<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934 FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
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 Number: 0-11933
AXCESS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 85-0294536
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3208 COMMANDER DRIVE, CARROLLTON, TEXAS 75006
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(972) 407-6080
--------------
(Registrant's telephone number, including area code)
LASERTECHNICS, INC.
-------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Shares of common stock outstanding on May 11, 1998: 2,466,868. Shares of
non-voting common stock outstanding on May 11, 1998: 112,492.
Transitional Small Business Disclosure Format (Check One); Yes No X
--- ---
<PAGE> 2
AXCESS INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets for the three months
ended March 31, 1998 and 1997, Unaudited............................................ 1
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997, Unaudited............................................ 3
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997, Unaudited............................................ 4
Notes to Condensed Consolidated Financial Statements, Unaudited..................... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................... 9
PART II. OTHER INFORMATION
Item 1 Legal Proceedings .................................................................. 13
Item 2. Changes in Securities .............................................................. 13
Item 4. Submission of Matters to Vote of Securityholders.................................... 14
Item 6. Exhibits and Reports on Form 8-K.................................................... 15
SIGNATURES............................................................................................ 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AXCESS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 506,660 $ 1,687,178
Note receivable from stockholder ....................... 1,790,679 1,158,684
Accounts receivable - trade, less allowance for doubtful
accounts of $379,196 in 1998 and $380,911 in 1997 .... 1,710,319 1,864,270
Inventory .............................................. 4,959,672 5,244,116
Prepaid expenses and other ............................. 231,914 180,218
----------- -----------
Total current assets ........................... 9,199,244 10,134,466
----------- -----------
Property, plant & equipment, net ......................... 2,931,721 2,974,725
Goodwill, net ............................................ 69,964 90,473
Deferred license fee, net ................................ 932,542 1,400,000
Other assets ............................................. 175,203 85,748
----------- -----------
Total assets ................................... $13,308,674 $14,685,412
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to stockholders (note 3) ................. $ 2,953,925 $ 2,931,821
Notes payable .......................................... 895,565 3,942,495
Accounts payable ....................................... 1,460,640 1,789,321
Capital lease obligations, current ..................... 770,067 807,935
Other accrued liabilities .............................. 2,016,069 2,089,793
----------- -----------
Total current liabilities ..................... 8,096,266 11,561,365
Capital lease obligations, noncurrent .................... 101,345 114,845
Note payable - long term ................................. 2,005,205 535,205
Other .................................................... 4,694 4,694
----------- -----------
Total liabilities .............................. $10,207,510 $12,216,109
----------- -----------
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
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<PAGE> 4
AXCESS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock:
7,000,000 shares authorized in 1998 and 1997
Series A: $26.00 stated value; 57,692
shares outstanding in 1998 and 1997 ............................. $ 1,500,000 $ 1,500,000
Series B: $28.40 stated value; 52,817
shares outstanding in 1998 and 1997 ............................. 1,500,000 1,500,000
Series C: $30.20 stated value; 35,427
shares outstanding in 1998 and 1997 ............................. 1,069,880 1,069,880
Series G: $10,000.00 stated value; 995
shares outstanding in 1998 and 789.735 in 1997 .................. 9,950,000 7,897,353
Series H: $10,000.00 stated value; 160
shares outstanding in 1998 and none in 1997 ..................... 1,600,000 --
Common stock, $.01 par value, 6,250,000 shares authorized in 1998 and
2,837,500 in 1997; 2,466,868 shares issued
and outstanding in 1998 and 2,331,748 in 1997 ..................... 24,669 23,318
Non-voting convertible common stock, $.01 par value, 112,500
shares authorized in 1998 and 1997; 112,492 shares issued
and outstanding in 1998 and 1997. Convertible into common
stock on a one share for one share basis .......................... 1,125 1,125
Additional paid-in capital .................................................. 57,750,414 57,168,716
Accumulated deficit ......................................................... (70,294,924) (66,691,089)
------------ ------------
Total stockholders' equity ............................. 3,101,164 2,469,303
------------ ------------
Total liabilities and stockholders' equity ............. $ 13,308,674 $ 14,685,412
============ ============
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
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<PAGE> 5
AXCESS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
Sales ...................................................... $ 2,288,027 $ 4,589,787
Cost of sales .............................................. 1,427,975 2,662,572
----------- -----------
Gross profit ........................................ 860,052 1,927,215
----------- -----------
Expenses:
Research and development .............................. 1,576,783 753,251
General and administrative ............................ 1,329,066 1,002,501
Selling and marketing ................................. 1,079,334 1,468,589
----------- -----------
Total operating expenses .......................... 3,985,183 3,224,341
----------- -----------
Loss from operations .............................. (3,125,131) (1,297,126)
----------- -----------
Other income (expense):
Interest income ....................................... 33,780 11,135
Interest expense ...................................... (291,806) (171,249)
Other ................................................. 60,849 16,229
----------- -----------
Other expense, net .......................... (197,177) (143,885)
----------- -----------
Net loss ................................... (3,322,308) (1,441,011)
Preferred stock dividend requirements ...................... (281,527) (189,215)
----------- -----------
Net loss applicable to common stock ........ $(3,603,835) $(1,630,226)
=========== ===========
Basic and diluted net loss per share ....................... $ (1.47) $ (0.81)
=========== ===========
Weighted average basic and diluted shares of
common stock outstanding ................... 2,445,727 2,006,450
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
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<PAGE> 6
AXCESS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... $ (3,322,308) $ (1,441,011)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization .............................. 129,464 150,312
Provision for losses on accounts receivable ................ (1,715) 2,987
Provision for product warranty reserve ..................... 10,647 93,179
Amortization of financing discount, issuance costs
and other non-cash interest .............................. 93,419 30,542
Accrued interest on convertible debentures ................. -- 47,644
Non-cash compensation ...................................... -- 40,000
(Increase) decrease in:
Accounts receivable, net ............................... 155,666 (1,580,686)
Inventory .............................................. 284,444 397,858
Prepaid expenses and other ............................. (51,696) 213,661
Other assets ........................................... 85,545 54,799
Increase (decrease) in:
Accounts payable ....................................... (328,681) 1,627,545
Accrued liabilities .................................... (140,941) (616,939)
------------ ------------
Net cash used in operating activities .............. (3,086,156) (980,109)
Cash flows from investing activities:
Capital expenditures ............................................. (65,951) (117,929)
------------ ------------
Cash flows from financing activities:
Borrowings under financing agreements ............................ -- 250,000
Principal payments on financing agreements ....................... (924,826) (75,725)
Principal payments on capital lease obligations ................. (51,368) (80,456)
Net proceeds from issuance of preferred and common stock ......... 2,947,783 --
------------ ------------
Net cash provided by financing activities ...... 1,971,589 93,819
Net decrease in cash and cash equivalents ...... (1,180,518) (1,004,219)
Cash and cash equivalents, beginning of period ....................... 1,687,178 1,598,744
------------ ------------
Cash and cash equivalents, end of period ............................. $ 506,660 $ 594,525
============ ============
</TABLE>
(Continued)
See accompanying notes to unaudited condensed
consolidated financial statements.
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<PAGE> 7
AXCESS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 31,
1998 1997
---- ----
<S> <C> <C>
Supplemental information:
Cash paid during the period for interest .............. $ 54,541 28,374
========== ========
Conversions to stock:
Debentures, net of unamortized discount and expenses $ -- 268,836
Accrued interest ................................... $ -- 34,699
========== ========
Convertible preferred stock accretion ................. $ -- 87,468
========== ========
Restricted common stock issued in connection with
Xerox settlement ................................... $ 562,500 --
========== ========
Conversion feature, detachable warrants and restricted
common stock issued in connection with notes payable
to stockholders .................................... $ 93,419 --
========== ========
Conversion of accrued interest and current note payable
to long-term note payable and deferred license
fee................................................. $1,694,958 --
========== ========
</TABLE>
See accompanying notes to unaudited condensed
consolidated financial statements.
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<PAGE> 8
AXCESS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These unaudited condensed consolidated financial statements of AXCESS
Inc. ("AXCESS") (formerly Lasertechnics, Inc.) and its majority and
wholly-owned subsidiaries, Sandia Imaging Systems Corporation
("Sandia"), Sandia Imaging Systems Europe SA ("Sandia Europe") and
Lasertechnics Marking Corporation ("LMC") (unless otherwise indicated,
"AXCESS", "Sandia", "Sandia Europe" and "LMC" are hereinafter
collectively referred to as the "Company"), for the quarter ended March
31, 1998, have been prepared in accordance with generally accepted
accounting principles for interim financial reporting. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements and should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's Form 10-KSB, as amended, for the year ended December 31,
1997. All significant intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been made
to the prior period amounts in order to present the consolidated
financial position and results of operations on a consistent basis. In
the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial
position at March 31, 1998, results of operations for the three month
period ended March 31, 1998 and 1997, and changes in cash flows for the
three months ended March 31, 1998 and 1997 have been made. The results
of operations for any given three month period are not necessarily
indicative of the results for an entire year.
The Company has restated its condensed consolidated financial
statements for the three months ended March 31, 1997, to conform its
accounting for beneficial conversion features related to the issuance
of convertible debentures in October 1995 and March 1996, and
convertible preferred stock issued in July 1996 to the Financial
Accounting Standard Board's Emerging Issues Task Force Topic No. D-60
issued in March 1997 ("Topic No. D-60"). Topic No. D-60 requires that
the intrinsic value of beneficial conversion features of convertible
debt securities should be recognized as interest expense over the
period from issuance to the first date that conversions can occur.
Previously, the Company was amortizing the estimated fair value of the
beneficial conversion feature to interest expense over the life of the
convertible debentures. Topic No. D-60 further states that the
intrinsic value of beneficial conversion features of convertible
preferred stock should be treated as a return to the preferred
stockholder over the period from issuance to the first date that
conversion can occur. The Company had not previously assigned a value
to the beneficial conversion feature of its Series D Convertible
Preferred Stock. As a result of this restatement, interest expense for
the three months ended March 31, 1997, was reduced by approximately
$50,000.
(2) EARNINGS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share, in the fourth
quarter of 1997, which requires companies to present basic earnings per
share and diluted earnings per share. Basic earnings per share is
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company restated its
March 31, 1997, per share calculation to reflect the adoption of SFAS
128.
