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[Logo] AMERICAN ACCESS(TM) | PUBLIC OFFERING |
TECHNOLOGIES, INC. | PROSPECTUS |
------------------ | MAY 2, 2002 |
SOLUTIONS TO OPEN OFFICE ARCHITECTURE |------------------|
American Access common
stock is traded on the
NASDAQ Small Cap Market under
the symbol AATK
128,000 SHARES OF COMMON STOCK
These shares of common stock are being offered by Crescent International Ltd.,
one of our current shareholders. We issued the shares, or reserved the shares
for issuance, to Crescent in connection with investments made in American Access
in May 2000.
The selling shareholder may sell the shares covered by this Prospectus on the
Nasdaq Stock Market and in ordinary brokerage transactions, in negotiated
transactions or otherwise, at prevailing market prices at the time of sale or at
negotiated prices, and may engage a broker or a dealer to sell the shares. For
additional information, you should refer to the Plan of Distribution section of
this Prospectus. The selling shareholder may be deemed to be an underwriter
within the meaning of the Securities Act in connection with the sale of its
shares. We will not receive any proceeds from the sale of the shares, but will
bear the costs relating to the registration of the shares.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
Our company
American Access manufactures, develops and sells products that place
telecommunications equipment in office buildings, hospitals, convention centers,
schools, and any building in need of an efficient system to route information.
Our zone cabling termination cabinets are used to house and mount
telecommunications equipment in ceilings, floors and in modular office
furniture. Cables and wires that allow computers, telephones and fax machines to
work are also plugged into this cabinet, saving users over time up to 70% of the
cost to install, move, add and change the office layout. Our wholly-owned
subsidiary, Omega Metals, Inc. is a metal fabricating company with the
capabilities for fine finish work, such as powder coating.
In January 2002, we acquired the product rights to the Eclipse
Ultraviolet Light Air Cleansing System. Our initial marketing strategy
aggressively targets contractors and distributors who will supply the system to
the homeowner, for installation in the central air conditioning system.
On April 10, 2001 the company signed an Agreement and Plan of Merger
with DataWorld Solutions, Inc., Farmingdale, NY, subject to shareholder approval
and other customary conditions. We terminated the merger agreement in July 2001
because of substantial and material adverse changes to DataWorld's business, and
other breaches of the merger agreement by DataWorld. Currently, the agreement is
the subject of litigation in the 18th Judicial Circuit Court, Seminole County.
GENERAL BUSINESS RISK FACTORS
Except for historical information, the information in this prospectus
and in our SEC reports contains forward-looking statements about our expected
future business and performance. Our actual operating results and financial
performance may prove to be very different from what we might have predicted as
of the date of this prospectus. The risks described below deserve your special
consideration.
Short Operating History
We were incorporated in October 1996 and have a limited operating
history from which to evaluate our business prospects. Our operating history in
the future will be subject to all of the risks and uncertainties inherent in the
development and maturation of a business. We have only owned Omega Metals since
November 1998.
Our Products may not be commercially successful
To date, we have only sold limited amounts of our products in the
commercial marketplace. We will have to sell our products in greater numbers in
order to be successful. However, we may not be able to generate sales of our
products in increasing numbers due to several reasons, including the possibility
that potential customers will not see the advantage of using our products over
the traditional way of cabling telecommunications products.
2
Our markets are highly competitive
The telecommunications industry is highly competitive, with several key
players. It is also subject to rapid change and sensitive to new product
introductions or enhancements and marketing efforts by industry participants.
Competitors may be developing technologies or products which may be similar or
superior to our. These competitors may have a better ability to market their
products.
To effectively compete, we need to continue to grow our business and to
generate greater revenues. This will allow us the resources to develop new
products in response to new technology and to meet customer demands in a broad
distribution channel. We cannot assure that we will be able to grow sufficiently
to compete effectively in this marketplace.
We have had a history of operating losses
We incurred net losses of approximately $1,441,000 in 2001, $2,034,000
in 2000 and $1,747,000 in 1999. Our expenses are currently greater than our
revenues. Our ability to operate profitably depends on increasing our sales and
achieving sufficient gross profit margins. We cannot assure you that we will
operate profitably.
Competitors may copy our products
Although we have received patents in the United States on aspects of
our products, with additional patents pending in the U.S. and other countries,
this may not prevent competitors from developing products substantially
equivalent to ours. Patent litigation entails high costs and can take a long
time. Therefore, our patent position may not prevent competition.
SECURITIES RISKS
Market price could fall
If our stockholders sell substantial amounts of our common stock,
including shares issued upon the exercise of outstanding warrants in the public
market, the market price of our common stock could fall.
Exercise of stock options and warrants will result in dilution
We have a substantial number of stock warrants and options outstanding,
each of which is exercisable to purchase one share of common stock. If all the
warrants and options are exercised, the interest of holders of common stock
would be subject to substantial dilution.
Potential lack of liquidity
Our common stock trades on the NASDAQ as a Small Cap stock with a small
float. Stocks trading as Small Cap issues with thin floats generally attract a
smaller number of market makers and a less active public market and may be
subject to significant volatility.
3
Risk of delisting from Nasdaq
At February 14, 2002, the price of the Company's common stock had
closed below the Nasdaq minimum required $1.00 per share for the past 30
consecutive days. Continued listing standards for Nasdaq require that we must
regain compliance and trade above $1.00 for ten (10) consecutive days before
August 13, 2002 or, when viewed with other requirements, we risk being delisted
from the Nasdaq Small Cap Market. If at August 13, 2002, we have not regained
compliance, but we meet the initial listing criteria for the Nadaq SmallCap
Market, we will be granted an additional 180 calendar days grace period to
demonstrate compliance
USE OF PROCEEDS
The shares being sold with this prospectus are being sold by selling
security holders. American Access will not receive the proceeds of any sales.
MARKET FOR SECURITIES
American Access' common stock is traded on the Nasdaq Stock
Exchange, under the symbol AATK. Prior to April 13, 1999, the company's common
stock was traded in the over-the-counter market included in the NASD Electronic
Bulletin Board under the symbol AATK.
The following is the range of high and low closing prices for the
company's common stock for the periods indicated:
High Low High Low High Low
Year Ending Year Ending Year Ending
December 31, 2000 December 31, 2001 December 31, 2002
1st Quarter $17.00 $5.75 $1.90 $0.813 $ 0.80 $ 0.53
2ndQuarter $13.25 $3.375 $2.00 $0.770
3rd Quarter $ 9.50 $4.00 $1.48 $0.56
4th Quarter $ 5.00 $1.156 $3.92 $0.67
The above represents inter-dealer quotations which do not include
retail mark-ups, markdowns, or commissions, and do not necessarily represent
actual transactions. About 4,400 investors were record holders of American
Access common stock on April 9, 2002.
DIVIDEND POLICY
American Access has not paid any dividends on its common stock, and it
is not anticipated that any dividends will be paid in the foreseeable future.
The Board of Directors intends to follow a policy of retaining earnings, if any,
to finance the growth of the company. The declaration and payment of dividends
in the future will be determined by the Board of Directors in light of
conditions then existing, including the company's earnings, financial condition,
capital requirements and other factors.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Overview
American Access was formed in October 1996 to acquire the assets of Vic
Murray and Associates, Inc. American Access purchased VMA to obtain the pending
patent for the Zone Cabling Termination Cabinet, which the company has since
developed and marketed.
Shortly after the acquisition of VMA, American Access decided to
discontinue the operations and business activities of VMA, which was a
manufacturer's representative of various products. Today, we develop, design,
and manufacture products for the telecommunications industry. Our cabling
cabinets store and efficiently distribute the wiring for computer, telephone,
and television systems installed in office buildings, hospitals, schools,
convention centers, and any building that needs an efficient system to route
information.
In November 1998, American Access acquired Omega Metals, Inc., a
precision sheet metal fabrication operation, which has and will continue to
provide product prototyping, manufacturing, assembling and packaging operations
to the company. Omega operates as a wholly owned subsidiary with sales and
manufacturing intact. The 67,500 sq. ft. plant is actually divided into two
facilities, one that manufactures American Access products and one that houses
all other manufacturing jobs.
Our latest acquisition is the product rights to an ultraviolet light
air purifying unit that is installed into the duct work in a home's centralized
air conditioning system. We retained the marketing services of the product's
former owner under a separate agreement.
A growing awareness of the benefits of zone cabling in the
telecommunications industry has prompted the Company to negotiate private label
agreements with established solutions providers. We are now generating orders
from the earlier agreements, and continue to seek new partners for private
labeling. We are also actively pursuing inclusion in federal government projects
through our distributors.
The following discussion and analysis should be read in conjunction
with a discussion about risk factors and the consolidated financial statements
of the company, included elsewhere in this report.
RESULTS OF OPERATIONS
REVENUES
Revenues for the year ended December 31, 2001 decreased by $1,203,229
to $4,068,224 as compared to $5,271,453 for the year ended December 31, 2000.
Sales of zone cabling termination cabinets decreased by $510,093 and sales of
formed metal decreased by $693,136 in 2001 compared to 2000. The decrease in
formed metal sales is attributed to cancellations and fewer new projects
pursuant to the slowdown of the economy. The decrease in zone cabling cabinets
is attributed to the slowdown in the economy, which affected new construction.
COSTS AND EXPENSES
Direct costs for the year ended December 31, 2001 represented 53.0% of
revenues. For the year ended December 31, 2000 these costs represented 48.7% of
revenues. The increase in direct costs is primarily due to the smaller formed
metal jobs and to a price reduction in the zone cabling cabinets, implemented in
anticipation of larger and multiple orders from our growing number of
distributors and OEM partners.
Compensation and related benefits expenses decreased by $276,284 to
$1,168,153 for the year ended December 31, 2001. These costs totaled $1,444,437
for the year ended December 31, 2000. This decrease is due primarily to the
adjustment of our sales force.
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Selling, general and administrative expenses for the year ended
December 31, 2001 amounted to $1,839,489. This was a decrease of $552,978 from
the December 31, 2000 amount of $2,392,467. This reduction was primarily a
result of reduction of commissions paid to outside reps, reduced travel, reduced
payroll taxes due to fewer employees, reduced office expenses, a reduction in
professional fees (primarily attorneys), and significant reduction in
amortization due to goodwill written down last year.
LOSS FROM OPERATIONS
Loss from operations for the year ended December 31, 2001 increased
$63,843 to $1,417,496 as compared to $1,353,653 for the year ended December 31,
2000.
NET LOSS
Net loss for the year ended December 31, 2001 decreased $592,724 to
$1,441,069 as compared to $2,033,793 for the year ended December 31, 2000. This
improvement is the result of not having unusual (non-operating) expenses in
2001.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was $867,407 and $1,195,401 for
the years ended December 31, 2001 and 2000 respectively. Net cash used by
operating activities during the year ended December 31, 2001 consisted primarily
of net losses, increase in accounts receivable, offset by depreciation,
amortization and warrants issued for services. Net cash used by operating
activities during the year ended December 31, 2000 primarily consisted of net
losses, increase in inventories and decrease in accounts payable, offset by
depreciation, amortization, provision for uncollectible notes, loss on
impairment of assets and warrants issued for services.
Net cash used in investing activities for the year ended December 31,
2001 was $1,571,865. This represents purchase of investments offset by proceeds
of $200,000 from notes receivable. Net cash provided used in investing
activities for the year ended December 31, 2000 was $6,417. Funds received were
from the sale of investments and payment of notes receivable offset by increase
in notes receivable and property and equipment acquisition.
Net cash provided by financing activities was $2,388,081 for the year
ended December 31, 2001. The Company received proceeds of $2,624,675 from the
exercise of warrants and repaid a capital lease of $244,379. In the year ended
December 31, 2000, the company received proceeds of $1,573,885 from the sale of
common stock and warrants. The company utilized $73,812 to repay a line of
credit and $612,416 to acquire treasury stock.
The company's operating and capital requirements in connection with its
operations have been and will continue to be significant. Based on its current
plans, the company anticipates that revenues earned from product sales will be
the primary source of funds for operating activities. In addition to existing
cash and cash equivalents, the company may rely on bank borrowing or the
exercise of existing warrants to meet its basic capital and liquidity needs for
the next 12 months. Additional capital is being sought to fund the expansion of
our product line and marketing efforts, which may also include bank borrowing or
a private placement of securities.
6
Our May 2000 Stock Purchase Agreement with Crescent International Ltd.,
a Bermuda-based investment company, expired in the fourth quarter of 2001. Upon
execution of the Stock Purchase Agreement Crescent purchased 406,278 shares of
Common Stock at a purchase price of $1,900,000.
Crescent still owns an Incentive Warrant to purchase up to 128,000
shares at an exercise price of $7.0149 per share, which expires in May 2005.
This exercise price is subject to adjustment under certain circumstances in the
event of stock splits, stock dividends, recapitalizations, reclassifications,
and similar events.
The Company has filed a post-effective amendment to the Registration
Statement for the shares underlying the Incentive Warrant. Pursuant to
Crescent's Registration Rights, the Company was required to pay to Crescent
liquidated damages of $82,455 for failing to keep the Registration Statement
effective prior to this amendment.
Our contractual obligations and commercial commitments consist of
payments due monthly on a lease for our Lake Mary property. Lease payments total
$160,798 for the period from March 1, 2002 until the lease ends on May 30, 2003.
We own our Keystone Heights facility, which is unencumbered. Additionally, under
a purchase of product rights agreement for our recently acquired ultraviolet
light air cleansing system, the Eclipse, the Company, along with other
conditions, is obligated to pay $500,000 in restricted common stock. The Seller
has the discretion to call for shares no sooner than one year after the
effective date of the agreement and no later than five years after the effective
date.
