Revenues for the six months ended June 30, 2000 decreased by $28,143 or
1.0% to $2,897,424 as compared to $2,925,567 for the six months ended June 30,
1999. Revenues for the three months ended June 30, 2000 decreased by $248,397 or
15.2% to $1,387,008 as compared to $1,635,405 for the three months ended June
30, 1999.
COSTS AND EXPENSES
Direct costs represent cost incurred by the Company to have its
products manufactured and assembled. These costs represented 49.0% of revenues
for the six months ended June 30,2000, and 42.4% of revenues for the six months
ended June 30, 1999. The costs represented 47.9% of revenues for the three
months ended June 30, 2000, and 45.1% of revenues for the three months ended
June 30, 1999. The increase in the direct costs is mainly attributed to sales of
generator enclosures representing 42.2% of the parent's revenue in the first six
months. These sales were for fulfillment of the previous owner, Genco Inc.'s
commitments and quotations.
Selling, General and Administrative expenses increased by $407,914 to
$1,942,854 for the six months ended June 30, 2000 as compared to $1,534,940 for
the six months ended June 30, 1999. For the three months ended June 30, 2000,
selling, general and administrative expenses increased by $215,182 to $1,073,547
compared to $858,365 for the three months ended June 30, 1999. This increase was
the result of costs associated with the continued development and 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. Initial joint venture plans
were with Miami-based Vulcan Microsystems, Inc. and have been replaced by an
in-house IT department. Vulcan's principals will not be paid 1 million shares of
American Access common stock, due if they had delivered the web portal.
7
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LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities utilized cash of $780,815 during the
six months ended June 30, 2000 as compared to utilizing cash of $409,355 during
the six months ended June 30, 1999.
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 for future equity sales up to $15 million, will be sufficient
to meet its capital and liquidity needs for the next 12 months. The Company also
believes that cash required to fulfill purchase orders will be available through
bank borrowings or factoring, if required. The company's primary customers are
substantial corporations with credit ratings that will support such credit
arrangements.
Management's plans include the following:
1. We will concentrate our marketing efforts on our B2B e-commerce
portal and continue to market through our traditional channels. We
have established a Strategic Partnership with GE Capital IT
Solutions, which will provide design services. Other alliances are
pending.
2. We are actively soliciting private label agreements, with several
contracts pending.
3. We are expanding our proprietary product line as the needs for
zone cabling become more apparent and defined. We maintain U.S.
and international patents on our products.
4. In August 1999, we acquired the assets of Genco, Inc., a
generator-cover manufacturer. We will honor all pending orders,
but will gradually decrease production in inverse proportion to
our expanded growth in manufacturing of our proprietary zone
cabling units and products subject to private labeling.
5. We have moved from an acquisition and expansion phase into one of
focused growth for sales and revenue.
6. American Access has implemented a Qualified Stock Option Incentive
Plan for employees and directors, which was approved by
shareholders at the 2000 annual meeting. We believe that rewarding
employees who contribute to our growth builds loyalty and
encourages an environment of creative thinking and productivity.
7. The Company has acquired additional working capital through a
Stock Purchase Agreement with Crescent International, Ltd. Up to
$15 million of Company common stock can be sold to Crescent, at
the Company's request, and which Crescent has agreed to purchase,
subject to limitations and conditions.
SUBSEQUENT EVENTS
In July 2000, the Company's Business-to-Business e-commerce portal went live, as
scheduled, after having been created by an in-house IT Department. Testing and
refinement will continue through the third quarter of 2000. The Company will act
as distributor for its own and for other telecommunications manufacturing
companies' products featured on the Internet site. Design services will be
available. The Company has agreements with General Electric's GE Capital IT
Solutions, and is negotiating other such liaisons. Initial joint venture plans
with Miami-based Vulcan Microsystems, Inc. have been terminated, and Vulcan's
principals will not be paid 1 million shares of American Access common stock,
due if they had delivered the web portal. Vulcan's two principals were
originally retained as technology consultants for the project, whereby they were
issued warrants to purchase 200,000 shares of the Company's common stock, which
can still be exercised for $15 per share until January 26, 2001. American
Access' initial $200,000 contribution to the joint venture, AATK.com,, was
expensed as pre-development costs in the first quarter of 2000.