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<PAGE> 9
AXCESS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(3) COMPREHENSIVE INCOME
In June 1997, Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, was issued. SFAS 130
establishes standards for reporting and displaying comprehensive income
and its components in an annual financial statement that is displayed
with the same prominence as other financial statements.
Reclassification of financial statements for earlier periods is
required if provided for comparative purposes. The statement also
requires the accumulated balance of other comprehensive income to be
displayed separately from retained earnings and additional
paid-in-capital in the equity section of the statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after
December 31, 1997. The adoption of this statement has no effect on the
Company for the quarters ended March 31, 1998 and 1997.
(4) SPECIAL MEETING OF STOCKHOLDERS
At a special meeting of stockholders held on March 31, 1998, the
stockholders approved a proposal to effect a 1-for-20 reverse stock
split and a proposal to change the Company's name from Lasertechnics,
Inc. to AXCESS Inc. The stockholders meeting was adjourned until April
8, 1998, at which time the stockholders approved a proposal to decrease
the number of authorized common shares of the Company from 56,750,000
to 6,250,000. All references to shares in the accompanying condensed
consolidated financial statements have been retroactively changed to
reflect the reverse stock split. Unless otherwise indicated, the effect
of these changes has been retroactively made in the accompanying
condensed consolidated financial statements, footnotes and management's
discussion and analysis and other information.
(5) ISSUANCE OF COMMON STOCK
During the quarter ended March 31, 1998, a total of 135,120 shares of
AXCESS common stock were issued. The Company and Xerox Corporation
("Xerox") entered into a settlement agreement, which was accounted for
as though effective on March 31, 1998, to revise previously existing
indebtedness due Xerox of $2.1 million plus accrued interest, pursuant
to which the Company agreed to pay Xerox $1.47 million of a license
fee for certain technology and issue Xerox 120,000 shares of common
stock, effective March 31, 1998, with a fair value of $562,500. Xerox
has agreed not to sell any of these shares until December 1999, at
which time shares may be subject to certain limitations. The reduction
in the amounts due Xerox as a result of the settlement agreement has
been credited to deferred licensing fee on the accompanying unaudited
condensed consolidated balance sheet at March 31, 1998. The Company
funded the payment to Xerox from proceeds received, effective March
31, 1998, from Amphion Ventures L.P. under the terms of a two-year
loan which bears interest at the rate of 10% per annum. Accordingly,
the Company has classified the $1.47 million as a non-current
liability in the accompanying balance sheet at March 31, 1998. In
addition, Amphion Ventures L.P. received, effective March 31, 1998, as
a loan origination fee, (i) 15,120 shares of restricted common stock
with a fair value of approximately $68,000 as of the date of issuance
and (ii) 3-year warrants to purchase 14,700 shares of Common Stock
with an exercise price of $5.00 per share with a fair value of
approximately $25,000 as of the date of issuance. In connection with
the shares and warrants, the Company recorded a discount to equity of
approximately $93,000, which has been accreted to interest expense.
(6) ISSUANCE OF PREFERRED STOCK AND FINANCING COMMITMENT
During quarter ended March 31, 1998, Amphion Ventures L.P. purchased
205 shares of the Company's Series G Convertible Preferred Stock at its
stated value of $10,000 per share for a total aggregate purchase price
of $2,050,000.
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<PAGE> 10
The Company also obtained a $5.5 million commitment for equity
financing from Amphion Ventures L.P. In connection with the Company's
1998 plan of operations, Amphion Ventures L.P. has committed to
purchase up to $5.5 million of the Company's Series G Convertible
Preferred Stock at its stated value of $10,000 per share or the
Company's new Series H NonVoting Convertible Preferred Stock at its
stated value of $10,000 per share. As an inducement to provide such
equity financing, Amphion Ventures L.P. received three-year warrants
having an aggregate value equal to 10% of the total stated value of the
preferred stock purchased with an exercise price equal to the market
price of the Company's common stock on the date of the preferred stock
purchase. The warrants are not exercisable, however, if the exercise
would result in the purchaser being deemed the beneficial owner of more
than 48% of the Company's common stock. Pursuant to this arrangement,
the Company issued 160 shares of Series H Convertible Non-Voting
Preferred Stock to Amphion Ventures L.P. in March 1998, for a total
purchase price of $1,600,000.
(7) CONTINGENCIES
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of
management of the Company, the ultimate disposition of these matters
will not have a material effect on the accompanying condensed
consolidated financial statements. See Legal Proceedings - Part II,
Item I.
(8) SUBSEQUENT EVENTS
In August 1997, the Securities and Exchange Commission approved certain
changes to the continued listing requirements of the Nasdaq SmallCap
Market. Two such rule changes, which became effective February 22,
1998, require an issuer to maintain a minimum bid price of $1 per share
for its listed securities and to maintain a minimum of $2 million in
net tangible assets. A special stockholders' meeting was held on March
31, 1998, at which time the stockholders approved, among other things,
a 1-for-20 reverse split. As of April 2, 1998, the first full trading
day after the Company gave notice to Nasdaq that the reverse stock
split was approved by its stockholders, the closing bid price of the
Common Stock was $5.00 per share, which is in excess of the minimum bid
price of $1.00 per share established by the new Nasdaq listing
requirements. Further, by letter dated April 15, 1998, Nasdaq advised
the Company that it was in compliance with the new Nasdaq listing
requirements and approved the Company's continued listing on Nasdaq.
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<PAGE> 11
AXCESS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Separate Business Units. The summarized financial data of LMC and Sandia as of
and for the three-month period ended March 31, 1998, as presented below, do not
necessarily reflect the financial position or results of operations of LMC and
Sandia if the two entities had no ownership or management relationships.
<TABLE>
<CAPTION>
Marking Consolidated
(Sandia) (LMC) (AXCESS)
THREE MONTHS ENDED MARCH 31, 1998 (Unaudited) (Unaudited) (Unaudited)
- ---------------------------------
<S> <C> <C> <C>
Sales ....................................... $ 732,415 1,555,612 2,288,027
Cost of sales ............................... 358,057 1,069,918 1,427,975
----------- ----------- -----------
Gross profit ........................... $ 374,358 485,694 860,052
----------- ----------- -----------
Gross margin % ......................... 51% 31% 38%
----------- ----------- -----------
Operating Expenses:
Research and development .................... $ 1,404,700 172,083 1,576,783
General and administrative .................. 984,106 344,960 1,329,066
Selling and marketing ....................... 808,293 271,041 1,079,334
----------- ----------- -----------
Total operating expenses ........... 3,197,099 788,084 3,985,183
----------- ----------- -----------
Loss from operations ............... (2,822,741) (302,390) (3,125,131)
Other expense, net .......................... (167,129) (30,048) (197,177)
----------- ----------- -----------
Net loss before preferred dividends ......... $(2,989,870) (332,438) (3,322,308)
=========== =========== ===========
THREE MONTHS ENDED MARCH 31, 1997
- ---------------------------------
Sales ....................................... $ 2,482,492 2,107,295 4,589,787
Cost of sales ............................... 1,506,044 1,156,528 2,662,572
----------- ----------- -----------
Gross profit ........................... $ 976,448 950,767 1,927,215
----------- ----------- -----------
Gross margin % ......................... 40% 45% 42%
----------- ----------- -----------
Operating Expenses:
Research and development .................... $ 507,905 245,346 753,251
General and administrative .................. 615,501 387,000 1,002,501
Selling and marketing ....................... 1,139,131 329,458 1,468,589
----------- ----------- -----------
Total operating expenses ........... 2,262,537 961,804 3,224,341
----------- ----------- -----------
Loss from operations ............... (1,286,089) (11,037) (1,297,126)
Other expense, net .......................... (81,836) (62,049) (143,885)
----------- ----------- -----------
Net loss before preferred dividends ......... $(1,367,925) (73,086) (1,441,011)
=========== =========== ===========
</TABLE>
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<PAGE> 12
AXCESS INC. AND SUBSIDIARIES
Consolidated sales for the three months ended March 31, 1998 were $2,288,027,
representing a decrease of $2,301,760 or a 50% decrease from the first quarter
of 1997. Imaging segment sales decreased $1,750,077 or a 70% decrease from the
same period last year primarily due to significant printer sales to three major
customers in the first quarter of 1997 and no significant printer sales to major
customers in the first quarter of 1998. Marking segment sales decreased $551,683
or a 26% decrease from the same period last year due to a decrease in domestic
marker sales. The Company's ability to improve future sales may be affected by
the volatility of market demand, timing of large governmental and state agency
contracts, competition and technological innovations.
Consolidated cost of sales for the three months ended March 31, 1998 was
$1,427,975, representing a decrease of $1,234,597 or a 46% decrease from the
first quarter of 1997. The decrease was primarily attributable to the decrease
in sales. Gross margin as a percentage of sales decreased in the first quarter
of 1998 to 38% from 42% in the same period in 1997. The decrease in gross margin
for the three months ended March 31, 1998 was primarily due to increased product
costs and warranty expense in the marking segment of the Company's business.
Consolidated research and development expenses were $1,576,783 representing an
increase of $823,532 or a 109% increase over the first quarter of 1997. The
increase was due to the expenditure of approximately $1,000,000 for new product
development costs associated with the Technology Development Agreement with XL
Vision, Inc., a Safeguard Scientifics partnership company.
Consolidated general and administrative expenses for the three months ended
March 31, 1998, were $1,329,066, representing an increase of $326,565 or a 33%
increase over the first quarter of 1997. This increase was primarily due to
legal, printing and accounting costs associated with the special shareholder
meeting held in March 1998 to consider and vote on proposals to effect a 1-for
20 reverse stock split, change the authorized common shares and the name change
to AXCESS Inc.
Consolidated selling and marketing expenses for the three months ended March 31,
1998, were $1,079,334, representing a decrease of $389,255 or a 27% decrease
from the first quarter of 1997. Imaging segment's net decrease was approximately
$330,000 primarily because of lower DataGlyph(TM) license fees and marketing
expenses, lower commissions due to lower sales and lower customer service costs.