Management's plans include the following:
o Sales of our products in the last quarter of 2001 increased by
more than 44% from sales in the third quarter 2001. However,
we have posted a net loss for 2001, which we attribute to the
soft economy, a factor in zone cabling projects being
cancelled or postponed, and which caused a loss of metal
fabricating business when some of Omega's customers ceased
operations.
o The company added to its sales efforts beginning in the fourth
quarter of 2001. We hired an inside sales associate and in
February and March 2002, we hired three independent sales
associates who will work closely with our distributors, Value
Added Resellers, and end-users. Our vice president of sales is
making more direct calls on large corporations for private
labeling and in conjunction with expansion projects they may
have planned. Our emphasis continues to be on private labeling
for other innovative companies that see the value in our
products but would prefer to market then under their own
names. We have signed agreements with some large and
well-respected telecommunications companies, and other
agreements are pending. We expanded our product line in 2001,
and our wireless cabinet has been well received in the
marketplace.
o We are focused on growth for sales and revenue. We remain debt
free, with substantial working capital after the exercise of
stock purchase warrants in October 2001 netted the Company
almost $2.7 million. We have the capacity for the manufacture
of American Access products and other metal fabricating jobs
with potential revenues three times our current revenues. The
combined operation provides a greater diversification of
facilities and equipment.
o We added to our product line in January 2002 when we acquired
all rights to the Eclipse Ultraviolet Light Air Purifying
System, installed in a home's HVAC system. We believe that
this acquisition will expand our presence in the marketplace
and significantly contribute to our revenue growth.
o American Access in 2001 amended its Qualified Stock Option
Incentive Plan for Employees and Directors, which was approved
by shareholders at the 2000 annual meeting. By amending the
plan, we are able to continue to offer this incentive to
employees who are key in making the company grow profitably.
o In November 2001, the Board of Directors voted to participate
in a stock by-back program, the third year we have chosen to
invest in our Company. The Board authorized $1 million in
stock purchases, and to date we have bought back 29,800 shares
totaling $1,500 in December 2001 and $22,000 in 2002.
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o The Company is currently a member of the Telecommunications
Industry Association, and we have committed to working on its
subcommittees that study zone cabling solutions. The TIA sets
telecommunications industry standards.
o We created an Advisory Board of accomplished professionals in
the telecommunications and other related industries. Members
are assisting us in evaluating joint ventures, pending and
future private label agreements, and possible future
acquisitions and mergers. Members may also review public
relations and marketing materials, make presentations,
introduce the Company's zone cabling products to help
establish a niche in the marketplace, suggest improvements to
business procedures, and advise the Company on products,
industry customs and trends.
o The company believes that it can acquire working capital
through sale of additional securities, including exercise of
outstanding warrants, private placement, or borrowings,
including bank borrowing and private equity lines, in view of
the nature of its customer base. Indeed, in October 2001, the
Company realized almost $2.7 million from the exercise of
warrants. The company continues to be subject to a number of
risk factors, including the uncertainty of market acceptance
for its product line, the need for additional funds in the
future, competition, technological obsolescence and the
difficulties faced by young companies in general.
OUR BUSINESS
Our background
American Access founder, Victor E. Murray, began working in the
electrical, cable and industrial supply business in 1945, forming strong
relationships with electrical engineers, electrical contractors, municipalities,
power companies and distribution companies, eventually opening his own company
in 1977.
Murray seized an opportunity to evaluate industry needs after the
break-up of the AT&T monopoly, when thousands of technology, service and
equipment companies began to develop revolutionary telecommunications products
and services. Simultaneously, the computer industry rapidly evolved, creating
even more opportunities.
Murray decided to specialize in wire management for Voice, Data, Fiber
Optic, CCTV and CATV applications. With the birth of new and revolutionary high
speed telecommunications technology and equipment, wiring and wire management
would become a critical part of telecommunications. American Access is gaining a
reputation as an innovator in the field of wire management, having consulted on,
designed and supplied product for a wide range of building projects. Our ceiling
and raised-floor cabinets, and our systems furniture panels, can save up to 70%
of the cost to reconfigure office and school data centers and networks by
eliminating excessive wiring and rewiring in traditional home run arrangements.
To keep pace with the market, we introduced a wireless access-point enclosure in
2001.
Our wholly-owned subsidiary, Omega Metals, Inc., continues to
manufacture zone cabling cabinets along with other metal fabricating jobs,
ensuring quality and cost control. Omega in 2000 and again in 2001 was
sub-contracted to participate in the manufacture of chemical warfare detectors
for the U.S. Army. Also, Omega provided a key component for a secured
telecommunications system pursuant to a rush order for the Pentagon's ongoing
renovations and emergency need in the fall of 2001.
In January 2002, we acquired the product rights to the Eclipse
Ultraviolet Light Air Cleansing System. Our initial marketing strategy
aggressively targets contractors and distributors who will supply the system to
the homeowner, for installation in the central air conditioning system.
8
Currently a member of the Telecommunications Industry Association, our
Company has committed to working on its subcommittees that study zone cabling
solutions. The TIA sets telecommunications industry standards.
We held our first meeting of our newly-created Advisory Board during
the prestigious Building Industry Consulting Services International (BICSI) in
January 2002. Our advisors are accomplished professionals in the
telecommunications and other related industries. Members are assisting us in
evaluating joint ventures, pending and future private label agreements, and
possible future acquisitions and mergers. Members may also review public
relations and marketing materials, make presentations, introduce the Company's
zone cabling products to help establish a niche in the marketplace, suggest
improvements to business procedures, and advise the Company on products,
industry customs and trends.
The Company's web presence, the subsidiary Zonecabling.com, was built
with an in-house technology team after relations with a joint venture partner
ended in litigation. However, we determined that marketing our products through
a website competed with our traditional marketing methods. Currently, this
subsidiary is subject to a Management with Option to Purchase Agreement with a
former major stockholder/officer/director and its role is being evaluated. If
the option to purchase the subsidiary is exercised before the expiration of the
agreement on December 31, 2002, the Company would receive $500,000 under the
terms of the agreement.
We have expanded our proprietary line of products to include several
different sized cabinets and a new wireless cabinet, and we continue to forge
private labeling agreements with several manufacturers, for which we custom
design products to their specifications, serving as an Original Equipment
Manufacturer, or label our standard and modified products to suit these
customers' needs. Among those solutions providers are Tyco's AMP and America
Cabling System (ACS) divisions, Hitachi's Maxcess, and Flexspace. We have also
negotiated with Anixter International, one of the nation's top distributors of
telecommunications systems' products, to include our products in its repertoire
for government contracts and large private sector jobs. We signed a new
distributor agreement with Anixter in February 2002. Independently, we are an
approved government vendor, able to sell our products for network applications
at the federal level.
Termination of proposed merger with DataWorld Solutions, Inc and resulting
litigation
On July 19, 2001, American Access filed a complaint in the Florida
court's, 18th Judicial Circuit, against DataWorld Solutions, Inc., of
Farmingdale, New York, seeking a declaratory judgment that American Access was
permitted to terminate its Agreement and Plan of Merger with DataWorld, entered
into on April 10, 2001, and is not subject to a penalty for terminating said
agreement. The termination was predicated on substantial and adverse material
changes to DataWorld's business and other actions taken by DataWorld.
Background of our product development
Until now, wire management systems have not evolved as rapidly as the
telecommunications industry. Industry leaders began to realize that with the
advent of technologically advanced equipment, systems, new methods of
conveyance, and the demand for connection to the Internet the established
methods of wiring and wire management were outdated.
Telecommunication wiring originates outside the building and is routed
into the building through either an underground, direct buried or aerial
facility. The wiring is then distributed to each floor of a building through
areas known as telecommunications closets. From the closets, all wiring is
sorted and distributed as needed to all the workers' stations on that floor.
Every workstation, where phones, computers and fax machines are located, is
required to have two horizontal cables running from it to the telecommunications
closet. This traditional method of wiring is called star topology. It provides
very little flexibility when wires and cables need to be rerouted as additions
or changes are made at a workstation.
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The telecommunications closet is located in a common area within each
floor. The cables distributed from it could be as far as 295 ft. (90 meters)
away from each workstation. For voice wiring, the maximum main cable length is
800 meters. This illustrates that a massive amount of wire is required for
telecommunications. It is not unusual for a 40-story building to have 200-300
miles of wiring. To meet the many industry standards and regulations, the old
method of cable distribution in an office environment requires very expensive
modular furniture to help route the miles of wires. In some applications, even
modular furniture may not meet industry guidelines. American Access products
meet industry standards and are specially designed solutions to cabling
problems.
Today, we all rely on staying in touch. People communicate more with
computers, phones and fax machines. To accommodate the growing
telecommunications industry, more cables and wires must be run to carry voice,
data, and video images faster, cheaper, cleaner, in longer runs, and using less
space. At the same time, future additions and changes to a system must be
considered. Old methods of wiring require that a new line of cable be run from
the user's desk, or workstation, back to the telecommunications closet for each
and every change. Our enclosure, the Zone Cabling Termination Cabinet,
eliminates the need for those new lines by placing the telecommunications
equipment close to the workstation and in an inconspicuous location.
Zone cabling is used in open office areas, hotels, convention centers,
entertainment and theme parks, hospitals, government buildings, schools,
industrial complexes, data centers, banks, and any other area where a flexible
cable layout is required to support a changing or growing network for
communicating information.
AMERICAN ACCESS PRODUCTS
The American Access product line capitalizes on the need for zone
cabling solutions. Our cabinets provide efficiency and flexibility, and are the
only fire-rated and Underwriter's Laboratories approved systems in the industry.
In 1996, we consulted with many of the leading telecommunications
specialists and engineers. All were in agreement. No one had developed a device
that met all of the industry standards and could effectively and efficiently be
used to house and route telecommunications cables and wires. However, some sort
of device was absolutely required to complete the Open Office Architecture
design. American Access researched and verified that no such enclosure existed.
In fact, our research revealed that no one was even developing such a device.
We designed an enclosure to house and distribute telecommunications
wiring and equipment in buildings. This enclosure is called a Zone Cabling
Termination Cabinet. We currently hold a patent for this cabinet that may be
installed in the ceiling, above the ceiling, on or in the wall or in the floor
structure. The ceiling unit fits into the suspended ceiling, providing easy
access to the wires and cables running to each workstation. Less cable is used.
Installation is easier and quicker, causing fewer disruptions and down time for
office workers. The floor and modular furniture units provide the same solution
as our ceiling unit installations. Our modular furniture unit is named EthoCom.
We believe that our products are among only a few manufactured that can
efficiently house telecommunications cables, distribute wiring to workstations,
and store unused cabling until it is needed, while complying with all industry
and government guidelines, standards and regulations. The cabinets can be used
for all low voltage wiring systems, including voice, data, video, building
controls, security, and fire/life/safety wiring systems. The cabinet was
designed to accommodate all manufacturers' equipment.
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Product application
The zone cabling cabinet will reduce the amount of wire running from
the workstation to the telecommunications closet. The wiring will now run from
the workstation to our cabinet, which is readily accessible through the ceiling
grid system, the floor, or through the modular furniture. The cabinet is
designed to accommodate all of the newly developed Open Office Architecture
wiring equipment. This ceiling enclosure is mounted in a standard 2ft. x 4ft. or
2ft. x 2 ft. ceiling grid system, but is physically attached to the building
structure to support the weight of the equipment installed within the enclosure.
The equipment is reached through a door that opens from below the ceiling for
easy maintenance, installations and changes. The floor system is installed under
raised floors with easy access. Modular office furniture is our most recent
application, which we developed in conjunction with a special line of Herman
Miller furniture. Specially trained, highly-paid technicians will be required
for far fewer hours to make those changes when any of our systems grow or are
reconfigured. The new equipment just plugs in, creating less down time and less
loss of productivity. Cables are easily re-routed and reused. Less cable is
used, reducing the cost of materials and labor. Money is saved with the initial
installation and when systems are changed.
The cabinets make better use of telecommunications closets, reducing
the mass of cables to be run throughout the building. Building owners are then
provided more usable space that generates rent.
Product standards
The standards, regulations and various industry association guidelines
are very specific. They address the components of the product, the product
itself, the installation, and every aspect that may affect the safety of people
or property, including:
o wire and cable lengths and widths, the minimum and maximum allowed. For
example, to wire for a telephone system, the maximum main cable length
is 800 meters;
o ability of the product to withstand heat and fire damage;
o markings. Each enclosure must be marked with the manufacturer's name,
trademark, or other descriptive marking. An enclosure may also be
designated with environmental ratings, such as rainproof, watertight,
corrosion resistant and dust-tight;
o number of cables needed to run from the telecommunications closet to
the workstation;
o voltage and grounding concerns; and
o the ability of the product to function as advertised.
American Access believes its Zone Cabling Termination Cabinet is one of
a handful of products that meets the standards and requirements of the
telecommunications industry, including Building Industrial Consulting Services
International, National Electric Code regulations NEC 300-22 B & C, American
National Standards Institute/Telephone Industry Association/Electrical Industry
Association publication 568 A, as well as the zone cabling guidelines as
specified in the Telecommunications Systems Bulletin - TSB 75. This product was
the first to be tested by Underwriters Laboratories for this application.
Therefore, Underwriters Laboratories has assigned this product to a new category
listing. This listing is identified as UL 1863, telecommunications cabinets. In
conducting product tests, Underwriters Laboratories lists, classifies, or
recognizes products for their ability to perform as designed. A UL listing is
the highest category a product can achieve, implying that as tested, all
components of the product work as expected. Our products achieved this highest
level after testing.
MARKETING
Our efforts indicate that the telecommunications industry is beginning
to promote zone cabling as a means to distribute fiber and short runs of
enhanced copper, which are used as a conductor for telecommunications signals
from outside lines into buildings and to telephones, fax machines and computers.