8
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PART II. OTHER INFORMATION
The SB-2 Registration Statement filed with the Securities and Exchange
Commission on May 2, 2000, a right granted pursuant to a Stock Purchase
Agreement with Crescent International Ltd. ("the Invsestor"), became effective
July 12, 2000. The Company may sell its common stock from time to time, and the
Investor shall purchase up to $15 million. The Company on May 2 sold $1.9
million in stock at $4.6766 per share. The sale price is the lowest three-day
average bid price during the 22 days preceding the sales, less an 8% discount.
Subsequent purchases of up to $1,150,000 each may be requested. The Company paid
a 1% fee on the total at the initial purchase. In addition, there will be a 1%
fee on each sale. A 10% commission will be paid to the financial consultants the
Company employs as sales are executed.
In June 2000, the Stockholders at our annual shareholders
meeting ratified the 2000 Employee Stock Option Plan and the 2000 Directors
Stock Option Plan. The Employee plan rewards participants who, in the judgment
of the Company are or will become responsible for the direction and financial
success of the Company. The plan provides increased incentive to make
significant contributions to the long-term performance and growth of the
Company. Shareholders also approved an increase in the authorized shares of the
Company's Common Stock from 10 million to 30 million. Also approved by
shareholders is the Agreement with Crescent International, Ltd. as described
above.
The Shareholders also re-elected John Presley, Bobby Story, Erik
Wiisanen and John Cooney to the Board of Directors. Stephen Albee was elected to
a first term as a director. On June 29, 2000, Bobby Story resigned as a
director, but agreed to serve as a consultant during the transition of
management. Joseph McGuire was appointed to the Board and named Chief Financial
Officer to replace Story. McGuire brings 20 years of Wall Street experience to
the position.
ITEM 6. EXHIBITS AND REPORTS
--------------------
(b) EXHIBITS
The following exhibits are being filed as part of this report:
Exhibit No. Description
----------- -----------
8.2 Joint Venture Agreement with Vulcan Microsystems; Incorporated by
Reference as an Exhibit filed on Form 8-K Feb. 11, 2000
8.3 Consulting Agreement with Erik Gray and Bill Wetmore; Incorporated by
Reference as an Exhibit filed on Form 8-K Feb. 11, 2000
8.4 Employee Stock Option Plan; Incorporated by Reference to Form
10-KSB filed with the Securities and Exchange Commission on April
18, 2000.
8.5 Director's Stock Option Plan; Incorporated by Reference to Form
10-KSB filed with the Securities and Exchange Commission on April
18, 2000.
8.6 Stock Purchase Agreement with Crescent International, Ltd.;
Incorporated by Reference to Form 8-K, filed with the Securities and
Exchange Commission on May 5, 2000.
8.7 Registration Rights Agreement with Crescent International Ltd;
Incorporated by Reference to Form 8-K, filed with the Securities
and Exchange Commission on May 5, 2000.
8.8 Agreement for issuance of Incentive and Early Put warrants to
Crescent International Ltd.; Incorporated by Reference to Form
8-K, filed with the Securities and Exchange Commission on May 5, 2000.
8.9 Closing Statement to Stock Purchase Agreement with Crescent
International Ltd.; Incorporated by Reference to Form 8-K, filed with
the Securities and Exchange Commission on May 5, 2000.
9
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8.10 Proxy Statement for Annual Shareholders Meeting, Incorporated by
Reference, filed with the Securities and Exchange Commission on
June 10, 2000.
8.11 Promissory note executed by director and officer-employee Erik
Wiisanen.
8.12 Pro Promissory note executed by director and officer-employee John
Presley
8.13 Promissory note executed by director and officer-employee Bobby Story.
8.14 Promissory note executed by Bobby Story for pledge of common stock.
27.0 Financial Data Schedule
(c) Exhibits on Form 8-K Incorporated By Reference, as filed
with the Securities and Exchange Commission on April 6, 2000,
May 5, 2000 and as a subsequent event on July 27, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 2000
AMERICAN ACCESS TECHNOLOGIES, INC.
(Registrant)
By: /s/ Joseph F. McGuire
----------------------------------------
Joseph F. McGuire
Treasurer
Chief Financial Officer
By: /s/ John E. Presley
----------------------------------------
John E. Presley
President
10