Other expense, consisting primarily of interest expense, for the three months
ended March 31, 1998 was $197,177 compared to $143,885 for the same period in
1997. Total interest expense was $291,806 in 1998 compared to $171,249 in 1997
for an increase of $120,557 or 70%. The higher interest costs is in line with
the higher level of debt outstanding during the 1998 quarter plus the interest
charge associated with the shares and warrants issued in connection with the
note payable to shareholders.
The consolidated net loss for the three months ended March 31, 1998 was
$3,667,961 compared to the $1,630,226 loss incurred in the same period of 1997
for an increase of $2,037,735 or 125%. Lower sales resulted in lower gross
profits of approximately $1,000,000. The remainder of the increase is the result
of $1,000,000 in research and development costs associated with the new product
development agreement with XL Vision, and a higher preferred dividend
requirement due to the increase in outstanding convertible preferred stock.
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<PAGE> 13
AXCESS INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Since its inception the Company has utilized the proceeds from a number of
public and private sales of its equity and debt securities and the exercise of
options and warrants to meet its working capital requirements.
Cash and cash equivalents decreased $1,180,527 at March 31, 1998 compared to
December 31, 1997. Financing activities generated net cash of $1,971,589
principally from borrowings under financing agreements and the sale of preferred
stock. Operating activities used net cash of $3,086,156 principally to support
the loss of $3,322,308 plus decreases in accounts payable and accrued
liabilities. Capital expenditures amounted to $65,951 compared to $117,929 for
the same period in 1997.
The Company's future working capital requirements will depend upon many factors,
including the extent and timing of the Company's product sales, the Company's
operating results and the status of competitive products. In addition, if the
Company elects to continue to develop the document reader, digital camera and
dithering technology that it has a right to acquire from XL Vision, Inc. ("XLV")
under the terms of the Intellectual Property Transfer Agreement by and between
the Company and XLV, the Company will be obligated to pay XLV $3,600,000.
Although the Company's actual working capital needs depend upon numerous
factors, including actual expenditures and revenues generated from its
operations as compared to its business plan, the Company does not anticipate
that its existing working capital resources and revenues from operations will be
adequate to satisfy its working capital requirements for the remainder of the
year. The Company has received a commitment for up to $5.5 million of new
financing, in the form of convertible preferred stock purchases, from an
affiliate of an existing institutional investor (See Note 6 to Notes to
Unaudited Condensed Consolidated Financial Statements included herein). During
the first three months of 1998, the Company used $1.6 million of this
commitment, leaving a remainder of $3.9 million. The Company is currently in
discussions with other existing and potential corporate and institutional
investors, and believes that the Company will be able to obtain additional
funding. However, no other commitments have been received by the Company for
such funding and there can be no assurances that such funding will be available
on terms satisfactory to the Company, or on any terms.
In 1983, the City of Albuquerque, New Mexico issued 8% tax-exempt industrial
development revenue bonds in connection with a 25-year capital lease of LMC's
headquarters facility. The principal amount outstanding as of March 31, 1998 was
approximately $794,000. Pursuant to its agreement with the City of Albuquerque,
AXCESS is required to maintain a current ratio of at least 1 to 1. At March 31,
1998, AXCESS' current ratio was 1.14 to 1 which is in compliance with the lease
terms.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
The Company occasionally makes forward-looking statements concerning its plans,
goals, product and service offerings, and anticipated financial performance.
These forward-looking statements may generally be identified by introductions
such as "outlook" for an upcoming period of time, or words and phrases such as
"should", "expect", "hope", "plans", "projected", "believes", "forward-looking"
(or variants of those words and phrases) or similar language indicating the
expression of an opinion or view concerning the future.
- 11 -
<PAGE> 14
AXCESS INC. AND SUBSIDIARIES
These forward-looking statements are subject to risks and uncertainties based on
a number of factors and actual results or events may differ materially from
those anticipated by such forward-looking statements. These factors include, but
are not limited to: the ability to raise capital; the growth rate of the
Company's revenue and market share; the consummation of new, and the
non-termination of, existing relationships with customers and suppliers; the
Company's ability to effectively manage its business functions while growing the
Company's business in a rapidly changing environment; the ability of the Company
to adapt and expand its services in such an environment; the effective and
efficient development of new products; and the quality of the Company's plans
and strategies, and the ability of the Company to execute such plans and
strategies.
In addition, forward-looking statements concerning the Company's expected
revenue or earnings levels are subject to many additional uncertainties
applicable to competitors generally and to general economic conditions over
which the Company has no control. The Company does not plan to generally
publicly update prior forward-looking statements for unanticipated events or
otherwise and, accordingly, prior forward-looking statements should not be
considered to be "fresh" simply because the Company has not made additional
comments on those forward-looking statements. See "Cautionary Statements" in the
Company's Form 10-KSB for the period ended December 31, 1997.
SHARES ELIGIBLE FOR FUTURE SALE; CONVERTIBLE SECURITIES AND WARRANTS
Future sales of common stock in the public market by existing stockholders,
warrant holders and holders of convertible securities subsequent to the date
hereof could adversely affect the market price of AXCESS' common stock. At March
31, 1998, an aggregate of approximately 1,706,855 shares of Common Stock were
freely tradable without restriction under the Securities Act of 1933 (the
"Securities Act"). In addition, up to 760,013 shares were eligible for resale in
accordance with the manner of sale and volume limitations of Rule 144
promulgated under the Securities Act.
As of March 31, 1998, there were 57,692, 52,817 and 35,427 shares of Series A, B
and C convertible preferred stock outstanding, respectively. Each share of
Series A, B and C convertible preferred stock is convertible at any time, at the
option of the holder, into one share of common stock. As of March 31, 1998,
there were 995 and 160 shares of Series G and Series H convertible preferred
stock outstanding, respectively. Each share of Series G and H convertible
preferred stock has a stated value of $10,000 per share. Shares of the Series G
convertible preferred stock are convertible at any time, at the option of the
holder, into common stock based upon a conversion price of $10.00 per share.
Shares of the Series H convertible preferred stock are convertible at any time,
at the option of the holder, into non-voting common stock based on a conversion
price of $10.00 per share.
A note payable, in the principal amount of $535,205 with final maturity of
January 15, 2000, will become convertible anytime after January 15, 1999 at a
conversion price of $5.00 per share.
There are currently 355,004 warrants outstanding to acquire the same number of
shares of common stock. AXCESS has reserved approximately 500,000 shares of
Common Stock for issuance upon the exercise of outstanding convertible
securities and warrants. AXCESS has also reserved approximately 55,000 shares of
Common Stock for issuance to key employees, officers, directors and consultants
pursuant to the Company's benefit plans.
- 12 -
<PAGE> 15
AXCESS INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, on February 28, 1996, an investor group filed suit
against the Company in the United States District Court for the Southern
District of New York. This lawsuit arises out of the Company's refusal to
recognize the investor group's attempt to exercise an option to purchase 70,000
shares of the Company's common stock at a price of $9.90 per share. The option
had been granted to the Company's former President and CEO who attempted to
transfer his option to the investor group on the last day of the option term in
September of 1995. On that same day, the investor group attempted to exercise
the option. The Company refused to recognize the attempted transfer of the
option to the investor group on the primary grounds that the option was granted
personally to the Company's former President and CEO and was not transferable to
third-parties. The lawsuit seeks issuance and registration of the 70,000 shares
upon payment of the exercise price, or in the alternative, monetary damages,
which the investor group alleges to be not less than $2,800,000. On May 1, 1996
the Company moved to dismiss the complaint on the grounds that the court in New
York lacked personal jurisdiction over the Company. The court denied the motion
to dismiss by order dated June 10, 1997. Subsequently, the Company filed an
answer, denying the material allegations of the complaint and asserting various
defenses. On December 31, 1997, plaintiffs moved for partial summary judgment on
the question of liability, as to whether or not the option was assignable. The
Company filed papers opposing this motion on or about January 26, 1998. Although
the Company intends to vigorously oppose this claim, there can be no assurances
that the Company will prevail in the pending litigation, and an adverse outcome
could have a material adverse effect upon the financial position and liquidity
of the Company.
During the period covered by this report, the Company and Xerox entered into a
settlement agreement regarding the scope of the Company's license for
DataGlyphs(TM), a 2-D symbology developed by Xerox. Under the terms of the
settlement agreement, which was accounted for effective March 31, 1998, the
Company paid Xerox $1.47 million and issued Xerox 120,000 shares of common
stock, effective March, 31, 1998. Xerox agreed not to sell those shares until
December 1999, at which time shares may be sold subject to certain limitations.
See Note 5 to Notes to Unaudited Condensed Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES.
During the first quarter of 1998, the Company issued unregistered securities in
connection with each of the transactions described below.
All references in this section to number of shares and to the exercise or
conversion process of convertible securities are reported on a post 1-for-20
reverse stock split basis. The issuance of preferred stock, common stock and
warrants were exempt from the registration requirements of the Securities Act of
1933, as amended, by virtue of Section 4(2) thereof as a transaction not
involving a public offering and an appropriate restrictive legend was affixed to
the certificates and warrants.
Amphion Ventures L.P. purchased 205 shares of Series G Convertible Preferred
Stock (the "Series G Preferred Stock") and 160 shares of Series H Convertible
Preferred Stock (the "Series H Preferred Stock") during the three month period
ended March 31, 1998, for an aggregate purchase price of $3,650,000. The
purchase price was payable primarily by the delivery of unconditional promissory
notes payable to the Company by Amphion Ventures L.P., the balance of which was
$1,770,000 as of March 31, 1998.
- 13 -
<PAGE> 16
AXCESS INC. AND SUBSIDIARIES
Each share of Series G Preferred Stock is convertible in whole or in part at any
time at the option of the holder into shares of common stock of the Company
equal to the quotient of (i) the aggregate original Series G Preferred stock
issue price of the shares ($10,000/share) being divided by (ii) the conversion
price, which is currently $10.00 and is subject to adjustment from time to time.
Each share of Series H Preferred Stock is convertible in whole or in part at any
time at the option of the holder into shares of non-voting common stock of the
Company equal to the quotient of (i) the aggregate original Series H Preferred
Stock issue price of the shares ($10,000/share) being divided by (ii) the
conversion price, which is currently $10.00 and is subject to adjustment from
time to time. Although the Company's non-voting common stock may be converted to
common stock at any time by a holder thereof, Amphion Ventures has agreed not to
convert any shares of non-voting common stock to common stock until the Company
has issued 1,000,000 shares of common stock to XL Vision, Inc. under the terms
of the Technology Development Agreement by and between the Company and XL
Vision, Inc. unless Amphion Ventures receives the prior written consent of the
Company.