This new cabling architecture provides broader band width, which means increased
Internet speeds, and reduces costs associated with moves, adds, and changes
(MACs) in an office setting.
Although our previous marketing strategy had focused on "channel
distribution" whereby distributors entered partnership programs to stock
products in regional warehouses and to promote that
11
product through the distribution channel, we have expanded this focus to include
our own sales professionals who target key accounts at the design phase and who
are building relationships with Original Equipment Manufacturers and Value Added
Resellers that can include our products in the early phases of network design
and implementation. . We have begun to participate as guest speakers in regional
sales meetings for telecommunications network installers and in national
conferences, such as the BICSI Winter Conference. By sharing our message with
decision-makers in the industry, we believe recognition and acceptance for zone
cabling will fuel our marketing efforts.
Concurrently, Omega Metals and our powder coating process utilize two
manufacturers' representatives, who are independent contractors, and who sell
our products in the Eastern United States. Omega's vice president of sales
coordinates the rep-driven system, and with our reps makes calls on the end
users of metal fabrication. Some accounts, which have been developed in house,
have been retained by Omega.
We use several brochures to assist in marketing. These pieces range
from one page to an eight page full color product and application brochure. We
also maintain a World Wide Web site for the casual visitor, telecommunications
expert, and the investor. All of these marketing/media materials provide company
information, product information, engineering specifications, drawings,
application for use, installation instruction, and features and benefits
tailored to each individual market need. Additionally the World Wide Web site
provides marketing support materials that can be downloaded and printed at
individual locations throughout the world. Questions and answers can be
transmitted via e-mail feedback capability, query analysis for tracking of
inquiries, lead generation for the distributors, distribution of marketing
materials to end-users not normally addressed by the individual distributors.
The company participates in three or four trade shows per year.
The end users of our products contract with specialized, Building
Industry Consulting Services International (BICSI) Certified Registered
Communications Distribution Designers (RCDD), qualified engineers and
contracting firms. These specialists design, specify, purchase and install
cabling of all types, switches and all other telecommunications equipment as
required by the end user. All product purchases are made through authorized
distributors with the exception of certain companies who can purchase extremely
large quantities as a private label type product.
We believe the market potential is enormous for new installation and
for refurbishing existing Zone Cabling Termination Cabinets and that the
partnering for private labeling and government sales will enhance our position
in the industry.
Distribution and Sales
American Access Technologies maintains authorized distributors that are
providers of integrated cabling and network solutions that support business
information and network infrastructure requirements. These distributors team
with customers to implement network solutions by combining a variety of
customized pre- and post-sale services and products from the world's leading
manufacturers. Our authorized distributors include: Accutech, , Anixter, Best
Communications, Branch Datacom, CED Electric, Coleman's, Communications Supply
Corp., Core Data Comm, Energy Electric, Englewood Electric, GE Supply, Graybar,
Hughes Supply, Kent Datacom, LiteComm Supply, Madison Electronics, Platt,
RESOURCElectronics, Rexel/CCW, State Electric, Southern Distribution and WESCO
Distribution.
Competition
The markets for our products are highly competitive and subject to
rapid change. These markets are sensitive to the introduction of new products
and the enhancement of existing ones. Industry participants also aggressively
market their products.
12
Competitors may be developing technologies or products that may be
similar or superior to ours. These competitors may have a better ability to
market their products.
In order to effectively compete, we need to make our business grow. By
generating greater revenues, we will have the resources to develop new products
in response to new technology. We will be able to meet customer demands, and to
sell products in a broad distribution channel. We cannot assure that we will be
able to grow sufficiently to compete effectively in this marketplace.
MANUFACTURING/OMEGA METALS, INC.
We have developed all of our products utilizing computer assisted
design drawings (CADD). Master copies of these drawings are safeguarded at the
home office and certain copies are available to outsource firms. On November 12,
1998, we acquired all the outstanding common stock of Omega Metals, Inc.(Omega),
in exchange for 226,470 shares of our common stock. Omega has been a contract
manufacturer of various products used in the telecommunications industry.
Omega is a precision sheet metal fabrication and assembly company
located in Northeast Florida midway between Jacksonville and Gainesville. The
company was established in 1981, serving a diverse client base of over 300,
including engineering, technology and electronic companies, mostly in the
Southeastern markets. Clients include CSX Railroad and the U.S. military.
We operate from a 67,500 sq. ft. manufacturing facility situated on 8
1/2 acres of land that we own. The manufacturing process is run by a
state-of-the-art computer control system. Manufacturing services include
precision stamping, bending, assembling, painting and silk screening. Quality
control at Omega Metals is based on the Department of Defense military standard
MIL-1-45208A. Inspection equipment is strictly maintained to assure consistent
quality.
In March, 2000, our new powder coating system began operations. The
powder coating system imparts the highest quality finish to fabricated metal.
Diversified facilities and equipment allow Omega Metals, Inc. to handle a broad
range of customer requirements. Strict attention to quality assures our
customers of consistent production and conformity to their specific
requirements.
The manufacturing capability is not limited to only precision metal
fabrication. On site state of the art high-tech surface coatings such as
iridizing, powder coating, silk screening and specialized production painting
are also available.
Omega will continue to operate as a wholly owned subsidiary with sales
and manufacturing intact. In 2000, a clean room powder-coating operation and
expanded office space had been completed. Omega markets its services through two
sales representatives who are independent contractors covering the Eastern
United States. Omega's vice president of sales works in the field, calling on
and developing accounts.
FUTURE PRODUCT DEVELOPMENT
As we identified the specific product needs of the telecommunications
industry, products were developed to meet these needs. The products assist
equipment manufacturers in marketing their own products. We continue to
customize our zone cabling termination cabinets to meet the needs of our
customers. We are developing new enclosures that further streamline the cable
path for fiber optic and copper wiring, including a space-saving 2' x 2' ceiling
tile unit and a wireless unit. There can be no assurance that any new products
will be successfully developed or marketed.
13
INTELLECTUAL PROPERTY
Currently, multiple United States Patents have issued for the related
technology of our Zone Cabling Termination Cabinet, including U.S. Patent No.
5,911,611 issued on June 15, 1999, U.S. Patent No. 5,842,313 issued on December
1, 1998, and U.S. Patent No. 6,112,483 issued on September 5, 2000 for
Communications Cable Interconnection Apparatus and Associated Method For An Open
Office Architecture. Foreign applications are pending for this disclosure in
Australia, Canada, China, Japan, Mexico, and Europe. Registrations in Germany,
Austria, and Great Britain are being processed with patent grants anticipated.
In addition to the Zone Cabling enclosure, U.S. Patent No. 6,201,687
for Modular Furniture Wall System and Method for Telecommunications Equipment
and Wire Management In An Open Office Architecture was issued on March 13, 2001.
Competitors may copy our products
Although we have received patents in the United States on aspects of
our products, competitors may not be prevented from developing products
substantially equivalent to ours. Patent litigation entails high costs and can
take a long time. Therefore, our patent position may not prevent competition
GOVERNMENT REGULATION - INDUSTRY STANDARDS
Our products and those in the telecommunications industry must meet
governmental and industry standards. In the U.S., our products must comply with
various regulations established by the Federal Communications Commission and
Underwriters Laboratories, as well as standards established by Bell
Communications research and local building codes. Our cabinet has been approved
by Underwriters Laboratories for low voltage communications. It meets or exceeds
the national electrical code requirements. We belong to trade organizations such
as the Telecommunications Industry Association, International Association of
Electrical Inspectors and Building Industrial Consulting Services International.
EMPLOYEES
American Access is managed by working directors and key personnel at
both its corporate headquarters in Lake Mary, Florida and its manufacturing site
in Keystone Heights, Florida. Approximately 27 full-time employees staff
American Access in management, sales, administration and production.
Omega employs approximately 50 persons, including 5 in management, 2 in
marketing and sales, 3 in engineering and 40 in production and distribution.
LITIGATION
American Access Technologies, Inc., on September 14, 2000 was served as
a defendant in a lawsuit filed by Vulcan Microsystems, Inc. in the Circuit Court
of the Eleventh Judicial Circuit for Miami-Dade County Florida. Vulcan alleges
that American Access breached the terms and committed other misdeeds in
connection with the companies' letter of intent to establish a joint venture to
engage in e-commerce. Vulcan is seeking in excess of $15,000 damages. American
Access intends to vigorously defend its position and has filed a counterclaim
against Vulcan to include damages in excess of $15,000. We allege that Vulcan
breached the terms of the letter agreement and committed other misdeeds in
connection with the joint venture.
American Access at March 15 has filed suit in Seminole County Circuit
Court, 18th Judicial Circuit, against McLean Ventures LLC, and personal
guarantor Manuel Iglesias, for default in payment of a
14
promissory note of $325,000, with accrued interest in excess of $36,000 at
December 31, 2000. We are seeking full repayment of the note. The original
promissor, Universal Beverages Holding Corp., Inc., assigned its obligations
with written consent of the Company, after the Company filed a lawsuit for
default of the original note of $500,000 plus accrued interest. Although McLean
paid the accrued interest and a portion of the principal at assignment, its
obligations were in default at October 31, 2000. This note is reserved for the
full amount owed. McLean failed to answer our complaint, and we sought a default
judgment against it, which was granted May 22, 2001. We are pursuing legal
remedies to aid in collection of this judgment.
On April 10, 2001, American Access Technologies, Inc. entered into an
Agreement and Plan of Merger with DataWorld Solutions, Inc., of Farmingdale, New
York, in which our newly incorporated subsidiary, Dolphin Acquisition Corp., a
corporation registered in Delaware, was to have been merged into DataWorld, with
DataWorld the surviving subsidiary. Subsequent to signing the agreement,
DataWorld suffered material adverse effects to its business condition, which we
believe so prejudiced the terms of the merger against our shareholders that we
terminated the agreement on July 2, 2001. We filed suit against DataWorld on
July 11, 2001 in the 18th Judicial Circuit Court, Seminole County, Florida,
seeking general damages in excess of $15,000 from DataWorld for breach of
contract. DataWorld countersued for $500,000, the termination payment specified
in the agreement, payable under limited circumstances. We do not believe that
DataWorld is entitled to the termination payment. There is no guarantee that
this litigation will terminate in our favor.
FACILITIES
The company maintains offices at 37 Skyline Drive, Suite 1101, Lake
Mary, FL 32746. The 10,472 square feet of office space is leased for 4 years,
expiring May 30, 2003, at a rent of approximately $11,000 per month. Management
believes that the terms of its lease are at least as good as may be obtained
from another party.
Omega Metals operates from its 67,500 sq. ft. manufacturing facility
situated on 8 1/2 acres of land that it owns in Keystone Heights, midway between
Jacksonville and Gainesville.
MANAGEMENT
The directors and executive officers of the Company are as follows:
Name Age Position
John Presley 62 President, Director
Joe McGuire 43 Sec/Treasurer, Director
Steve Robinson 53 Director
Erik Wiisanen 55 Director, VP Marketing, Omega Metals, Inc.
William Hadaway 56 Director
William Boyd 43 Vice President
JOHN PRESLEY. Director of the company since November 1998, and
President since April 12, 1999, Presley is a graduate registered professional
Engineer. He graduated from the University of Florida in January of 1961 with a
BSME, and attended a number of colleges for graduate work. He worked in many
industries as an engineer and manager before founding Omega metals in 1981.
Omega became a wholly-owned subsidiary of American Access in November, 1998.
15
JOSEPH MCGUIRE was hired by the Company on June 4, 2000. The Board of
Directors appointed him Chief Financial Officer and Director on June 29, 2000.
He has 13 years CFO experience, holding not only his CPA, but various Series
licenses. He is a graduate of the University of Notre Dame. From 1998 until June
2000, he was Chief Financial Officer for Hirst Investment Management, Inc. From
1997 to 1998, CFO for MHR Fund Management; from 1995 to 1997, CFO for the Common
Fund; from 1994 to 1995, CFO for Link Strategic Investors; and from 1989 to
1995, CFO for John Henry & Co., Inc. Prior to 1989, he held management positions
with Dean Witter Reynolds, Paine Webber, Inc., and Price Waterhouse.
ERIK WIISANEN, Vice-President-Marketing of Omega., was elected a
director in December, 1999. He graduated from Cornell University in 1965. He
worked in Banking as a Vice President of Barnett Bank until 1970 and was a
representative for shipping interests until helping to found Omega Metals in
1981. He was co-founder and President of the Board of Directors for a private
kindergarten. He has been vice president in charge of sales for Omega since
1981.
STEVEN ROBINSON, director, is an original founder of American Access
Technologies, Inc. He was appointed to the Board again in January 2001. He has
an extensive background in sales, marketing and operations with several
well-known local corporations. Since February 2001, he has served as President
of IbidAmerica, Inc. He was instrumental in developing Network 2000 sales as a
long-distance independent marketing/sales company for US Sprint. He is retired
from the US Navy. While in the Navy, he specialized in logistics and supply
management including federal government purchasing within DFARS regulations,
contract management and inventory control. He is the founder and majority
shareholder and currently president and CEO of a chemical manufacturing and
marketing company. He also is the majority shareholder of a wireless digital
phone services and products distributor.
WILLIAM HADAWAY, director appointed in January 2001, is a 1965 graduate
of the University of Buffalo with a B.S. degree in Accounting. He earned his CPA
license from the University of the State of New York in 1967. In 1981 he was
granted a CPA license from the Florida Institute of Certified Public
Accountants. Hadaway has been a sole practitioner or partner in a public
accounting firm since 1971. He has lectured on budgeting, cash management and
taxes. Prior to establishing his own firm, Hadaway was employed by Lathan,
Lumsden & McCorminck, the largest non-national CPA firm in Buffalo, NY., and by
Fiddler & Co., CPA in western NY.
WILLIAM BOYD, Vice President, has more than 10 years of
telecommunications and cable distribution sales experience. He was Datacom
Manager for GE Supply, Jacksonville, FL before joining American Access
management in 2000. From September 1999 to December 1999 he was National Account
Manager for Tyco/ADT, promoted from Systems Sales Executive with Tyco, a
position he held since February 1996. Prior to jointing Amp, Boyd was Vice
President of National Sales and Marketing for Cable Distribution Systems, Inc.,
from February 1992, and Government Accounts Manager for Holscher-Wernig, Inc.
before its merger with Cable Distribution Systems.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to the
Company's chief executive officer for the last three completed fiscal years and
to any officer who earned $100,000 or more per year, (the "named executive
officers").
16
------------------------- --------------- ------------------ --------------------- ----------------
Name and Position Year Total Income Other Annual Bonus Other Annual
Compensation
------------------------- --------------- ------------------ --------------------- ----------------
John E. Presley, 2001 $175,000 -0- -0-
President
------------------------- --------------- ------------------ --------------------- ----------------
Erik Wiisanen 2001 $125,000 -0- -0-
Vice President
Omega Metals
------------------------- --------------- ------------------ --------------------- ----------------
Joseph McGuire 2001 $115,000 -0- -0-
Chief Financial Ofc.
------------------------- --------------- ------------------ --------------------- ----------------
John E. Presley, 2000 $175,000 -0- -0-
President
------------------------- --------------- ------------------ --------------------- ----------------
Erik Wiisanen 2000 $125,000 -0- -0-
Vice President
Omega Metals
------------------------- --------------- ------------------ --------------------- ----------------
John Presley, 1999 $175,000 -0- -0-
President
------------------------- --------------- ------------------ --------------------- ----------------
Erik Wiisanen 1999 $125,000 -0- -0-
Vice President
Omega Metals
------------------------- --------------- ------------------ --------------------- ----------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
The following information sets forth the individual grants of stock
options and freestanding SARs to the Company's named officers in the above table
in the fiscal year ended 2001.
--------------------- ----------------------------------- ------------------------------------ ------------ ------------------
Name Number of Securities Underlying % of Total Options/SARs Granted Exercise Expiration Date
Options/SARs Granted Employees in Fiscal Yr. Price
--------------------- ----------------------------------- ------------------------------------ ------------ ------------------
John Presley, 193,334 10.02% $1.00 July 1, 2006
President 332,685 17.25% $2.25 April 9, 2006
--------------------- ----------------------------------- ------------------------------------ ------------ ------------------
Erik Wiisanen 188,333 9.76% $1.00 July 1, 2006
Vice President 332,685 17.25% $2.25 April 9, 2006
Omega Metals
--------------------- ----------------------------------- ------------------------------------ ------------ ------------------
Joseph McGuire 193,333 10.02% $1.00 July 1, 2006
CFO 100,000 5.18% $2.25 April 9, 2006
--------------------- ----------------------------------- ------------------------------------ ------------ ------------------
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR and FY-END OPTIONS/SAR
VALUES
The following table sets forth the number of stock options and
freestanding SARs exercised by the named executive officers in the above table
during the last completed fiscal year. No options were exercised in such year.
----------------------- ---------------- ---------- --------------------------- -----------------------------
Name Shares Value Number of Unexercised Value of Unexercised
Acquired On Realized Securities Underlying In-The-Money Options/SARs
Exercise Options/SARs at FY-End At FY-End
----------------------- ---------------- ---------- --------------------------- -----------------------------
John Presley, --0-- --0-- 1,318,019 --0--
President
----------------------- ---------------- ---------- --------------------------- -----------------------------
Erik Wiisanen --0-- --0-- 787,888 --0--
Vice President
Omega Metals
----------------------- ---------------- ---------- --------------------------- -----------------------------
Joseph McGuire --0-- --0-- 393,333 --0--
Chief Financial Ofc.
----------------------- ---------------- ---------- --------------------------- -----------------------------
On April 9, 2001, Mr. Presley and Mr. Wiisanen entered into one-year
employment agreements with the Company, whereby their salaries would remain at
the current level and each was issued an additional 332,685 stock options at the
exercise price of $2.25. Additionally, CFO Joseph McGuire entered into a
one-year employment agreement on April 9, 2001 that includes compensation at his
current salary and an additional 100,000 stock options.
On December 21, 2001 shareholders at the annual meeting approved
amendments to the Directors and Employees Stock Option Plans, implemented in
2000 and revised by the Board in August, 2001. Under the Employee Plan, Mr.
Presley, Mr. Wiisanen and Mr. McGuire have each been granted 100,000 options at
1.00. Mr. Presley also has been granted 93,334 options under the Directors Plan.
Mr. Wiisanen has been granted 88,333 under the Director's Plan, and Mr. McGuire
93,333 under the Directors Plan.
DIRECTOR COMPENSATION
Directors are paid $500 for meetings attended at our corporate
headquarters and $250 for telephonic meetings. All travel and lodging expenses
associated with directors' meeting(s) are reimbursed by the company.
On December 21, 2001, the shareholders voted to amend the 2000
Directors Stock Option Plan to increase the shares funding the plan from 300,000
to 600,000. The plan was originally adopted in June 2000 as incentive for
continued and future service. Each director is awarded 50,000 options to
purchase American Access stock with additional shares granted for service on
committees, automatically renewable each year.
INDEMNIFICATION
Florida Business Corporation Act
Subsection (1) of Section 607.0850 of the Florida Business
Corporation Act empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including an employee benefit plan), against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (2) of Section 607.0850 of the BCA empowers a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards, except that no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such
17
action or suit was brought, or any other court of competent jurisdiction, shall
determine that despite the adjudication of liability, but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
BCA Section 607.0850 further provides that indemnification provided for
by Section 607.0850 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled and empowers the corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him and incurred by him
in the capacities set forth above, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liabilities under Section 607.0850.
Who we indemnify
Article 4 of American Access Articles of Incorporation provides that
the company shall indemnify those persons entitled to be indemnified, to the
fullest extent permitted by law.
Indemnification against public policy
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
company, the company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John Presley, President and Director, is the brother-in-law of Erik
Wiisanen, Vice President of Marketing for Omega Metals, Inc. and a Director for
American Access Technologies.
In May and June 2000, the Company authorized loans to three directors,
who also were officer-employees of American Access or its subsidiaries, and who
secured the loans with personal assets unrelated to these transactions. The
secured loans were to enable these directors to cover margin calls precipitated
by a drop in the price of the Company's common stock. On May 31, Director and
Company President John Presley and Director Erik Wiisanen each executed a
promissory note and security agreement for $75,000 and $60,000 respectively,
payable to the Company on or before December 31, 2000, with interest at the rate
of 10 percent paid in arrears. On June 8, 2000, Director and then-Chief
Financial Officer Bobby Story executed two promissory notes and a security
agreement for a total of $200,000, payable to the Company on or before December
31, 2000, with interest at the rate of 10 percent paid in arrears. In October
2000, Mr. Presley and Mr. Wiisanen executed additional promissory notes with
identical terms for $10,000 each, payable to the Company on or before April 30,
2001. All of these notes were extended to June 30, 2001 by a vote of
disinterested directors on January 14, 2001, in accordance with the Florida
Business Corporation Act. Subsequently, on August 9, 2001 the notes were
extended to June 30, 2002. A reserve for collectibility in the amount of
$221,278, including interest of $21,278, was taken on Mr. Story's note in the
quarter ended June 30, 2001. On October 18, 2001 Mr. Story repaid to the Company
the amount owed under the two promissory notes for $200,000 plus interest of
$26,866 for a total of $226,866. The reserve was reversed in the Company's
financial statement for the quarter ended September 30, 2001.
On March 27, 2001 the Company entered into a Management and Option to
Purchase Agreement pursuant to its subsidiary Zonecabling.com, Inc. with Mr.
Bobby Story, stockholder and former director/ officer. The site is not currently
operating, as it has been determined that it conflicts with the interests of our
distributors. Mr. Story is evaluating the future of the Business to Business
e-commerce site with an option to purchase the subsidiary for $500,000. Mr.
Story was issued 213,333 options to purchase
18
the common stock of American Access with an exercise price of $2.25, for
managing the subsidiary. He exercised 104,174 options and from the proceeds
repaid to the Company on October 18, 2001 two promissory notes for $200,000 plus
$26,867 interest, for a total of $226,867. The remaining 109,159 options are
still outstanding at March 25, 2002. The option to purchase Zonecabling.com has
not been exercised.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 2, 2002, the beneficial
ownership of the Company's Common Stock by (i) the only persons who own of
record or are known to own, beneficially, more than 5% of the Company's Common
Stock; (ii) each director and executive officer of the Company; and (iii) all
directors and officers as a group.
Name and Address of Shareholder Number of Shares Percent of Class
John Presley 1,431,254(1) 19.98%
6689 Shands Road
Keystone Heights, Florida 32656
Erik Wiisanen 901,123(1) 13.58%
6689 Shands Road
Keystone Height, Florida 32656
Joseph McGuire 410,333(1) 6.58%
37 Skyline Drive Suite 1101
Lake Mary, Florida 32746
Steve Robinson 118,000(1) 1.99%
1401 Horizon Court
Orlando, Florida 32809
William Hadaway 95,000(1) 1.60%
340 Crown Oak Center
Longwood, Florida 32750
Bobby E. Story 409,159(1) 6.54%
164 Golf Club Dr.
Longwood, Florida 32779
M.S. Farrell, Inc. 495,910(1) 7.82%
67 Wall Street
New York, NY 10005
William Boyd 170,000(1) 2.83%
6689 Shands Road
Keystone Heights, Florida 32656
All directors and officers as a group 3,125,710 35.99%
(6 persons)
19
Based upon 5,846,869 shares outstanding on March 29, 2002.
(1) Includes options or warrants to purchase common stock as follows:
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
NAME $1.00 OPTIONS $8 WARRANTS $22 WARRANTS $5.67 OPTIONS $2.25 WARRANTS
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
John 193,334 150,000 150,000 160,000 664,685
Presley
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
Erik 188,333 * * 155,000 444,555
Wiisanen
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
Joseph 193,333 * * 50,000 150,000
McGuire
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
Steve 60,000 * * * 15,000
Robinson
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
Bobby * 100,000 100,000 100,000 109,159
Story
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
William 75,000 * * 20,000 75,000
Boyd
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
William 65,000 * * * 30,000
Hadaway
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
NAME $2.25 warrants $4.75 warrants $5.61 $6 warrants $10 $11 warrants $25 warrants
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
M.S. 82,000 100,000 10,160 100,000 100,000 100,000 3,750
Farrell
-------------- ---------------- ----------------------- ------------------------ -------------- -----------------
DESCRIPTION OF SECURITIES
Common stock
American Access is authorized to issue 30,000,000 shares of common
stock with $.001 par value. The holders of the common stock are entitled to one
vote per each share held and have the sole right and power to vote on all
matters on which a vote of stockholders is taken. Voting rights are
non-cumulative. The holders of shares of common stock are entitled to receive
dividends when, as and if declared by the Board of Directors, out of funds
legally available therefore and to share pro-rata in any distribution to
stockholders. The company anticipates that any earnings will be retained for use
in its business for the foreseeable future. Upon liquidation, dissolution, or
winding up of the company, the holders of the common stock are entitled to
receive the net assets held by the company after distributions to the creditors.
The holders of common stock do not have any preemptive right to subscribe for or
purchase any shares of any class of stock. The outstanding shares of common
stock and the shares offered hereby will not be subject to further call or
redemption and will be fully paid and non-assessable.
Preferred Stock
The Board of Directors has the authority to cause American Access to
issue without any further vote or action by the stockholders, up to 1,000,000
shares of preferred stock, in one or more series, and to designate the number of
shares constituting any series, and to fix the rights, preferences, privileges
and restrictions thereof, including dividend rights, voting right, rights and
terms of redemption, redemption price or prices and liquidation preferences of
such series. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the company without further
action by the stockholders. The issuance of preferred stock with voting and
conversion rights may adversely affect the
20
voting power of the holders of common stock, including the loss of voting
control. No shares of preferred stock are currently outstanding.
SELLING SHAREHOLDER
In May of 2000 we entered into a Stock Purchase Agreement with Crescent
International Ltd., a Bermuda-based investment company. Under the Stock Purchase
Agreement, we can, at our option from time to time, require Crescent
International Ltd. to purchase shares of the Company's Common Stock at prices
determined in accordance with a formula, up to a maximum amount of $15,000,000.
However, we may not require Crescent to purchase shares if, after giving effect
to the purchase, Crescent would beneficially own more than 9.9% of our
outstanding shares.
Upon execution of the Stock Purchase Agreement Crescent purchased
406,278 shares of Common Stock at a purchase price of $1,900,000. As provided in
the Stock Purchase Agreement, the purchase price was determined by applying 92%
to the average of the lowest three consecutive bid prices during the preceding
22 trading days.
The shares that remained available under the Stock Purchase Agreement,
with an aggregate purchase price of $13,100,000, were to be issued by the
Company in maximum increments of $1,150,000 at minimum 22-day intervals for a
period that ended in November 2001 (maximum of $20,000 increments if the closing
bid price of out common stock does not equal or exceed $6.00 on each of the
seven trading days immediately preceding the issuance date). The ability of the
Company to issue shares under the Stock Purchase Agreement is subject to a
number of conditions (none of which are within the control of Crescent),
including requirements that (i) the average daily trading value of the Common
Stock for the 22 days preceding the issuance must be $600,000 or more, and (ii)
the resale of the shares must have been registered under the Securities Act of
1933. The purchase price per share for these issuances is determined by the same
formula as the original draws, applying 92% to the average of the lowest three
consecutive bid prices during the 22 trading days immediately preceding the
issuance. However, because some or all of these conditions were not subsequently
met, no additional shares were issued to Crescent under the Agreement and the
agreement has expired.