The Company issued 120,000 shares of restricted common stock to Xerox
Corporation in connection with the settlement of a license dispute discussed at
Note 5 to Notes to Unaudited Condensed Consolidated Financial Statements in Part
1 of this report.
The Company issued 15,120 shares of restricted common stock and a three-year
warrant to purchase up to 14,700 shares of common stock with an exercise price
of $5.00 per share to Amphion Ventures L.P. as an inducement for a loan in the
amount of $1.47 million.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As contemplated in the Company's Proxy Statement which was mailed to
stockholders beginning March 12, 1998, the Certificate of Incorporation of the
Company was amended on March 31, 1998 and April 9, 1998 (the "Amendments"), to
effect the following:
1. A 1-for-20 reverse stock split of the issued and outstanding shares
of common stock, non-voting common stock and Series A, B and C
preferred stock of the Company issued and outstanding as of January 30,
1998 (the "Record Date");
2. To provide for a cash payment of $4.50 per share (the "Fractional
Share Price") to each holder of issued and outstanding shares of common
stock as of the Record Date, in lieu of the issuance of fractional
shares which result from the reverse stock split;
3. To change the Company's name from Lasertechnics, Inc. to AXCESS
Inc.; and
4. To reduce the number of authorized shares of the Company's common
stock from 56,750,000 shares to 6,250,000 shares.
The Amendments were approved by the Board of Directors on January 30,
1998, and by the stockholders of the Company at a special meeting on March 31,
1998, which, with respect to item 4 above, was adjoined to and completed on
April 8, 1998. Further, in connection with the Company's name change to AXCESS
Inc., the Company also changed its trading symbol on Nasdaq from "LASX" to
"AXSI."
- 14 -
<PAGE> 17
AXCESS INC. AND SUBSIDIARIES
With respect to the approval of Proposals 1 and 2 described above, the
votes cast for, against and abstaining were as follows (all reported on a
pre-reverse split basis):
For 38,414,332
Against 1,067,589
Abstentions 99,370
With respect to the approval of Proposal 3 described above, the votes
cast for, against and abstaining were as follows (all reported on a pre-reverse
split basis):
For 57,608,893
Against 603,676
Abstentions 208,371
With respect to the approval of Proposal 4 described above, the votes
cast for, against and abstaining were as follows (all reported on a pre-reverse
split basis):
For 45,096,900
Against 994,698
Abstentions 263,975
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
3.1 --Certificate of Incorporation of the Company. Incorporated
herein by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (Registration No. 2-
80946).
3.2 --By-laws of AXCESS. Incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
S-1 (Registration No. 2-80946).
3.3 --First Amendment to Certificate of Incorporation of AXCESS
dated June 6, 1986. Incorporated herein by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1987.
3.4 --Second Amendment to Certificate of Incorporation of AXCESS,
dated May 27, 1987. Incorporated herein by reference to
Exhibit 3.4 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1987.
3.5 --Third Amendment to Certificate of Incorporation of AXCESS,
dated November 11, 1994. Incorporated herein by reference to
Exhibit 4.4 to the Company's Registration Statement on Form
S-3 (Registration No. 333-10665).
3.6 --Fourth Amendment to Certificate of Incorporation of AXCESS,
dated July 28, 1995. Incorporated herein by reference to
Exhibit 4.5 to the Company's Registration Statement on Form
S-3 (Registration No. 333-10665).
- 15 -
<PAGE> 18
AXCESS INC. AND SUBSIDIARIES
3.7 --Fifth Amendment to Certificate of Incorporation of AXCESS,
dated June 17, 1996. Incorporated herein by reference to
Exhibit 4.6 to the Company's Registration Statement on Form
S-3 (Registration No. 333-10665).
3.8 --Sixth Amendment to Certificate of Incorporation of AXCESS
dated March 31, 1998. Incorporated herein by reference to
Exhibit 99.1 to the Company's Report on Form 8-K dated April
13, 1998.
3.9 --Seventh Amendment to Certificate of Incorporation of AXCESS
dated March 31, 1998. Incorporated herein by reference to
Exhibit 99.2 to the Company's Report on Form 8-K dated April
13, 1998.
3.10 --Eighth Amendment to Certificate of Incorporation of AXCESS
dated April 9, 1998. Incorporated herein by reference to
Exhibit 99.3 to the Company's Report on Form 8-K dated April
13, 1998.
4.1 --Certificate of Designation of the Company's Series A, B and
C Preferred Stock, dated December 27, 1995. Incorporated
herein by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-3 (Registration No.
333-10665).
4.2 --Certificate of Designation of the Company's Series G
Preferred Stock. Incorporated herein by reference to Exhibit
4.5 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
4.3 --Certificate of Designation of the Company's Series H
Preferred Stock.*
10.1 --License agreement, dated June 30, 1988, between the Company
and Patlex Corporation. Incorporated herein by reference to
Exhibit 10.17 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1988.
10.2 --1991 Incentive Stock Option Plan, dated August 14, 1991.
Incorporated herein by reference to Exhibit 10.10 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1991.
10.3 --Purchase Agreement between Sandia Europe and Jean-Luc
Poutchnine, Alain Quilleau and Philippe Bonnevie, dated March
4, 1994. Incorporated herein by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.4 --Letter confirming sale of shares of AXCESS Common Stock to
Singapore Precision Industries PTE LTD, dated May 12, 1994.
Incorporated herein by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.5 --Advisory and investment banking services agreement between
AXCESS and Wolfensohn International, Inc., dated May 19, 1993.
Incorporated herein by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.6 --Purchase of Common Stock and Convertible Note Agreement
between the Company and J.P. Morgan Investment Corporation,
dated July 8, 1994. Incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.
- 16 -
<PAGE> 19
AXCESS INC. AND SUBSIDIARIES
10.7 --OEM License Agreement between Sandia and Xerox Corporation,
dated January 6, 1995. Incorporated herein by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.
10.8 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 19, 1994. Incorporated herein by
reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.9 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 31, 1994. Incorporated herein by
reference to Exhibit 10.22 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.10 --Amendment to the OEM License Agreement between Sandia and
Xerox Corporation, dated December 27, 1996. Incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996.
10.11 --Demand Promissory Note issued to Wolfensohn Associates L.P.,
dated March 27, 1997. Incorporated by reference to Exhibit
10.13 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 1997.
10.12 --Warrant to purchase shares of the Company's Common Stock
issued to Wolfensohn Associates L.P., dated March 27, 1997.
Incorporated by reference to Exhibit 10.14 to the Company's
Quarterly Report on Form 10-QSB for the period ended September
30, 1997.
10.13 --Note Purchase Agreement dated June 25, 1997, by and among
AXCESS, J.P. Morgan Investment Corporation and Wolfensohn
Associates L.P. Incorporated by reference to Exhibit 10.15 to
the Company's Quarterly Report on Form 10-QSB for the period
ended September 30, 1997.
10.14 --Intellectual Property Transfer Agreement dated January 8,
1998, by and between XL Vision, Inc. and Sandia Imaging
Systems Corporation. Incorporated herein by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
10.15 --Amendment to Notes and Note Purchase Agreement dated
December 31, 1997, by and among the Company, Antiope Partners
L.L.C. and J.P. Morgan Investment Corporation. Incorporated
herein by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-KSB, as amended, for the year ended December
31, 1997.
- 17 -
<PAGE> 20
AXCESS INC. AND SUBSIDIARIES
10.16 --Series G Preferred stock Purchase Agreement dated December
29, 1997, by and between the Company and Amphion Ventures L.P.
Incorporated herein by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-KSB, as amended, for the
year ended December 31, 1997.
10.17 --Pledge Agreement dated August 18, 1997, by and among the
Company, Antiope Partners L.L.C. and J.P. Morgan Investment
Corporation. Incorporated herein by reference to Exhibit 10.18
to the Company's Annual Report on Form 10-KSB, as amended, in
the year ended December 31, 1997.
10.18 --Preferred Stock Exchange Agreement dated January 8, 1998, by
and among the Company, Antiope Partners L.L.C. and H.T.
Ardinger. Incorporated herein by reference to Exhibit 10.19 to
the Company's Annual Report on Form 10-KSB, as amended, in the
year ended December 31, 1997.
10.19 --Form of Warrant to purchase shares of the Company's Common
Stock issued to Antiope Partners L.L.C. and Amphion Ventures
L.P. Incorporated herein by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-KSB, as amended, in the
year ended December 31, 1997.
10.20 --Settlement Agreement dated as of April 21, 1998, by and
between the Company and Xerox Corporation. Incorporated herein
by reference to Exhibit 10.21 to the Company's Annual Report
on Form 10-KSB, as amended, in the year ended December 31,
1997.
10.21 --Series H Preferred stock Purchase Agreement dated March 27,
1998, by and between the Company and Amphion Ventures L.P.*
10.22 --Form of Promissory Note executed by Amphion Ventures L.P.
payable to the Company.*
10.23 --Promissory Note executed by the Company payable to Amphion
Ventures L.P.*
27 --Financial Data Schedule.*
----------------
*Filed herewith.
B. REPORTS ON FORM 8-K
None.
- 18 -
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AXCESS, INC.
Date: May 14, 1998 By: /s/ Danny G. Hair
------------------------------------------
Danny G. Hair, Executive Vice President,
Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)
- 19 -
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 --Certificate of Incorporation of the Company. Incorporated herein by
reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1
(Registration No. 2-80946).
3.2 --By-laws of AXCESS. Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (Registration No. 2-80946).
3.3 --First Amendment to Certificate of Incorporation of AXCESS dated June 6,
1986. Incorporated herein by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1987.
3.4 --Second Amendment to Certificate of Incorporation of AXCESS, dated May 27,
1987. Incorporated herein by reference to Exhibit 3.4 to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1987.
3.5 --Third Amendment to Certificate of Incorporation of AXCESS, dated November
11, 1994. Incorporated herein by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-3 (Registration No. 333-10665).