As part of the transaction, the Company also issued two warrants to
Crescent. The Early Put Warrant was a warrant to purchase an indeterminate
number of shares at an exercise price of $.01 per share. The number of shares is
determined by reference to the market price of the Company's Common Stock on the
date the registration statement of which this Prospectus is a part is declared
effective, as compared to $4.6766 per share, the purchase price for the shares
acquired by Crescent in May 2000. Because the market price on the date this
Registration Statement first became effective exceeded $4.6766 per share, no
shares were issuable upon exercise of the warrant. The purpose of this Warrant
was to protect Crescent against decreases in the market value of the shares
between the dates the shares were acquired and the date the Registration
Statement was declared effective, although it remained subject to liquidity
risks associated with the relatively low trading volume of the Company's Common
Stock, and risks of bankruptcy or insolvency due to the Company's history of
operating losses. If the market price of the Company's Common Stock had fallen
below $4.6766 on the date the Registration Statement was declared effective, the
effect of this Warrant would be dilutive to existing shareholders, as it would
involve the issuance of shares of Common Stock at $.01 per share, provided that
the issuance did not increase Crescent's beneficial ownership of the Company's
Common Stock above 9.9% at the time of issuance.
The Incentive Warrant is a warrant to purchase up to 128,000 shares at
an exercise price of $7.0149 per share. This exercise price is subject to
adjustment under certain circumstances in the event of stock splits, stock
dividends, recapitalizations, reclassifications, and similar events.
21
The Company is also required to register the resale of all of the
shares issuable under the Stock Purchase Agreement, including the shares
issuable upon exercise of the Incentive Warrant, and to keep the Registration
Statement effective for a period of six months after the agreement with Crescent
ends. The Company is filing this amendment because the initial Registration
Statement became stale in August 2001. Pursuant to Crescent's Registration
Rights, the Company is required to pay to Crescent liquidated damages of
$82,454.66 for failing to keep the Registration Statement effective prior to
this amendment. Crescent liquidated its stock position in October and November
2001, by selling under Rule 144 of the Securities Act of 1933. Liquidated
damages are calculated based on the dates of sale of securities.
The Company had no prior dealings with Crescent International Ltd.
Crescent has also advised us that at the time the Shares were acquired it had no
understandings or arrangements to dispose of the Shares.
The following table sets forth certain information as of December 31,
2001, regarding the ownership of the common stock by the selling shareholder and
as adjusted to give effect to the sale of the shares offered in this prospectus.
----------------------------------------- ---------------------- --------------------------- -------------------------
Name Shares Shares which may Number of
owned prior be offered under shares to be
to this this prospectus owned after
offering the offering
----------------------------------------- ---------------------- --------------------------- -------------------------
Crescent International Ltd. at -0- 128,000 -0-
12-10-2001
----------------------------------------- ---------------------- --------------------------- -------------------------
The Selling Shareholder and its officers and directors have not held
any positions or office or had any other material relationship with the Company
or any of its affiliates within the past three years.
--------------------------------------------------------------------------------
PLAN OF DISTRIBUTION
--------------------------------------------------------------------------------
The shares of common stock are being offered on behalf of the selling
shareholder, and we will not receive any proceeds from the offering. The shares
of common stock may be sold or distributed from time to time by the selling
shareholder, or by pledgees, donees or transferees of, or other successors in
interest to, the selling shareholder, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agent or may acquire such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be subject to
change. The sale of the shares of common stock may be effected through one or
more of the following methods: (i) ordinary brokers' transactions; (ii)
transactions involving cross or block trades or otherwise on the NASDAQ Stock
Market; (iii) purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this prospectus;
(iv) "at the market" to or through market makers or into established trading
markets, including direct sales to purchasers or sales effected through agents;
and (v) any combination of the foregoing, or by any other legally available
means. The selling shareholder also may enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
shares of common stock, which shares of common stock may be resold thereafter
pursuant to this prospectus. We cannot be certain that all or any of the shares
of common stock will be sold by the selling shareholder.
--------------------------------------------------------------------------------
22
Brokers, dealers, underwriters or agents participating in the sale of
the shares of common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the selling shareholder and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). The
selling shareholder and any broker-dealers or other persons who act in
connection with the sale of the common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission they receive and
proceeds of any sale of such shares may be deemed to be underwriting discounts
and commissions under the Securities Act. Neither the Company nor the selling
shareholder can presently estimate the amount of such compensation. The Company
knows of no existing arrangements between the selling shareholder and any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock.
--------------------------------------------------------------------------------
The selling shareholder and any other persons participating in the sale
or distribution of the common stock will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the common stock by the
selling shareholder or any other such persons. The foregoing may affect the
marketability of the common stock. We will pay substantially all of the expenses
incidental to the registration, offering and sale of the common stock to the
public, other than any commissions or discounts of underwriters, broker-dealers
or agents. We and the selling shareholder have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
--------------------------------------------------------------------------------
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for
the company by Joel Bernstein, Esq. P.A., Miami, Florida.
EXPERTS
The financial statements appearing in this Prospectus and
Registration Statement have been audited by Rachlin Cohen & Holtz, CPA's,
independent certified public accountants, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Additional information
o For further information with respect to American Access and the
securities hereby offered, reference is made to the exhibits filed as
part of this registration statement, which may be inspected and copied
at the public reference facilities of the commission in Washington
D.C.,
o and copies of such material can be obtained from the Public Reference
Section of the Commission, 450 5th Street, N.W., Washington, D.C.
20549, at prescribed rates and
o are available on the World Wide Web at : http://www.sec.gov.
-------------------
23
================================================================================
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 - F-31
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
American Access Technologies, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of American Access
Technologies, Inc. and Subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years ended December 31, 2001 and 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Access
Technologies, Inc. and Subsidiaries as of December 31, 2001, and the results of
their operations and their cash flows for each of the years ended December 31,
2001 and 2000, in conformity with accounting principles generally accepted in
the United States.
As more fully discussed in Note 2 to the consolidated financial statements, the
Company is subject to certain risks and other matters.
RACHLIN COHEN & HOLTZ LLP
Fort Lauderdale, Florida
February 1, 2002
F-2
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
ASSETS
------
Current Assets:
Cash and cash equivalents $ 348,757
Investment securities 1,751,665
Accounts receivable, net of allowance of $75,000 1,084,012
Inventories 707,553
Prepaid expenses and other current assets 83,093
Notes receivable, directors and stockholders,
including accrued interest 178,211
Note receivable, other, net of allowance of $361,562 --
------------
Total current assets 4,153,291
Property, Plant and Equipment 2,883,368
Patent Costs 70,404
Deposit on Product Rights 129,780
Other Assets 13,075
------------
Total assets $ 7,249,918
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 370,373
Accrued expenses 89,169
------------
Total current liabilities 459,542
------------
Commitments, Contingencies, Other Matters and Subsequent Events --
Stockholders' Equity:
Series A 10% Senior Convertible Preferred stock, $.001 par value;
authorized 1,000,000 shares; issued and outstanding 0 shares --
Common stock, $.001 par value; authorized 30,000,000 shares;
5,847
issued 5,846,870 shares
Additional paid-in capital 13,606,551
Deficit (6,820,252)
Treasury stock, 2,000 common shares at cost (1,500)
Stock subscription receivable, net of allowance of approximately $2,712,000 (270)
------------
Total stockholders' equity 6,790,376
------------
Total liabilities and stockholders' equity $ 7,249,918
============
F-3
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
---- ----
Net Sales
Formed metal $ 2,722,428 $ 3,415,564
Zone cabling termination cabinet 1,345,796 1,855,889
----------- -----------
4,068,224 5,271,453
Costs and Expenses:
Cost of sales 2,155,748 2,566,837
Selling, general and administrative 1,839,489 2,392,467
Compensation and related benefits 1,168,153 1,444,437
Stock-based compensation 322,330 221,365
----------- -----------
5,485,720 6,625,106
Loss Before Other Income (Expense) (1,417,496) (1,353,653)
----------- -----------
Other Income (Expense):
Interest income 40,662 72,945
Other income 23,300 34,915
Realized and unrealized gain (loss) on investments 878 13,064
Abandoned joint venture -- (182,736)
Write-off of goodwill -- (254,803)
Provision for doubtful notes receivable (20,000) (361,562)
Interest expense (68,413) (1,963)
----------- -----------
(23,573) (680,140)
Net Loss $(1,441,069) $(2,033,793)
=========== ===========
Basic Net Loss Per Common Share $ (.30) $ (.45)
=========== ===========
Weighted Average Common Shares Outstanding 4,797,251 4,540,847
=========== ===========
See notes to consolidated financial statements
F-4
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Series A Additional
Preferred Stock Common Stock Paid-in
--------------- ------------
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
Balance, December 31, 1999 10,600 $ 1,060,000 4,094,239 $ 4,094 $ 9,144,508 $(3,208,875)
Year Ended December 31, 2000:
Note receivable arising from loan of 197,600 -- -- -- -- -- --
shares treasury stock, at cost
Allowance for note receivable to reduce to -- -- -- -- (970,949) --
estimated fair value of treasury stock loaned
Purchase of 141,000 shares of treasury stock -- -- -- -- -- --
Issuance of common stock for domain name -- -- 2,420 3 9,997 --
Conversion of preferred stock to common
stock, including dividends (10,600) (1,060,000) 215,534 216 1,196,299 (136,515)
Warrants granted for services -- -- -- -- 221,365 --
Exercise of warrants:
Cash -- -- 5,000 5 39,995 --
Cashless transaction -- -- 17,475 17 (17) --
Sale of common stock in private placement, --
net of related costs -- -- 406,280 406 1,533,479 --
Net loss -- -- -- -- -- (2,033,793)
-------- ----------- ----------- ------- ----------- -----------
Balance, December 31, 2000 -- $ -- 4,740,948 $ 4,741 $11,174,677 $(5,379,183)
Year Ended December 31, 2001:
Return and retirement of treasury stock -- -- (277,100) (277) (523,033) --
Warrants granted for services -- -- -- -- 173,830 --
Stock issued for services -- -- 96,500 96 157,689 --
Exercise of warrants -- -- 1,286,522 1,287 2,623,388 --
Treasury stock purchased -- -- -- -- -- --
Net loss -- -- -- -- -- (1,441,069)
-------- ----------- ----------- ------- ----------- -----------
Balance December 31, 2001 -- $ -- 5,846,870 $ 5,847 $13,606,551 $(6,820,252)
======== =========== =========== ======= =========== ===========
[restubbed table]
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
Stock Treasury
Treasury Subscription Stock
Stock Receivable Receivable Total
----- ---------- ---------- -----
Balance, December 31, 1999 $ (881,843) $ (270) $ -- $ 6,117,614
Year Ended December 31, 2000:
Note receivable arising from loan of 197,600 1,205,599 -- (1,205,599) --
shares treasury stock, at cost
Allowance for note receivable to reduce to -- -- 970,949 --
estimated fair value of treasury stock loaned
Purchase of 141,000 shares of treasury stock (612,416) -- -- (612,416)
Issuance of common stock for domain name -- -- -- 10,000
Conversion of preferred stock to common
stock, including dividends -- -- -- --
Warrants granted for services -- -- -- 221,365
Exercise of warrants:
Cash -- -- -- 40,000
Cashless transaction -- -- -- --
Sale of common stock in private placement,
net of related costs -- -- -- 1,533,885
Net loss -- -- -- (2,033,793)
---------- ------------ ------------ ------------
Balance, December 31, 2000 $ (288,660) $ (270) $ (234,650) $ 5,276,655
Year Ended December 31, 2001:
Return and retirement of treasury stock 288,660 -- 234,650 --
Warrants granted for services -- -- -- 173,830
Stock issued for services -- -- -- 157,785
Exercise of warrants -- -- -- 2,624,675
Treasury stock purchased (1,500) -- -- (1,500)
Net loss -- -- -- (1,441,069)
---------- ------------ ------------ ------------
Balance December 31, 2001 $ (1,500) $ (270) $ -- $ 6,790,376
========== ============ ============ ============
See notes to consolidated financial statements
F-5
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
---- ----
Cash Flows from Operating Activities:
Net loss $(1,441,069) $(2,033,793)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 354,733 423,161
Warrants and stock issued for services 322,330 221,365
Realized and unrealized gains on investments (878) (13,064)
Provision for doubtful accounts 21,505 30,922
Provision for doubtful notes receivable 20,000 361,562
Write-off of goodwill -- 254,804
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (93,805) (27,721)
Inventories (55,615) (211,124)
Prepaid expenses and other assets (41,822) (16,654)
Increase (decrease) in accounts payable and accrued expenses 47,214 (184,859)
----------- -----------
Net cash used in operating activities (867,407) (1,195,401)
----------- -----------
Cash Flows from Investing Activities:
Purchase of investments (1,750,787)
Proceeds from sale of investments -- 846,408
Proceeds from payments on notes receivable 200,000 250,000
Increase in notes receivable (4,223) (419,935)
Acquisition of property and equipment (16,855) (667,872)
Patent costs -- (15,018)
----------- -----------
Net cash used in investing activities (1,571,865) (6,417)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from exercise of warrants 2,624,675 40,000
Proceeds from sale of common stock, net of related costs 9,285 1,533,885
Payments on capital lease obligations (244,379)
Payments on line of credit -- (73,812)
Acquisition of treasury stock (1,500) (612,416)
----------- -----------
Net cash provided by financing activities 2,388,081 887,657
----------- -----------
Net Decrease in Cash and Cash Equivalents (51,191) (314,161)
Cash and Cash Equivalents, Beginning 399,948 714,109
----------- -----------
Cash and Cash Equivalents, Ending $ 348,757 $ 399,948
=========== ===========
F-6
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CAPITALIZATION
American Access Technologies, Inc. ("Company") was incorporated on
October 21, 1996, under the laws of the State of Florida. The
Company's Articles of Incorporation, as amended on November 25,
1996, authorize the Company to issue and have outstanding at any one
time 10,000,000 shares of common stock, par value $.001 per share
and 1,000,000 shares of preferred stock, par value $.001 per share.
On October 2, 1998, the previously amended Articles of Incorporation
were further amended to provide for the issuance of 60,000 shares of
Series A 10% Senior Convertible Preferred stock. The amendment
provided, among other things, that the holders of the Series A
Preferred stock shall be entitled to voting rights equal to the
votes that would be cast by the holders of the number of shares of
common stock into which the Series A Preferred stock could be
converted immediately prior to the taking of such votes, including
any shares which would be issuable in payment of accrued and unpaid
dividends.
During November, 1998, the Company completed a $5,000,000 private
placement of 50,000 shares of its Series A 10% Senior Convertible
Preferred Stock, par value of $.001 per share, at $100.00 per share
(See Note 13). During 1999, holders of the Series A Preferred stock
converted 39,400 of the Series A Preferred shares into 289,981
common shares. During January 2000, the remaining 10,600 shares of
Series A Preferred were converted into 215,534 shares of common
stock. At December 31, 2001, there was no Preferred stock issued and
outstanding.
On February 14, 2001, the Articles of Incorporation were further
amended increasing the shares of common stock authorized from
10,000,000 to 30,000,000 shares.
BUSINESS
The Company manufactures patented zone cabling enclosures for the
telecommunications industry. The enclosures house and route cables
and wires used in voice, computer and data transmission systems.
Copper, fiber optic and wireless network systems can be moved, added
to or changed through the enclosure rather than through longer runs
back to the telecommunications closet.
Omega Metals, Inc. ("Omega"), a wholly-owned subsidiary of the
Company, shears and molds metal and manufactures metal-formed
products for customers principally in Florida and Georgia.
Zonecabling.com, Inc., a wholly-owned subsidiary of the Company, was
incorporated on May 4, 2000, to develop a Business-to-Business
e-commence portal, and is currently inactive.
F-7
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
BUSINESS (Continued)
AATK.com, LLC was incorporated February 2, 2000 pursuant to a joint
venture agreement. The Company owned 76% of AATK.com which is
inactive and administratively dissolved inasmuch as the joint
venture has been dissolved and is the subject of pending litigation
(see Note 16).
Dolphin Acquisition Corporation, a wholly-owned subsidiary of the
Company, which as incorporated in April 2001, was formed as a part
of an agreement and plan of merger with an unrelated entity. The
subsidiary was to be merged into this entity with the entity
becoming the surviving subsidiary. The Company terminated the
agreement and plan of merger on July 2, 2001 and is currently
involved in litigation with the entity (see Note 16). Dolphin
Acquisition Corporation is currently inactive.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries. All material
intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they
may ultimately differ from actual results. Those estimates subject
to potential change in the near term include allowances for doubtful
accounts and notes receivable.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time the
product is shipped to the customer.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents, investments in securities, accounts receivable and
notes receivable.
F-8
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CONCENTRATIONS OF CREDIT RISK (Continued)
CASH AND CASH EQUIVALENTS
The Company maintains deposit balances at financial
institutions that, from time to time, may exceed federally
insured limits. At December 31, 2001, the Company had deposits
in excess of federally insured limits of approximately
$98,000. The Company maintains its cash with high quality
financial institutions, which the Company believes limits
these risks.
In addition, the Company maintains investment accounts with a
financial institution which is not insured by the FDIC. These
funds, which were invested primarily in mutual funds and
equity instruments at December 31, 2001, may be subject to
insurance by SPIC, Securities Investor Protection Corporation,
subject to various limitations. At December 31, 2001,
$1,751,665 was held in this account.
ACCOUNTS RECEIVABLE
The Company does business and extends credit based on an
evaluation of the customers' financial condition generally
without requiring collateral. Exposure to losses on
receivables is expected to vary by customer due to the
financial condition of each customer. The Company monitors
exposure to credit losses and maintains allowances for
anticipated losses considered necessary under the
circumstances.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
INVESTMENT SECURITIES
The Company classifies its investment securities in one of three
categories: trading, available for sale, or held-to-maturity.
Trading securities are bought and held principally for the purpose
of selling them in the near term. Held-to-maturity are those
securities as to which the Company has the ability and intent to
hold the security until maturity. All other securities not included
in trading or held-to-maturity are classified as available for sale.
Trading and available for sale securities are recorded at fair
value. Held-to-maturity securities are recorded at amortized costs,
adjusted for the amortization or accretion of premiums and
discounts.
Unrealized holding gains and losses, net of the related tax effect,
on available for sale securities are excluded from earnings and are
reported as a separate component of stockholders' equity until
realized. Realized gains and losses from the sale of available for
sale securities are determined on a specific identification basis. A
decline in the market value of any available for sale or
held-to-maturity security below cost that is deemed other than
temporary results in a reduction in carrying amount to fair value.
The impairment is charged to earnings and a new cost basis for the
security is established. Dividend and interest income are recognized
when earned.
F-9
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INVESTMENT SECURITIES (Continued)
Investment securities at December 31, 2001 consist of mutual funds
and equity securities, which are classified as trading securities.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost
determined using an average cost method. Inventory costs for
finished goods and work-in-process include material, labor,
production overhead, and outside services.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated,
using the straight-line method, over the estimated useful lives of
the assets. Gain or loss on disposition of assets is recognized
currently. Repairs and maintenance are charged to expense as
incurred. Major replacements and betterments are capitalized and
depreciated over the remaining useful lives of the assets.
PATENTS
The Company has capitalized certain incremental costs incurred
related to acquiring four patents on the Company's products. In each
of the years 1998 through 2001, a patent was finalized and issued by
the United States Patent Department. The Company amortizes the cost
of patents over the patents' lives, 18 years.
PRODUCT DEVELOPMENT COSTS
Costs in connection with the development of the Company's product
are comprised of design, production, consulting and other related
professional fees. These costs are charged to expense as incurred.
ADVERTISING
Advertising costs are charged to expense as incurred. Advertising
costs were not material during the years ended December 31, 2001 and
2000.
INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the recognition
of deferred tax liabilities and assets for temporary differences,
operating loss carryforwards, and tax credit carryforwards existing
at the date of the financial statements. An effective tax rate of
37% was used to calculate the deferred income taxes.
F-10
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES (Continued)
A temporary difference is a difference between the tax basis of an
asset or liability and its reported amount in the financial
statements that will result in taxable or deductible amounts in
future years when the asset is recovered or the liability is
settled. Deferred taxes represent the future tax return consequences
of these differences.
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF
The Company accounts for long-lived assets in accordance with the
provision of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. This
statement requires that long-lived assets and certain identifiable
intangible assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
RECENT ACCOUNTING PRONOUNCEMENTS
In August 2001, the FASB issued Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets (SFAS 144), which
addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS 144 supersedes Statement No.
121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a
business. SFAS 144 retains the requirement in Opinion No. 30 to
report separately discontinued operations and extends that reporting
to a component of an entity that either has been disposed of or is
classified as held for sale. The Company is required and plans to
adopt the provisions of SFAS 144 for the quarter ending March 31,
2002. The Company does not believe the adoption of SFAS 144 will
have a significant impact on its financial statements.
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143,
"Accounting for Asset Retirement Obligations". SFAS 143 requires
entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The
statement requires that the amount recorded as a liability be
capitalized by increasing the carrying amount of the related
long-lived asset. Subsequent to initial measurement, the liability
is accreted to the ultimate
F-11
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
amount anticipated to be paid, and is also adjusted for revisions to
the timing or amount of estimated cash flows. The capitalized cost
is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss upon settlement.
SFAS 143 will be effective for the Company's financial statements
beginning January 1, 2002, with earlier application encouraged. The
Company believes that the adoption of this statement will not have a
significant impact on the results of operations or financial
position of the Company.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations",
and SFAS No. 142, "Goodwill and Other Intangible Assets" which
replace Accounting Principles Board Opinion Nos. 16, "Business
Combinations" and 17, "Intangible Assets", respectively. SFAS No.
141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001, and that the
use of the pooling-of-interests method be prohibited. SFAS No. 142
changes the accounting for goodwill from an amortization method to
an impairment-only method. Amortization of goodwill, including
goodwill recorded in past business combinations, will cease upon
adoption of SFAS No. 142, which the Company will be required to
adopt on January 1, 2002. After December 31, 2001, goodwill can only
be written down upon impairment discovered during annual tests for
fair value, or discovered during tests taken when certain triggering
events occur. The Company believes that the adoption of this
statement will not have a significant impact on the results of
operations or financial position of the Company.
In September 2000, Statement of Financial Accounting Standards No.
140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (SFAS 140) was issued. SFAS 140
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities.
SFAS 140 is effective for recognition and reclassification of
collateral and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December
15, 2000 and is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31,
2001. The adoption of SFAS 140 did not have a material effect on the
financial position or results of operations of the Trust.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets or liabilities in the balance
sheet and to measure them at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of the gain or loss
recognition on the hedging derivative with the recognition of (i)
the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated
as a hedging instrument, the gain or loss is recognized in income in
the period of change. On June 30, 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133."
F-12
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In June, 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." SFAS No. 133
as amended by SFAS No. 137 and 138 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts
to hedge existing risks or for speculative purposes. Accordingly,
the adoption of this standard on January 1, 2001 did not
significantly effect the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin, or SAB No. 101, "Revenue Recognition in
Financial Statements". SAB 101 provides guidance for revenue
recognition under certain circumstances. The Staff Accounting
Bulletin was effective during the fourth quarter of 2000, and did
not have an effect on the Company's consolidated results of
operations, financial position and cash flows.
RECLASSIFICATIONS
Certain amounts in prior year financial statements have been
reclassified for comparative purposes to conform with the
presentation in the current year financial statements.
NOTE 2. SUMMARY OF CERTAIN RISKS AND OTHER MATTERS
PROFITABILITY AND LIQUIDITY
As of December 31, 2001, the Company reflected stockholders' equity
of approximately $6,790,000. However, the Company has incurred net
losses of approximately $1,441,000 in 2001 and $2,034,000 in 2000,
and has an accumulated deficit balance of approximately $6,820,000
at December 31, 2001. The Company's ability to achieve sustained
profitable operations is dependent on continuing to achieve sales
growth through expansion of sales and marketing efforts. Management
believes that cash flows from operations and additional financing
available from other sources will be sufficient to fund operations.
There is no assurance that such events will occur.
SIGNIFICANT RELATED PARTY TRANSACTIONS
In 1999, 2000 and continuing into 2001, the Company has entered into
several significant related party transactions with current and
former officers and directors. See Notes 4, 6, 14 and 16 for further
information regarding these transactions.
PENDING LITIGATION
The Company is involved in certain pending litigation as to which it
cannot predict the outcome with any certainty (see Note 16).
F-13
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. INVESTMENT SECURITIES
All marketable securities are deemed by management to be trading and
are reported at fair value with net unrealized gains or losses reported
on the consolidated statement of operations. Realized gains and losses
are recorded based on the specific identification method. For the year
ended December 31, 2001, gross unrealized gains and losses were
approximately $880. The carrying amount of the Company's investments is
shown in the table below:
Equity securities $1,350,000
Mutual funds 401,665
----------
$1,751,665
==========
NOTE 4. NOTES RECEIVABLE, DIRECTORS AND STOCKHOLDERS
NOTES RECEIVABLE IN EXCHANGE FOR CASH
In May and June 2000, the Company authorized loans to three
directors, who also are officers of American Access or its
subsidiaries, and who collateralized the loans with personal assets
unrelated to these transactions. The collateralized loans were to
enable these directors to cover margin calls precipitated by a drop
in the price of the Company's common stock. On May 31, 2000, two
directors (one of whom is the Company's president) each executed a
promissory note and security agreement for $75,000 and $60,000
respectively, payable on or before December 31, 2000, with interest
at 10%. On June 8, 2000, a former Director and Chief Financial
Officer executed two promissory notes and a security agreement for a
total of $260,000, payable on or before December 31, 2000, with
interest at 10%. Although the Company agreed to loan $260,000,
ultimately only $200,000 was borrowed. In October 2000, the two
directors executed additional promissory notes with identical terms
for $10,000 each, payable on or before April 30, 2001. Each of these
notes were extended to June 30, 2002. On October 18, 2001, the
former Director and Chief Financial Officer repaid the amount owed
under the two promissory notes, plus interest of $26,866, for a
total of $226,866.
No interest has been paid on remaining notes receivable since
inception and through December 31, 2001.
In addition, the Company loaned $20,000 to a stockholder pursuant to
a note receivable, interest at 10%, principal due December 31, 2001.
A reserve for doubtful collectibility in the amount of $20,000 has
been provided as of December 31, 2001.
Accrued/
Principal Unpaid
Balance Interest Total
------- -------- -----
Officers/Directors/Stockholders $155,000 $ 23,212 $178,212
F-14
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4. NOTES RECEIVABLE, DIRECTORS AND STOCKHOLDERS (Continued)
NOTES RECEIVABLE IN EXCHANGE FOR SHARES HELD IN TREASURY
On June 14, 2000, the Company loaned 197,600 shares of treasury
stock to the former Director and Chief Financial Officer to cover a
margin call on the Company's common stock. This loan was secured
with personal assets. The shares were to be returned to the Company
at the earlier of the date the common stock price reaches $15 or
June 30, 2001. On March 30, 2001, the shares were returned to the
Company and subsequently retired.