3.6 --Fourth Amendment to Certificate of Incorporation of AXCESS, dated July 28,
1995. Incorporated herein by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-3 (Registration No. 333-10665).
3.7 --Fifth Amendment to Certificate of Incorporation of AXCESS, dated June 17,
1996. Incorporated herein by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-3 (Registration No. 333-10665).
3.8 --Sixth Amendment to Certificate of Incorporation of AXCESS dated March 31,
1998. Incorporated herein by reference to Exhibit 99.1 to the Company's
Report on Form 8-K dated April 13, 1998.
3.9 --Seventh Amendment to Certificate of Incorporation of AXCESS dated March
31, 1998. Incorporated herein by reference to Exhibit 99.2 to the Company's
Report on Form 8-K dated April 13, 1998.
3.10 --Eighth Amendment to Certificate of Incorporation of AXCESS dated April 9,
1998. Incorporated herein by reference to Exhibit 99.3 to the Company's
Report on Form 8-K dated April 13, 1998.
4.1 --Certificate of Designation of the Company's Series A, B and C Preferred
Stock, dated December 27, 1995. Incorporated herein by reference to Exhibit
4.7 to the Company's Registration Statement on Form S-3 (Registration No.
333-10665).
4.2 --Certificate of Designation of AXCESS Series G Preferred Stock.
Incorporated herein by reference to Exhibit 4.5 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997.
4.3 --Certificate of Designation of the Company's Series H Preferred Stock.*
10.1 --License agreement, dated June 30, 1988, between the Company and Patlex
Corporation. Incorporated herein by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10- KSB for the year ended December 31,
1988.
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
10.2 --1991 Incentive Stock Option Plan, dated August 14, 1991. Incorporated
herein by reference to Exhibit 10.10 to Lasertechnics' Annual Report on Form
10-KSB for the year ended December 31, 1991.
10.3 --Purchase Agreement between Sandia Europe and Jean-Luc Poutchnine, Alain
Quilleau and Philippe Bonnevie, dated March 4, 1994. Incorporated herein by
reference to Exhibit 10.15 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
10.4 --Letter confirming sale of shares of AXCESS Common Stock to Singapore
Precision Industries PTE LTD, dated May 12, 1994. Incorporated herein by
reference to Exhibit 10.16 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
10.5 --Advisory and investment banking services agreement between AXCESS and
Wolfensohn International, Inc., dated May 19, 1993. Incorporated herein by
reference to Exhibit 10.18 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
10.6 --Purchase of Common Stock and Convertible Note Agreement between the
Company and J.P. Morgan Investment Corporation, dated July 8, 1994.
Incorporated herein by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994.
10.7 --OEM License Agreement between Sandia and Xerox Corporation, dated January
6, 1995. Incorporated herein by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1994.
10.8 --Demand Promissory Note issued to J.P. Morgan Investment Corporation, dated
December 19, 1994. Incorporated herein by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1994.
10.9 --Demand Promissory Note issued to J.P. Morgan Investment Corporation, dated
December 31, 1994. Incorporated herein by reference to Exhibit 10.22 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1994.
10.10 --Amendment to the OEM License Agreement between Sandia and Xerox
Corporation, dated December 27, 1996. Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
10.11 --Demand Promissory Note issued to Wolfensohn Associates L.P., dated March
27, 1997. Incorporated by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-QSB for the period ended September 30, 1997.
10.12 --Warrant to purchase shares of the Company's Common Stock issued to
Wolfensohn Associates L.P., dated March 27, 1997. Incorporated by reference
to Exhibit 10.14 to the Company's Quarterly Report on Form 10-QSB for the
period ended September 30, 1997.
10.13 --Note Purchase Agreement dated June 25, 1997, by and among AXCESS, J.P.
Morgan Investment Corporation and Wolfensohn Associates L.P. Incorporated by
reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10-QSB
for the period ended September 30, 1997.
10.14 --Intellectual Property Transfer Agreement dated January 8, 1998, by and
between XL Vision, Inc. and Sandia Imaging Systems Corporation. Incorporated
herein by reference to Exhibit 10.15 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997.
10.15 --Amendment to Notes and Note Purchase Agreement dated December 31, 1997, by
and among the Company, Antiope Partners L.L.C. and J.P. Morgan Investment
Corporation. Incorporated herein by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-KSB, as amended, for the year ended
December 31, 1997.
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
10.16 --Series G Preferred stock Purchase Agreement dated December 29, 1997, by
and between the Company and Amphion Ventures L.P. Incorporated herein by
reference to Exhibit 10.17 to the Company's Annual Report on Form 10-KSB, as
amended, for the year ended December 31, 1997.
10.17 --Pledge Agreement dated August 18, 1997, by and among the Company, Antiope
Partners L.L.C. and J.P. Morgan Investment Corporation. Incorporated herein
by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-KSB,
as amended, in the year ended December 31, 1997.
10.18 --Preferred Stock Exchange Agreement dated January 8, 1998, by and among the
Company, Antiope Partners L.L.C. and H.T. Ardinger. Incorporated herein by
reference to Exhibit 10.19 to the Company's Annual Report on Form 10-KSB, as
amended, in the year ended December 31, 1997.
10.19 --Form of Warrant to purchase shares of the Company's Common Stock issued to
Antiope Partners L.L.C. and Amphion Ventures L.P. Incorporated herein by
reference to Exhibit 10.20 to the Company's Annual Report on Form 10-KSB, as
amended, in the year ended December 31, 1997.
10.20 --Settlement Agreement dated as of April 21, 1998, by and between the
Company and Xerox Corporation. Incorporated herein by reference to Exhibit
10.21 to the Company's Annual Report on Form 10-KSB, as amended, in the year
ended December 31, 1997.
10.21 --Series H Preferred stock Purchase Agreement dated March 27, 1998, by and
between the Company and Amphion Ventures L.P.*
10.22 --Form of Promissory Note executed by Amphion Ventures L.P. payable to the
Company.*
10.23 --Promissory Note executed by the Company payable to Amphion Ventures L.P.*
27 --Financial Data Schedule.*
</TABLE>
* Filed herewith.
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF DESIGNATION,
PREFERENCES, POWERS AND RIGHTS
OF
SERIES H PREFERRED STOCK
OF
AXCESS INC.
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
AXCESS INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), hereby certifies that,
pursuant to the authority contained in Article Fourth of its Certificate of
Incorporation, as amended, and in accordance with the provisions of Sections 103
and 151 of the General Corporation Law of the State of Delaware, its Board of
Directors has adopted the following resolution providing for the issuance of
Series H Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock of the
Company is hereby created and the Board of Directors hereby fixes the
designation and amount thereof, and the voting powers, preferences, and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations, or restrictions thereon as follows:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall have a
par value of $.01 per share and shall be designated as Series H Preferred Stock
(the "Series H Preferred Stock") and the number of shares constituting the
Series H Preferred Stock shall be TWO THOUSAND FIVE HUNDRED (2,500). The Series
H Preferred Stock shall have a stated value of Ten Thousand Dollars ($10,000)
per share (the "Original Series H Issue Price").
SECTION 2. RANK. The Series H Preferred stock shall rank: (i) junior to any
other class or series of capital stock of the Company hereafter created
specifically ranking by its terms senior to the Series H Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.01 par value per share ("Common Stock") and Non-Voting Common
Stock, $.01 par value per share ("NonVoting Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with the Series H
Preferred Stock (collectively, with the Common Stock and Non-Voting Common
Stock, the "Junior Securities"); and (iv) on parity with the Series A Preferred
Stock of the Company, par value $.01 per share (the "Series A Preferred Stock"),
the Series B Preferred Stock of the Company, par value $.01 per share (the
"Series B Preferred Stock"), the Series C Preferred
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<PAGE> 2
Stock of the Company, par value $.01 per share (the "Series C Preferred Stock"),
the Series G Preferred Stock of the Company, par value $.01 per share (the
"Series G Preferred Stock") and any class or series of capital stock of the
Company hereafter created specifically ranking by its terms on parity with the
Series H Preferred Stock (the "Parity Securities") in each case as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
SECTION 3. DIVIDENDS AND DISTRIBUTIONS. (a) Subject to Section 3(d), the
holders of record of shares of Series H Preferred Stock (the "Holders"), in
preference to the holders of shares of capital stock ranking junior to the
Series H Preferred Stock as to dividends, shall be entitled to receive dividends
on each share of Series H Preferred Stock held of record at the annual rate of
8% of the Original Series H Issue Price, payable semi-annually, to the extent of
funds legally available therefor. Such dividends shall be cumulative, shall
accrue on each share on a daily basis (calculated on the basis of a 360-day
year, whether or not earned or declared, from the date of original issue of such
shares) and shall be payable in arrears, when, as and if declared by the Board
of Directors, on the last day of June and December in each year (each such date,
a "Dividend Payment Date"). Each such dividend will be paid to the Holders as
they appear on the stock register of the Company on the record date therefor as
shall be fixed by the Board of Directors, which record date shall not be more
than 25 days or less than 10 days preceding the payment date thereof.
(b) The Company may, at its option, make any dividend payment to
Holders of Series H Preferred Stock in cash or in additional shares of Series H
Preferred Stock or in any combination of cash and such shares. Each such
dividend payment (or portion thereof) to be paid in shares of Series H Preferred
Stock shall be paid by the issuance and delivery to such Holders of that number
of additional shares of Series H Preferred Stock as shall be equal to the
quotient obtained by dividing the aggregate dollar amount of such dividend
payment (or portion thereof) by the Original Series H Issue Price per share.
Dividends to be paid in additional shares of Series H Preferred Stock shall be
deemed to have been made when certificates representing such additional shares
of Series H Preferred Stock have been delivered to the record holders of the
Series H Preferred Stock entitled to receive the same, in accordance with the
instructions of such holders designated in writing to the Company at least two
business days prior to any Dividend Payment Date. All shares of Series H
Preferred Stock paid as such dividends ("Dividend Shares") shall be validly
issued, fully paid and non-assessable, shall be free and clear of preemptive
rights and liens, claims and encumbrances of any kind. Subject to the other
provisions of this Certificate of Designation, holders of shares of Series H
Preferred Stock shall not be entitled to any dividend, whether payable in cash,
additional shares of Series H Preferred Stock, or other property, in excess of
full cumulative dividends as herein provided. No interest, or sum of money in
lieu of interest, shall be payable under this Certificate of Designation in
respect of any dividend payment or payments on the Series H Preferred Stock
which may be in arrears.