NOTE 5. NOTES RECEIVABLE, OTHER
The Company has instituted litigation against the debtor and personal
guarantor for default in payment of a promissory note of $325,000, with
accrued interest in excess of approximately $36,000 at December 31,
2000. The original promissor assigned its obligations with written
consent of the Company, after the Company filed a lawsuit for default
of the original note of $500,000 plus 15% interest, of which
approximately $63,000 was unpaid at December 31, 1999. Although the
debtor paid an initial cash payment of $250,000, its obligations of
$325,000 plus $36,562 in interest were in default at October 31, 2000.
The Company is attempting to negotiate a settlement agreement with the
debtor and the note's guarantor. An allowance for doubtful
collectibility of the total outstanding principal balance, as well as
all accrued interest, has been recorded as of December 31, 2001.
NOTE 6. STOCK SUBSCRIPTION RECEIVABLE
During June 1999, an individual affiliated with the investment banking
firm involved in the Company's registration as a public company,
exercised options to purchase 270,000 shares of Company common stock at
$8.00 per share for a total of $2,160,000. The Company accepted as
payment for these shares three notes receivable totaling $2,160,000.
The notes receivable, as amended, were due on December 31, 2001, and
bear interest at 10%. The Company could have required the notes be paid
in full sooner if the Company stock price equaled or exceeded $35 (the
market price of the Company's common stock was $0.80 at December 31,
2001).
The Company has recorded the exercise of these warrants, net of an
allowance, by increasing common stock outstanding and increasing stock
subscriptions receivable, a separate component of stockholders' equity.
The balance as of December 31, 2001 follows:
Notes receivable $2,160,000
Accrued interest receivable 551,978
----------
2,711,978
Less allowance 2,711,708
----------
$ 270
==========
F-15
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6. STOCK SUBSCRIPTION RECEIVABLE (Continued)
The interest earned on the notes receivable has been recorded as an
increase in stockholders' equity rather than included in operations,
because the transaction giving rise to the notes was an equity
transaction. No interest was recorded in 2001 due to uncertainty of
collectibility.
NOTE 7. PRODUCT LINE DISPOSAL
In June 2000, the Company announced that it was no longer actively
marketing its Genco generator-cover product line due to the fact that
factory floor space was needed to produce its proprietary products. The
Company expensed the remaining unamortized goodwill of $254,803, which
is included as a separately stated item in the accompanying
consolidated statements of operations for the year ended December 31,
2000.
NOTE 8. INVENTORIES
Raw materials $191,371
Work-in-process 96,482
Finished goods 419,700
--------
$707,553
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
Estimated Useful
Lives (Years)
-------------
Land -- $ 103,860
Building and improvements 30 1,369,805
Machinery and equipment 5-7 3,634,584
Vehicles 3-5 40,303
Tools 3-5 28,064
----------
5,176,616
Less accumulated depreciation 2,293,248
----------
$2,883,368
==========
Depreciation expense for the years ended December 31, 2001 and 2000 was
$324,826 and $264,608, respectively.
NOTE 10. OBLIGATIONS UNDER CAPITAL LEASES
In October 2000, the Company entered into an obligation under a capital
lease for approximately $276,000 for the purchase of equipment, which
has a term extending through 2005, and which provided for an implicit
interest rate of approximately 11.5%.
F-16
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 10. OBLIGATIONS UNDER CAPITAL LEASES (Continued)
In October, 2001, the Company paid for the equipment in full and
terminated the capital lease agreement. Approximately $60,000 was paid
in prepayment penalties in conjunction with this capital lease
termination.
NOTE 11. PROFIT SHARING PLAN
The Company has a 401(k) Profit Sharing Plan covering all non-leased
employees who meet minimum length of service and age requirements.
Employer contributions are made at the discretion of management. There
were no contributions made for 2001 and 2000, respectively. Employees
are vested for purposes of the contribution as follows:
Years of Service Percentage
---------------- ----------
Less than 1 0%
1-2 20
2-3 40
3-4 60
4-5 80
5 or more 100
NOTE 12. INCOME TAXES
The Company accounts for income taxes under the provision of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. SFAS No. 109 is an asset and liability approach for computing
deferred income taxes.
The provision for income taxes is computed on a consolidated return
basis.
A reconciliation of income taxes computed at the statutory federal rate
to income tax expense (benefit) is as follows:
2001 2000
---- ----
Tax provision at the statutory rate of 34% $(490,000) $(691,000)
State income taxes, net of federal income tax (43,000) (62,000)
Net operating loss carryforward adjustment (48,000) (313,000)
Provisions for uncollectible amounts 7,000 137,000
Exercise of stock options and warrants (435,000) (61,000)
Change in valuation allowance 927,000 908,000
Stock options not exercised (82,000) 82,000
--------- ---------
$ -- $ --
========= =========
F-17
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12. INCOME TAXES (Continued)
As of December 31, 2001, the Company had consolidated net operating
loss carryforwards for federal income tax reporting purposes amounting
to approximately $7,071,000, which expire in varying amounts to the
year 2020.
The Company has not recognized any benefit of such net operating loss
carryforwards in the accompanying consolidated financial statements in
accordance with the provisions of SFAS No. 109 as the realization of
this deferred tax benefit is not considered more likely than not. A
100% valuation allowance has been recognized to offset the entire
effect of the Company's net deferred tax asset. The Company's net
deferred tax asset position is composed primarily of the Company's net
operating loss carryforwards.
The components of the deferred tax asset at December 31, 2001 were as
follows:
Net operating loss carryforward $ 2,616,000
Allowance for collectibility 169,000
Depreciation and amortization (233,000)
Less valuation allowance (2,552,000)
-----------
Net deferred tax asset $ --
===========
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three
year period will place an annual limitation on the corporation's
ability to utilize its existing tax benefit carryforwards. The
Company's utilization of its tax benefit carryforwards may be
restricted in the event of possible future changes in the ownership of
the Company from the exercise of warrants or other future issuances of
common stock.
The Company's federal and state income tax returns have not been
examined by the respective taxing authorities for the past several
years. The final determination of the amount and timing of currently
payable income taxes is therefore subject to possible examination of
these unexamined years by such respective taxing authorities.
NOTE 13. PREFERRED STOCK
Preferred stockholders converted the remaining 10,600 preferred shares,
including cumulative dividends of $136,515, in 2000. The conversion
price, which varied based upon date of conversion, ranged from $5.47 to
$5.49. These conversions resulted in the issuance of 215,534 shares of
common stock.
F-18
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 14. COMMON STOCK
EQUITY FINANCING
On May 2, 2000, the Company entered into a Stock Purchase Agreement
("Agreement") with an investor to provide for the issuance of up to
$15,000,000 of Company common stock in exchange for cash payments in
monthly allotments of up to $1,150,000 with an initial allotment of
$2,250,000. The sales price will be the lowest three day average bid
price during the twenty-two days preceding the sales, less a
discount of 8%.
The Company paid a 1% fee on the total at the initial purchase. In
addition, there will be a 1% fee on each sale. The Company will pay
all legal fees in excess of $10,000 and due diligence fees not to
exceed $15,000.
On May 2, 2000, the Company sold 406,280 shares of Company common
stock under the Agreement. The Company received gross proceeds of
$1,900,000 and paid $366,115 in fees for net proceeds totaling
$1,533,885. Also on May 2, 2000, pursuant to the Agreement, the
Company issued to the investor an incentive warrant to purchase up
to 128,000 shares of Company common stock at an exercise price of
$7.0149 which expires May 2, 2005.
In 2001, no additional shares were sold to the investor. In November
2002, the Agreement expired. During 2001, the Company was required
to pay approximately $82,000 representing liquidating damages in
accordance with the Agreement for failing to effectively file
registration statements underlying the incentive warrant.
ISSUANCE OF COMMON STOCK FOR SERVICES
In July 2000, the Company entered into an agreement with an
unrelated individual for the purchase of a domain name. In July
2000, in accordance with the agreement, the Company issued 2,420
shares of Company common stock to this individual. In December 2000,
the Company canceled the agreement in accordance with its terms.
In January 2001, the Company issued 1,500 shares of common stock
pursuant to a business consulting arrangement with an investor,
which was completed September 4, 2000.
In April 2001, the Company issued 65,000 shares of common stock to
the Company's outside counsel for legal services rendered in
connection with an agreement and plan of merger (see Note 15).
In August 2001, the Company entered into an agreement for investment
banking services. The Company agreed to pay $5,000 of common stock a
month, the amount of shares due, to be recalculated quarterly, for
one year, payable at the beginning of each three-month period. The
Company issued an initial payment of 15,000 shares in October 2001.
F-19
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Compensation cost for stock
options and warrants, if any, is measured as the excess of the
estimated market price of the Company's common stock at the date of
grant, over the amount the recipient must pay to acquire the common
stock.
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," established accounting and
disclosure requirements using a fair-value-based method of accounting
for stock-based employee compensation plans. The Company has elected to
retain its current method of accounting as described above, and has
adopted the disclosure requirements of SFAS No. 123.
STOCK OPTION PLAN
On January 10, 2000, the Board of Directors of the Company ("Board")
authorized the 2000 Employee Stock Option Plan ("Stock Option Plan")
for those employees, consultants, and advisors (the "Participants")
of the Company who, in the judgment of the Company are or will
become responsible for the direction and financial success of the
Company. The adoption of the Stock Option Plan was ratified by the
stockholders on June 29, 2000. The purpose of the Stock Option Plan
is to provide the Participants with an increased incentive to make
significant contributions to the long-term performance and growth of
the Company. The Board authorized that 500,000 employee options and
300,000 board of director options be subject to this plan.
On January 10, 2000, the Company granted 515,000 employee options
and 340,000 board of director options with an exercise price of
$5.67 with a life of five years. Subsequent to the grant, 10,000
options were returned to the Company when an employee separated
employment. Also in 2000, a former director exercised 60,000
warrants in a cashless transaction for the difference in the
exercise price of $5.67 and the closing price of $8.00 on date of
exercise and received 17,475 shares of common stock.
On August 15, 2001, the Board authorized an amendment of the 2000
Stock Option Plan. The Board authorized an additional 500,000
employee options and 300,000 board of director options be subject to
this plan at an exercise price of $1.00. The amendment of the Stock
Option Plan was ratified by the stockholders on December 21, 2001.
NON-QUALIFIED STOCK OPTIONS
On April 9, 2001, the Company entered into employment agreements
with three officers of the Company and issued a total of 765,370
options to purchase the Company's common stock at an option price of
$2.25 in accordance with such agreements.
F-20
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. STOCK-BASED COMPENSATION (Continued)
WARRANTS
As of January 1, 2000, the Company had outstanding 1,307,375
warrants to purchase common stock at exercise prices ranging from
$6.375 to $28.875, 843,375 of which warrants are outstanding to
officer/directors.
During 2000, the Company issued 1,595,739 warrants to employees and
officers/directors to purchase common stock with exercise prices
ranging from $2.25 to $10.00. Also during 2000, the Company issued
855,363 warrants in connection with services provided to the Company
with exercise prices ranging from $2.25 to $10 and 161,860 warrants
in connection with equity transactions with exercise prices of $5.61
and $7.01.
Also, during 2000, warrants to purchase a total of 5,000 shares of
common stock were exercised at $8.00 per share.
The granting of the warrants in 2000 to consultants resulted in a
charge to consulting fees in the amount of approximately $221,000 in
2000 representing the fair value of the 855,363 warrants issued. The
161,860 warrants issued in connection with the negotiation of the
sale of common stock, (see Note 14), which have a fair value of
$144,772, were recorded as an increase and a decrease to additional
paid-in capital and have been offset in the accompanying
consolidated financial statements.
During 2001, the Company issued 350,000 warrants for investment
banking services to purchase common stock with exercise prices
ranging from $1.25 to $1.65. Also, during 2001, the Company issued
60,000 warrants to outside directors to purchase Company common
stock for $2.25 per share. The Company also issued 14,435 warrants
to purchase common stock for information technology consulting
services at an exercise price of $2.25. Additionally, the Company,
pursuant to a 1998 settlement agreement, issued 40,000 warrants to a
former officer/director.
From October 10-15, 2001 holders of outstanding stock purchase
warrants, including employees, consultants and investment bankers,
exercised 1,286,522 stock purchase warrants at $1.25, $1.65 and
$2.25 per share. The Company has received $2,624,674 and issued
1,286,522 shares of its common stock.
As of December 31, 2001, the Company has remaining outstanding
5,518,575 options and warrants to purchase common stock at exercise
prices ranging from $1.00 to $25.00, 4,408,730 of which are options
and warrants outstanding to employees and officers/directors.
The granting of the warrants in 2001 to consultants resulted in a
charge to consulting fees in the amount of approximately $56,000,
representing the fair value of the 434,435 warrants issued.