(c) So long as any Series H Preferred Stock remains outstanding, the
Company will not redeem, purchase or otherwise acquire any Junior Securities;
nor will the Company declare or pay any dividend or make any distribution (in
each case, whether in cash or securities or assets
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<PAGE> 3
in kind) upon any Junior Securities (other than stock dividends on Junior
Securities, payable in shares of, options, warrants or similar rights to acquire
shares of, the same class (and series, if applicable) of Junior Securities), or
make any sinking fund or other payment in respect of any of the foregoing if the
Company shall not have paid in full all accrued dividends on the Series H
Preferred Stock in accordance with Section 3(a) hereof.
(d) Anything contained herein to the contrary notwithstanding, if at
any time that any shares of Series H Preferred Stock are outstanding, the
closing bid price per share of the Common Stock on The Nasdaq Stock Market (or,
if the Common Stock is not then included in Nasdaq, but is listed on any
national securities exchange, on the principal national securities exchange on
which the Common Stock is then listed) remains above $20.00 per share (as
adjusted for any stock splits, reverse stock splits, stock dividends or similar
events after the date of this Certificate of Designation) for 20 consecutive
trading days, then, commencing on such 20th trading day, the cumulative dividend
will not be payable; provided, however, that if the closing bid price per share
of the Common Stock remains below $20.00 for 20 consecutive trading days (as so
adjusted), then the dividend will resume as of such 20th day.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
the Company ("Liquidation Event"), either voluntary or involuntary, the Holders
of shares of Series H Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities, and in parity with any
distribution to Parity Securities, an amount for each share of Series H
Preferred Stock then outstanding equal to the Original Series H Issue Price,
plus any and all accrued unpaid dividends. If upon the occurrence of such event,
and after payment in full of the preferential amounts with respect to the Senior
Securities, the assets and funds available to be distributed among the Holders
of the Series H Preferred Stock and Parity Securities shall be insufficient to
permit the payment to such Holders of the full preferential amounts due to the
Holders of the Series H Preferred Stock and the Parity Securities, respectively,
then the entire assets and funds of the Company legally available for
distribution shall be distributed among the Holders of the Series H Preferred
Stock and the Parity Securities, pro rata, based on the respective liquidation
amounts to which each such series of stock is entitled by the Company's
Certificate of Incorporation and any certificate(s) of designation relating
thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of
all or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which any person
or entity acquires more than fifty percent (50%)
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<PAGE> 4
of the voting power of the Company (a "Change of Control") shall be deemed to be
a Liquidation Event as defined in section 4(a); provided further that (i) a
consolidation, merger, acquisition, or other business combination of the Company
with or into any other publicly traded company or companies shall not be treated
as a Liquidation Event as defined in Section 4(a), but instead shall be treated
pursuant to Section 5(d)(ii) hereof, and (ii) a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
non-publicly traded company or companies (except for a consolidation, merger,
acquisition or other business combination with one of its subsidiaries) shall be
treated as a Liquidation Event as defined in section 4(a). The Company shall not
effect any transaction described in subsection 4(c)(ii) (except for a
consolidation, merger, acquisition or other business combination with one of its
subsidiaries) unless it first gives thirty (30) business days prior notice of
such transaction (during which time the Holder shall be entitled to convert its
shares of Series H Preferred Stock into Non-Voting Common Stock). For purposes
of this section 4(c), the public offering, sale or distribution of shares of
stock (or assets) of the Company's Sandia Imaging Systems Corporation subsidiary
or the Lasertechnics Marking Corporation subsidiary (but not both) shall not be
deemed to be a Liquidation Event.
(d) In the event that, immediately prior to or contemporaneously
with the closing of a transaction described in section 4(c) which would
constitute a Liquidation Event, the cash distributions required by Section 4(a)
have not been made, the Company shall either: (i) cause such closing to be
postponed until such cash distributions have been made, or (ii) cancel such
transaction, in which event the rights of the Holders of Series H Preferred
Stock shall be the same as existing immediately prior to such proposed
transaction.
SECTION 5. CONVERSION. The record Holders of this Series H Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. On the terms and subject to the conditions set
forth in this Certificate of Designation, each record Holder of Series H
Preferred Stock shall be entitled to convert the shares of Series H Preferred
Stock held by such Holder, in whole at any time and in part from time to time,
into a number of fully-paid and non-assessable shares of Non-Voting Common Stock
of the Company equal to the quotient of (i) the aggregate Original Series H
Issue Price of the shares of Series H Preferred Stock being converted divided by
(ii) the Conversion Price as determined pursuant to this Section 5(the
"Conversion Price"). The Conversion Price shall initially be TEN DOLLARS
($10.00) per share of Series H Preferred Stock. The Conversion Price shall be
subject to adjustment from time to time as provided in Section 5(d).
(b) Mechanics of Conversion. Conversion of shares of Series H
Preferred Stock may be effected by written notice to the Company, and shall be
effective upon receipt of such notice by the Company, or as otherwise provided
in such notice, and delivery to the Company of (i) one or more certificates
representing the shares of Series H Preferred Stock being converted, (ii) a
certificate of guaranteed delivery of such certificates reasonably satisfactory
to the Company, or (iii) evidence of the loss, theft or destruction of such
certificates pursuant to Section 10 of this Certificate of Designation, together
with any indemnity or security reasonably requested by the Company
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<PAGE> 5
pursuant to such section 10. Upon any conversion of shares of Series H Preferred
Stock pursuant to this Section 5, the Holder shall be deemed to be the record
holder of the shares of Non-Voting Common Stock into which shares of Series H
Preferred Stock have been converted and shall be entitled to receive duly
executed certificates, in proper form, representing such shares of Non-Voting
Common Stock as soon as practicable thereafter. Anything contained herein to the
contrary notwithstanding, if any conversion of shares of Series H Preferred
Stock would create a fractional share of Non-Voting Common Stock or a right to
acquire a fractional share of Non-Voting Common Stock, such fractional share
shall be disregarded and the number of shares of Non-Voting Common Stock
issuable upon such conversion, in the aggregate, shall be rounded to the nearest
whole number of shares (with one-half of a share rounded up).
(c) Reservation of Stock Issuable Upon Conversion. Other than as set
forth below, the Company shall at all times reserve and keep available out of
its authorized but unissued shares of Non-Voting Common Stock, solely for the
purpose of effecting the conversion of the Series H Preferred Stock, such number
of its shares of Non-Voting Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding Series H Preferred
Stock. Notwithstanding the foregoing, if at any time the number of authorized
but unissued shares of Non-Voting Common Stock (excluding for this purpose any
authorized but unissued shares of Non-Voting Common Stock that are properly
reserved for some other purpose) shall be insufficient to cause the conversion
into Non-Voting Common Stock of all shares of Series H Preferred Stock then
outstanding, the Company will, when authorized by the Board of Directors, take
such corporate action as may be reasonably necessary to increase its authorized
but unissued shares of Non-Voting Common Stock to such number of shares as shall
be sufficient for such purpose.
(d) Adjustment to Conversion Rate.
(i) Adjustment to Conversion Price Due to Stock Split, Stock
Dividend, Etc. If, at any time that any shares of Series H Preferred Stock
remaining outstanding, the number of outstanding shares of Non-Voting Common
Stock is increased by a stock split, stock dividend, or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Non-Voting Common Stock is decreased by a reverse stock
split, combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, at any
time that any shares of Series H Preferred Stock remain outstanding, there shall
be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of
Non-Voting Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity, or there is a sale of all or
substantially all the Company's assets or there is a Change of Control not
deemed to be a Liquidation Event pursuant to section 4(c), then the Holders
shall thereafter have the right to receive upon conversion of shares of Series H
Preferred Stock, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Non-Voting
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<PAGE> 6
Common Stock immediately theretofore issuable upon conversion, such stock,
securities and/or other assets which the Holder would have been entitled to
receive in such transaction had such shares of Series H Preferred Stock been
converted immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series H Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for the adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series H Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction described in this
subsection 5(d)(ii) unless (A) it first gives thirty (30) business days prior
notice of such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holders shall be
entitled to convert their shares of Series H Preferred Stock into Non-Voting
Common Stock) and (B) the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligations of the Company under this
Certificate of Designation including this subsection 5(d)(ii).
SECTION 6. VOTING. The Holders shall not be entitled to vote, either
together with the holders of the Company's voting Common Stock or voting
Preferred Stock, or as a single class, on any matter submitted to a vote of the
stockholders of the Company, or as to which the holders of the voting Common
Stock or voting Preferred Stock shall otherwise be entitled to vote. As used in
this Section 6, all references to votes and voting shall refer as well to action
and actions by written consent.
SECTION 7. OPTIONAL REDEMPTION BY COMPANY. The Series H Preferred Stock
shall be subject to optional redemption by the Company, in whole at any time or
in part from time to time, at a redemption price per share equal to the Original
Series H Issue Price, plus any and all accrued unpaid dividends thereon. The
Company shall give at least 10 days' prior written notice of any redemption
pursuant to this Section 7 to each Holder of shares of Series H Preferred Stock
to be redeemed. The Company's optional right of redemption is subject to each
Holder's right to convert all or any part of the shares to be redeemed into
NonVoting Common Stock pursuant to Section 5, provided that the Holder gives
written notice of such conversion to the Company in accordance with Section 5
within 10 business days after the Company's notice of redemption. The Holders of
Series H Preferred Stock shall not be entitled to any mandatory redemption of
their Shares without the consent of the Company.
SECTION 8. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Series H Preferred Stock shall be converted pursuant to Section 5 hereof or
redeemed pursuant to Section 7 hereof, the shares so converted or redeemed shall
be canceled, shall return to the status of authorized but unissued Preferred
Stock of no designated series, and shall not thereafter be issuable by the
Company as Series H Preferred Stock.
SECTION 9. OTHER PREFERRED STOCK. Nothing contained herein shall be
construed to prevent the Board of Directors from authorizing the creation of, or
to prevent the Company from
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<PAGE> 7
issuing shares of, one or more series of Preferred Stock senior to, junior to or
on parity with the Series H Preferred Stock as to dividend, liquidation rights
or otherwise.
SECTION 10. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any certificates
representing shares of Series H Preferred Stock, and (in the case of loss, theft
or destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the certificate(s), if mutilated, the
Company shall execute and deliver to the record Holder thereof new
certificate(s) of like tenor and date. However, the Company shall not be
obligated to re-issue such lost or stolen certificates if the Holder
contemporaneously requests the Company to convert such shares of Series H
Preferred Stock into shares of Non-Voting Common Stock.
SECTION 11. FRACTIONAL SHARES. In the event a Holder of Series H Preferred
Stock shall be entitled to receive a fractional interest in a share of Series H
Preferred Stock of less than one one-hundredth of one share, except as otherwise
provided herein, the Company shall either, in the sole discretion of the Board
of Directors, (a) round such fractional interest up to the next one-hundredth of
one whole share of Series H Preferred Stock or (b) deliver cash in the amount of
the fair market value (as determined by the Board of Directors or in any manner
prescribed by the Board of Directors) of such fractional interest.
SECTION 12. PREEMPTIVE RIGHTS. The Holders of Series H Preferred Stock are
not entitled to any preemptive or subscription rights in respect of any
securities of the Company.
SECTION 13. COUNTERPARTS. This Certificate of Designation may be executed
on separate counterparts and shall be effective as of the date signed.
IN WITNESS WHEREOF, AXCESS Inc. has caused this certificate to be signed by
its President and attested by its Secretary, as of the 30th day of April, 1998.
AXCESS INC.
By: /s/ Harry S. Budow
-----------------------------------
Harry S. Budow, President
Attest:
/s/ Danny G. Hair
- ------------------------------
Danny G. Hair, Secretary
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<PAGE> 1
EXHIBIT 10.21
AXCESS INC.
3208 Commander Drive
Carrollton, Texas 75006
March 27, 1998
Amphion Ventures L.P.
c/o Jackson Hole Management Co.
590 Madison Avenue
32nd Floor
New York, New York 10022
Re: Series H Preferred Stock Purchase Agreement
Ladies and Gentlemen:
By letter dated March 27, 1998, and amended on April 21, 1998, Amphion
Ventures L.P., a Delaware limited partnership (the "Purchaser"), committed to
provide up to $5,500,000 of equity financing to AXCESS Inc., a Delaware
corporation (the "Company"), in connection with the Company's 1998 plan of
operations and to maintain the Company's compliance with the net tangible asset
requirement of the new Nasdaq listing requirements (the "Commitment"). This
letter sets forth the terms and conditions on which the Company will issue and
sell to Purchaser shares of Series H Non-Voting Preferred Stock of the Company,
par value $.01 per share ("Series H Preferred Stock"), for an aggregate purchase
price of up to $5,500,000, payable as provided herein.
1. Advances; Purchase Price; Effectiveness. The Purchaser hereby agrees to
subscribe for and purchase from the Company, and the Company hereby agrees to
issue and sell to the Purchaser, up to $5,500,000 of shares (the "Shares") of
Series H Preferred Stock. The purchase price for each Share shall be $10,000,
payable in cash. The purchase and sale of Shares hereunder shall be effective as
of the date the Company receives the purchase price for each Share from
Purchaser (the "Effective Date") (subject to the filing of the Certificate of
Designation of the Series H Preferred Stock in the office of the Secretary of
State of the State of Delaware (the "Series H Certificate of Designation"),
which filing may occur subsequently to the Effective Date without effecting the
rights and obligations of the parties hereto).
2. Purchase and Delivery of Shares. Upon its receipt of the purchase price
for each Share, the Company shall issue and sell to Purchaser the number of
shares of Series H Preferred Stock (the "Shares"), the stated value of which
shall be $10,000 per share (the "Original Series H Issue Price"). On and as of
the Effective Date, the Company shall execute and deliver to the Purchaser a
stock certificate in proper form representing the Shares.
<PAGE> 2
AXCESS Inc.
March 27, 1998
Page 2
3. Conversion of Non-Voting Common Stock to Voting Common Stock. Purchaser
hereby agrees that until it receives written notice from the Company confirming
that the Company has issued 500,000 shares of Common Stock to XL Vision, Inc.
pursuant to the terms of that certain Technology Acquisition Agreement dated
January 8, 1998, it shall not, without the prior written consent of the Company,
convert any shares of the Non-Voting Common Stock issuable to Purchaser upon its
conversion of any Shares to voting Common Stock of the Company.
4. Securities Act Legend; Registration Rights.
4.1 The Shares will not be registered under the Securities Act of 1933,
as amended (the "Securities Act"). Certificates representing the Shares shall
bear a restrictive legend substantially to the effect of the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS, OR THE
SECURITIES LAWS OF ANY OTHER JURISDICTION. THEY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THOSE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION THEREFROM. ADDITIONAL
RESTRICTIONS REGARDING THE TERMS UNDER WHICH THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY BE CONVERTED INTO NON-VOTING COMMON STOCK OF THE COMPANY
ARE SET FORTH IN THAT CERTAIN SERIES H PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 27, 1998.
4.2 The Purchaser shall have the same registration rights with regard to
any shares of Non-Voting Common Stock issuable upon conversion of the Shares as
Antiope Ventures L.P. (formerly Wolfensohn Associates L.P. was entitled to
pursuant to the Stock Purchase Agreement dated as of January 20, 1994 (the
"Prior Agreement")), between the Company and Antiope Ventures L.P. The Company
shall have the same expense, indemnification and other obligations to the
Purchaser with respect to such registration rights as the Company owed to
Antiope Ventures L.P. under the Prior Agreement. The Company and the Purchaser
shall enter into a registration rights agreement in customary form to confirm
the registration rights provided for in this paragraph, as soon as practicable
after the date hereof.
5. Representations and Warranties by the Company. The Company hereby
represents and warrants to the Purchaser as follows:
5.1 The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has the corporate
power and authority to execute and deliver this agreement, to issue the Shares
on the basis described herein and otherwise to perform its obligations under
this agreement.
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<PAGE> 3
AXCESS Inc.
March 27, 1998
Page 3
5.2 The execution and delivery by the Company of this Agreement, the
issuance of the Shares, and the performance by the Company of its obligations
hereunder, have been duly authorized by all requisite corporate action on the
part of the Company (other than the filing of the Series H Certificate of
Designation and will not (i) violate any provision of law, statute, rule or
regulation or any order of any court or other agency of government, (ii)
conflict with or violate the Certificate of Incorporation or By-Laws of the
Company, in each case as amended, or (iii) violate, conflict with or constitute
(with due notice or lapse of time or both) a default under any indenture,
mortgage, lease, license, agreement or other contract or instrument or result in
the creation or imposition of any lien, charge or encumbrance of any nature upon
the properties or assets of the Company or any of its subsidiaries, in each case
if such violation, conflict, default, lien, charge or encumbrance would have a
material adverse effect on the Company.
5.3 This agreement has been duly executed and delivered by the Company
and constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except to the extent the
enforceability hereof may be limited by applicable bankruptcy, moratorium or
similar laws affecting the rights of creditors generally.
5.4 Based in part upon the representations and warranties of the
Purchaser contained in this agreement, no registration or filing with, or
consent or approval of, or other action by, any federal, state or other
governmental department, commission, board, bureau, agency or instrumentality or
any third party is or will be necessary for the execution and delivery of this
agreement by the Company and the issuance of the Shares hereunder, other than
(x) the filing of the Series H Certificate of Designation and (y) the filing of
a notice of sale on Form D with the Securities and Exchange Commission in
accordance with the rules and regulations thereof under the Securities Act.
5.5 Subject only to the filing of the Series H Certificate of
Designation, the Shares are duly authorized, validly issued, fully paid and
non-assessable shares of Series H Preferred Stock, and are not subject to any
preemptive rights.
5.6 Attached hereto as Exhibit A is a true copy of the Series H
Certificate of Designation. On the Effective Date, the Board of Directors of the
Company approved and adopted resolutions, in the form of the resolutions set
forth in Exhibit A, creating the Series H Preferred Stock and directing the
proper officers of the Company to file the same with the office of the Secretary
of State of the State of Delaware, in accordance with the applicable provisions
of the Delaware General Corporation Law. The Company hereby covenants and
agrees, for the benefit of the Purchaser, that the Company will cause the Series
H Certificate of Designation to be filed with the office of the Secretary of
State of the State of Delaware, in accordance with the applicable provisions of
the Delaware General Corporation Law, within 10 days after the date hereof.
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<PAGE> 4
AXCESS Inc.
March 27, 1998
Page 4
6. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
6.1 The Purchaser is acquiring the Shares for its own account, for
investment and not with a view to the distribution thereof within the meaning of
the Securities Act.
6.2 The Purchaser understands that the Shares have not been registered
under the Securities Act, by reason of their issuance by the Company in
transactions exempt from the registration requirements of the Securities Act,
and that the Shares must be held by the Purchaser indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration.
6.3 The Purchaser further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Act depends on the satisfaction of various conditions, and
that, if applicable, Rule 144 may afford the basis for sales only in limited
amounts, after compliance with the holding periods and other provisions thereof.
6.4 The Purchaser understands that its investment hereunder involves
substantial risks and represents and warrants that it has made such independent
examinations and investigations of the Company as it has deemed necessary in
making its investment decision, and the Purchaser further represents and
warrants that it has had sufficient access to the officers, directors, books and
records of the Company as it has deemed necessary to conduct such examination
and investigation and make such investment decision.
6.5 The Purchaser is able to bear the economic risk of the investment
contemplated by this agreement and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment contemplated by this agreement.
7. Reaffirmation of Representations and Warranties. The date Shares are
purchased shall constitute a reaffirmation of each and every one of the
representations and warranties of the Company set forth in Section 5 of this
agreement and those of the Purchaser set forth in Section 6 of this agreement as
if made as of each Effective Date, unless otherwise restated or corrected by
either the Purchaser or the Company, as the case may be.
8. Miscellaneous.
8.1 This agreement constitutes our entire agreement with respect to the
subject matter hereof. This agreement may not be modified or amended or any
provision hereof waived except by an instrument in writing signed by the Company
and the Purchaser.
-4-
<PAGE> 5
AXCESS Inc.
March 27, 1998
Page 5
8.2 This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The rights
of the Purchaser hereunder shall be assignable to any holder of the Shares.
Except as provided in the immediately preceding sentence, this agreement and the
rights of the Purchaser hereunder shall not be assignable, and any purported
assignment hereof or thereof shall be void.
8.3 This Agreement may be executed in any number of counterparts and on
separate counterparts, each of which shall be an original instrument, but all of
which together shall constitute a single agreement. One or more signature pages
from any counterpart of this Agreement may be attached to any other counterpart
of this Agreement without in any way changing the effect thereof. This Agreement
shall be effective when executed and delivered by the Company and the Purchaser.
8.4 All notices, requests, demands, consents, waivers, or other
communications made hereunder to any party or holder of Shares shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by nationally-recognized overnight courier, facsimile or by first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below:
if to the Company, to:
AXCESS Inc.
3208 Commander Drive
Carrollton, TX 75006
Attention: Chief Financial Officer
with a copy to:
Sayles & Lidji, P.C.
4400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Brian M. Lidji, Esq.; and
if to the Purchaser, to the Purchaser at its address
first set forth above,
or to such other address as the party to whom such communication is to be given
may have furnished to the other party in writing in accordance herewith. All
such notices, requests, demands, consents, waivers or other communications shall
be deemed to have been delivered (i) in the case of personal delivery, on the
date of delivery, (ii) if sent by facsimile, on the date sender receives a
confirmation
-5-
<PAGE> 6
AXCESS Inc.
March 27, 1998
Page 6
confirming receipt, (iii) if sent by overnight courier, on the next business day
following the date sent and (iv) in the case of mailing, on the third business
day following such mailing.
8.5 All representations, warranties and agreements contained herein
shall survive the execution and delivery of this Agreement and the sale of the
Shares hereunder.
8.6 This agreement, and all rights, obligations and liabilities
hereunder, shall be construed according to the laws of the State of New York
applicable to contracts made and to be performed wholly therein. Any judicial
proceeding brought against the Company to enforce, or otherwise in connection
with, this agreement may be brought in any court of competent jurisdiction in
the City of New York, and, by execution and delivery of this agreement, the
Company (i) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this agreement and (ii) irrevocably waives any objection it may now or hereafter
have as to the venue of any such proceeding brought in such a court or that such
a court is an inconvenient forum.
If the foregoing correctly sets forth your understanding of our agreement,
please so indicate by signing and returning to the Company the enclosed
counterpart of this Agreement.
Very truly yours,
AXCESS INC.
By: /s/ Danny G. Hair
-----------------------------------------
Danny G. Hair, Executive Vice President,
Chief Financial Officer and Secretary
The undersigned agrees with and
accepts the foregoing terms and
provisions as of the date first a
bove written.
AMPHION VENTURES L.P.
By Amphion Partners L.L.C.,
its general partner
By: /s/
---------------------------------
A Managing Member
-6-
<PAGE> 1
EXHIBIT 10.22
AMPHION VENTURES L.P.
FORM OF PROMISSORY NOTE
$_____________________ _________________, 1998
AMPHION VENTURES L.P., a New York limited partnership having its
principal place of business in New York, New York ("Amphion Ventures"), for
value received, hereby promises to pay to the order of AXCESS Inc., its legal
successors and permitted assigns (the "Holder"), on ________________________
(the "Final Maturity Date"), the unpaid principal amount of
_______________________________________ UNITED STATES DOLLARS (U.S.
$__________________), together with interest thereon from the date hereof, at
the rate of ten percent (10.00%) per annum, calculated on the basis of the
number of days elapsed over a 360- day year of twelve 30-day months (the
"Interest Rate"). Interest shall be payable quarterly in arrears, in cash, on
each January 1, April 1, July 1 and October 1 during the term of this Note,
commencing __________, 1998. Each payment received by the Holder hereunder shall
be applied first to the interest accrued on and then to the unpaid principal
amount of this Note.
Payment of principal and interest hereunder shall be made in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. All such payments
shall be paid by wire transfer of federal funds in accordance with the written
instructions of the Holder or, in the absence of current written instructions,
by check mailed to the Holder at the address last given to Amphion Ventures by
the Holder in writing for such purpose.
This Note may be prepaid in whole or in part at any time at the option
of Amphion Ventures, without premium or penalty, upon not less than two business
days' prior written notice to the Holder.
Except as otherwise expressly provided herein, the Amphion Ventures
hereby waives presentment for payment, demand for payment, notice of nonpayment,
protest and notice of protest.
This Note shall be binding upon Amphion Ventures and its successors and
assigns and shall inure to the benefit of the Holder, its legal successors and
its permitted assigns.
If Amphion Ventures fails to pay any amount of principal or interest
when due, and such due but unpaid amount remains unpaid for five business days
after the Holder makes written demand therefor, the entire unpaid principal of
and accrued interest on this Note shall forthwith
-1-
<PAGE> 2
AXCESS Inc.
March 27, 1998
Page 2
become absolutely due and payable without any further notice, demand, protest or
presentment whatsoever, all of which are hereby expressly waived.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without reference to its rules as to conflicts of
law. Any judicial proceeding brought against Amphion Ventures to enforce, or
otherwise in connection with, this Note shall be brought in any court of
competent jurisdiction in the City of New York, and, by acceptance of this Note,
the Holder (i) accepts, generally and unconditionally, the exclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this Note and (ii) irrevocably waives any objection it may now or hereafter have
as to the venue of any such proceeding brought in such a court or that such a
court is an inconvenient forum.
IN WITNESS WHEREOF, Amphion Ventures has caused this Note to be signed
by its duly authorized officer and has caused its corporate seal to be affixed
and attested by its general partner, as of the date first set forth above.
[Corporate Seal] Attested: AMPHION PARTNERS L.L.C.
By: Amphion Partners L.L.C., General Partner
By:
-------------------------------------
Richard C.E. Morgan, a Managing Member
-2-
<PAGE> 1
EXHIBIT 10.23
AXCESS INC.
PROMISSORY NOTE
$1,470,000.00 April 1998
AXCESS INC., a Delaware corporation having its principal place of
business in Carrollton, Texas (the "Company"), for value received, hereby
promises to pay to the order of Amphion Ventures L.P., its legal successors and
permitted assigns (the "Holder"), on April 30, 2000 (the "Final Maturity Date"),
the unpaid principal amount of ONE MILLION FOUR HUNDRED SEVENTY THOUSAND UNITED
STATES DOLLARS (U.S. $1,470,000.00), together with interest thereon from the
date hereof, at the rate of ten percent (10.00%) per annum, calculated on the
basis of the number of days elapsed over a 360-day year of twelve 30-day months
(the "Interest Rate"). Interest shall be payable quarterly in arrears, in cash,
on each January 1, April 1, July 1 and October 1 during the term of this Note,
commencing July 1, 1998. Each payment received by the Holder hereunder shall be
applied first to the interest accrued on and then to the unpaid principal amount
of this Note.
Payment of principal and interest hereunder shall be made in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. All such payments
shall be paid by wire transfer of federal funds in accordance with the written
instructions of the Holder or, in the absence of current written instructions,
by check mailed to the Holder at the address last given to the Company by the
Holder in writing for such purpose.
This Note may be prepaid in whole or in part at any time at the option
of the Company, without premium or penalty, upon not less than two business
days' prior written notice to the Holder.
Except as otherwise expressly provided herein, the Company hereby
waives presentment for payment, demand for payment, notice of nonpayment,
protest and notice of protest.
This Note shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Holder, its legal successors and
its permitted assigns.
If the Company fails to pay any amount of principal or interest when
due, and such due but unpaid amount remains unpaid for five business days after
the Holder makes written demand therefor, the entire unpaid principal of and
accrued interest on this Note shall forthwith become absolutely due and payable
without any further notice, demand, protest or presentment whatsoever, all of
which are hereby expressly waived.
-3-
<PAGE> 2
This Note shall be governed by and construed in accordance with the
laws of the State of New York, without reference to its rules as to conflicts of
law. Any judicial proceeding brought against the Company to enforce, or
otherwise in connection with, this Note shall be brought in any court of
competent jurisdiction in the City of New York, and, by acceptance of this Note,
the Holder (i) accepts, generally and unconditionally, the exclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this Note and (ii) irrevocably waives any objection it may now or hereafter have
as to the venue of any such proceeding brought in such a court or that such a
court is an inconvenient forum.
The obligations of the Company under this Note shall be secured by the
Company's exclusive license from Xerox Corporation for the development and sale
of products utilizing DataGlyphs, a 2-D symbology developed by Xerox.
Notwithstanding the foregoing, the Company's obligations to Holder hereunder
shall be, and hereby are, subordinated on customary terms to the obligations of
the Company to Angelo Gordon & Co. or one or more of its affiliates, under one
or more promissory notes of the Company entered into during January 1998, in the
aggregate principal amount not to exceed $650,000.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its duly authorized officer and has caused its corporate seal to be affixed and
attested by its Secretary or Assistant Secretary, as of the date first set forth
above.
[Corporate Seal] Attested: AXCESS INC.
/s/ Danny G. Hair By: /s/ Harry S. Budow
- -------------------------------- ----------------------------------
Danny G. Hair, Secretary Harry S. Budow, President
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 507
<SECURITIES> 0
<RECEIVABLES> 3,880
<ALLOWANCES> (379)
<INVENTORY> 4,960
<CURRENT-ASSETS> 9,199
<PP&E> 5,688
<DEPRECIATION> (2,756)
<TOTAL-ASSETS> 13,309
<CURRENT-LIABILITIES> 8,096
<BONDS> 0
0
15,620
<COMMON> 26
<OTHER-SE> (12,545)
<TOTAL-LIABILITY-AND-EQUITY> 13,309
<SALES> 2,288
<TOTAL-REVENUES> 2,288
<CGS> 1,428
<TOTAL-COSTS> 5,413
<OTHER-EXPENSES> 197
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 292
<INCOME-PRETAX> (3,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,322)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,604)<F2>
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
<FN>
<F1>Provision for doubtful accounts and inventory provision included in total
costs.
<F2>Net loss applicable to common stock.
</FN>
</TABLE>