F-21
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15. STOCK-BASED COMPENSATION (Continued)
FAIR VALUE DISCLOSURES
Had compensation cost for the options and warrants issued to
employees, officers and directors been determined based on the fair
value at the grant date consistent with SFAS No. 123, the Company's
net loss and loss per share would have been as follows:
2001 2000
---- ----
Net Loss:
As reported $ (1,441,069) $ (2,033,793)
============== =============
Pro forma $ (2,270,953) $ (3,265,607)
============== =============
Loss Per Share:
Basic:
As reported $ (.30) $ (.45)
============== =============
Pro forma $ (.47) $ (.72)
============== =============
The Company used the Black-Scholes option pricing model to determine
the fair value of grants made in 2001 and 2000. The following
assumptions were applied in determining the pro forma compensation
cost:
2001 2000
---- ----
Risk Free Interest Rate 5.0% - 5.5% 5.5%
Expected Dividend Yield -- --
Expected Option Life 0.21- 2 1/2years 1 1/2- 2 1/2YEARS
Expected Stock Price Volatility 122% to 140% 85% to 119%
Changes in outstanding options and warrants for common stock are as
follows:
2001 Range of 2000 Range of
2001 Exercise Price 2000 Exercise Price
---- -------------- ---- --------------
Outstanding at beginning of year 4,700,337 $2.25 to $25.00 1,307,375 $7.20 to $25.00
Options and warrants granted 2,448,138 $1.00 to $2.25 3,467,962 $2.25 to $10.00
Options and warrants exercised (1,286,522) $1.25 to $2.25 (65,000) $5.67 to $8.00
Options and warrants expired (343,375) $5.67 to $15 (10,000) $5.67
--------- ----------
Outstanding at end of year 5,518,578 $1.00 to $25.00 4,700,337 $2.25 to $25.00
========= ==========
Exercisable at end of year 5,358,578 4,700,337
========= ==========
F-22
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 15 STOCK-BASED COMPENSATION (Continued)
WARRANTS (Continued)
The following table summarizes information about outstanding options
at December 31, 2001:
Options Outstanding Options Exercisable
------------------------------------------------ -----------------------------------------------
Number Weighted Number Weighted
Outstanding Average Weighted Exercisable Average
Range of at Remaining Average at Remaining
Exercise December 31, Contractual Exercise December 31, Contractual
Prices 2001 Life Price 2001 Life
------ ---- ---- ----- ---- ----
$1.00 to $25.00 5,518,578 2.5 $1.00 to $25.00 5,518,578 2.5
========= === ========= ===
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
PENDING LITIGATION
CLASS ACTION
The Company has been named as a defendant in litigation which
purports to be a class action filing. In this purported class
action, the Plaintiff alleges in the Amended Complaint that the
defendants participated in a conspiracy to inflate the price of the
Company's common stock through market manipulation, making material
misrepresentations and omissions, and other wrongful conduct for the
purpose of allowing "insiders" to enrich themselves by selling their
personal holdings at the inflated price. The Company denies not only
any wrongdoing, but most of the material factual allegations as well
and intends to vigorously defend this case. The recently filed
Amended Complaint and preliminary investigations of facts appear to
support the Company's position. However, no discovery has yet
occurred nor has there been any information as to the position being
taken by various co-defendants. The Company believes the allegations
are baseless, and that it has no material exposure with respect to
the matter, and intends to defend its position vigorously. On March
29, 2001, the Company was notified that the venue has been changed
from New York to Orlando, Florida. On June 4, 2001, the Company was
successful in securing a dismissal in this case. On July 3, 2001,
the Plaintiffs filed a Motion to Reopen the case and the Company
subsequently filed an opposition to Plaintiff's motion. On August 2,
2001, the judge denied the Plaintiff's motion to reopen, ruling that
the case will remain closed.
JOINT VENTURE
In a separate matter, on January 26, 2000, the Company entered into
a Joint Venture Agreement. The Joint Venture was organized for the
purpose of entering into the business of developing and marketing an
e-based value added distributor of communications equipment.
F-23
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
PENDING LITIGATION (Continued)
JOINT VENTURE (Continued)
Pursuant to the Joint Venture agreement, the Company was obligated
to provide the following in exchange for a 76% ownership interest in
the Joint Venture, AATK.com, LLC.
o Provide $395,000 of cash to fund operating costs within
the first sixty days.
o Issue 135,000 shares of Company common stock to Vulcan
Microsystems, Inc. ("Vulcan") upon successful alpha
testing.
o Guarantee any contracts or obligations for ongoing
commitments in connection with technology or management,
not to exceed $25,000 per month.
o Issue to Vulcan 1,000,000 three-year warrants to
purchase Company common stock at $25 per share upon
acceptance of the alpha site.
o Immediately following the Joint Venture agreement, the
Company entered into a twelve-month technology
consulting agreement with two principals of Vulcan,
whereby they received warrants to purchase 200,000
shares of Company common stock. These warrants are
exercisable for cash only, at an exercise price of $10
per share for the first 180 days and an exercise price
of $15 for the remainder of the one-year life, up to
January 26, 2001.
Vulcan had the right to convert its 19% interest in the Joint
Venture into Company common stock at any time through January 2005.
Very soon after the joint venture agreement was reached, the
relationship with Vulcan deteriorated. As a result, the joint
venture was terminated and litigation resulted.
On August 6, 2000, Vulcan filed an action against the Company. The
allegations of the complaint concern alleged pre-contractual
negotiations and alleged misrepresentations made on behalf of the
Company. The complaint seeks damages for breach of contract, fraud,
negligent misrepresentations, conversion, breach of fiduciary duty
and unjust enrichment.
The Company filed a counterclaim against Vulcan and its principals
seeking damages for fraud, breach of fiduciary duty, conversion, and
an accounting. The Company believes that Vulcan and its principals
misappropriated a significant portion, if not the entire amount of
the initial $200,000 the Company funded into the joint venture.
F-24
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
PENDING LITIGATION (Continued)
JOINT VENTURE (Continued)
At present, the lawsuit is in the discovery stage of litigation. The
Company intends to vigorously defend the action and to prosecute the
counterclaim. However, neither management, nor legal counsel can
predict, with any degree of certainty, the outcome of the case.
In connection with this joint venture, the Company guaranteed two
equipment leases entered into by Vulcan. These leases, which are for
a term of thirty-six months, require monthly payments totaling
approximately $8,500. The equipment, to the best of the Company's
knowledge, is in the possession of Vulcan, which has been making the
monthly lease payments.
TERMINATION OF PROPOSED MERGER
On April 10, 2001, American Access Technologies, Inc. entered into
an Agreement and Plan of Merger with an unrelated entity in which
the Company's subsidiary, Dolphin Acquisition Corp., a corporation
registered in Delaware, was to have been merged. Subsequent to
signing the agreement, the merger candidate suffered material
adverse effects to its business condition, which the Company
believes so prejudiced the terms of the merger against the Company's
shareholders that the Company terminated the agreement on July 2,
2001. The Company filed suit against the entity on July 11, 2001 in
the 18th Judicial Circuit Court, Seminole County, Florida, seeking
general damages in excess of $15,000 for breach of contract. The
merger candidate counter sued for $500,000, the termination payment
specified in the agreement, payable under limited circumstances. The
Company does not believe that the entity is entitled to the
termination payment.
FORMER CONSULTANT
On March 17, 1999, a formal settlement agreement was reached
relating to certain litigation with a former officer/stockholder of
the Company in connection with a modified consulting agreement with
the Company. Under this settlement, the consulting agreement dated
August 28, 1997 was amended to provide, among other things, that the
former officer/stockholder was not required to provide any
consulting services and the Company was not required to compensate
the former officer/stockholder. The consulting agreement, as
amended, provided for, among other things, a term of five years, and
additional compensation in the form of an option to purchase 40,000
shares of common stock on the last day of each year of the
consulting term, exercisable for three years from date of issue, at
an exercise price of 125% of the closing price of the common stock
on the date of issue. In addition, under the terms of the settlement
agreement, the former officer/stockholder was granted a warrant to
purchase 15,000 shares of common stock at an exercise price of
$28.875 per share, exercisable on or before March 11, 2004.
F-25
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
MAJOR CUSTOMERS
The Company has one customer that purchased products that
represented approximately $459,000 or 11% of sales for the year
ended December 31, 2001.
For the year ended December 31, 2000, the Company had two customers
which represented approximately 29% of sales.
2000
----
Customer A $907,000
Customer B 600,000
MAJOR VENDORS
The Company purchases sheet metal and related products from a vendor
that represented approximately 54% and 43% of purchases for 2001 and
2000, respectively.
EMPLOYMENT CONTRACTS
On April 9, 2001 the Company entered into Employment Agreements with
three officers of the Company. Two of the officers were each issued
332,685 options to purchase the Company's common stock at an option
price of $2.25. The other officer was issued 100,000 options at the
same price.
The Company had entered into employment agreements with two members
of management of Omega. These agreements were for a term of two
years commencing in November 1998. The agreements provided, among
other things, for combined annual compensation of $250,000 plus
profit participation equal to 10% of the net profits of Omega, as
defined, in excess of $1,200,000 annually. Both contracts expired in
November 2000 and have not been renewed.
CONTRACTS WITH DISTRIBUTORS
During 1997, the Company entered into Distributor Agreements with
seven distributors. The agreements set forth terms whereby the
distributors may purchase products from the Company for resale to
their customers within the U.S. and Canada and Mexico when the
Company releases its products for sale in those countries. During
1999, the Company entered into additional Distributor Agreements
with five distributors. During 2000, an additional six Distributor
Agreements were added and in 2001, an additional two Distributor
Agreements were added for a total of twenty as of December 31, 2001.
The prices for the products covered by the agreements are based upon
the intention of the distributors to purchase a minimum number of
units as specified in the agreements. Revenue is recorded at such
time as the units are shipped to the distributors. The agreements
are for a term of one year and are automatically renewed each year
thereafter unless terminated by either party, and contain, among
other things, a warranty effective for one year after the date of
sale.
F-26
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
PRIVATE LABEL CONTRACTS
In 2000, the Company implemented a marketing plan that included
signing telecommunications industry network providers to Private
Label Agreements, in which the Company manufactured its patented
zone cabling enclosures and labeled them to the specifications of
these providers, or modified its cabinets to the specifications of
providers. During 2000, the Company entered into Private Label
Agreements with four network providers, and in 2001, with an
additional three network providers. The Agreements are in effect for
between one and three years, and all automatically renew provided
they have not been terminated by either party.
CO-MARKETING ALLIANCE AGREEMENT
On August 3, 1999, the Company entered into a Co-Marketing Alliance
Agreement with a leading manufacturer of modular office furniture
systems ("Manufacturer"). The companies jointly promote the use of
products in Herman Miller Ethospace products.
The agreement is for a term of two years, commencing June 1, 1999,
and is to be automatically renewed unless terminated by either
party. In conjunction with this agreement, the Company agreed to pay
the manufacturer an alliance fee equal to 5% of qualifying net
sales, as defined.
If, during the period of this agreement, the Company proposes to
enter into any agreement or transaction which will result in a
change in control of the Company, as defined, the Company shall give
the Manufacturer the right to enter into such transaction on the
same terms, but for a consideration equal to or higher than the
proposed transaction.
LEASE COMMITMENTS
The Company subleases certain office/warehouse space in Lake Mary,
Florida. The lease provides for monthly rent of approximately
$11,000 and expires May 30, 2003.
Future minimum operating lease commitments are approximately as
follows:
Year ending December 31:
2002 $137,000
2003 58,000
--------
$195,000
========
Rent charged to operations amounted to approximately $120,000 in
2001 and $111,000 in 2000.
F-27
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
MANAGEMENT AND OPTION TO PURCHASE AGREEMENT
On March 27, 2001, the Company entered into a Management and Option
to Purchase Agreement ("Agreement") relating to its wholly-owned
subsidiary Zonecabling.com, Inc. with a former director and officer
of the Company ("Executive"), to manage the Business-to-Business
e-commerce site with an option to purchase the subsidiary.
For services provided under the Agreement, the Executive received
213,333 options to purchase the common stock of the Company at an
exercise price of $2.25. These warrants, issued upon execution of
the Agreement, shall expire on December 31, 2002. In addition, the
Company agrees to pay to the Executive 25% of the net profits of
Zonecabling.com, Inc. for 2001, the term of the Agreement, or until
the Executive exercises his option to purchase Zonecabling.com, Inc.
In accordance with the Agreement, at any time up to, including, or
before December 31, 2002, the Executive shall have the right to
purchase all the outstanding common stock of Zonecabling.com, Inc.
from the Company for the sum of $500,000, at which time all rights
and duties of the Corporation pursuant to Zonecabling.com shall be
assigned and delegated to the Executive as his own. In any event,
when the common stock price of the Company reaches $6.75 per share,
a mandatory conversion of the Executive's warrants into common stock
shall occur and he will be required to purchase Zonecabling.com for
$500,000. In October 2001, the Executive exercised 104,174 of these
options, leaving 109,159 options unexercised. The option to purchase
Zonecabling.com has not been exercised.
The term of the Executive's employment shall continue through the
earlier of the Executive exercising his option to purchase
Zonecabling.com, Inc., or December 31, 2002. The employment of the
Executive may be terminated at any time by mutual agreement of both
parties with 30 days notice or by action of the Board of Directors
in the event of defaults, as defined.
CONSULTING AGREEMENTS
On May 26, 2000, the Company entered into a consulting agreement
which was amended on February 1, 2001. The agreement, as amended,
provides for the consultant to render investment banking advice to
the Company through February 1, 2002. The consultant is to receive
(i) $35,000, (ii) 300,000 warrants to purchase Company common stock
at exercise prices as follows:
100,000 at $4.75 per share
100,000 at $6.00 per share
100,000 at $10.00 per share
and (iii) 400,000 warrants to purchase Company stock for $2.25 per
share.
F-28
NOTE 16. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
CONSULTING AGREEMENTS (Continued)
On March 15, 2001, the Company entered into an agreement to retain
the services of a consultant for a period of six months to provide
the Company with general investment banking advice. In exchange for
its services, the consultant received a fee of $10,000 and 200,000
warrants to purchase the common stock of the Company. The exercise
price of the warrants is at 20% above the average closing price of
the Company's common stock on the sixty trading days preceding the
execution of the agreement, as reported by the Nasdaq Stock Exchange
($1.65 per share). The warrants shall expire five years after their
date of issue, March 15, 2006. The $10,000 fee was paid through he
issuance of 15,000 shares of Company common stock.
NOTE 17. NET LOSS PER COMMON SHARE
The Company computes earnings (loss) per common share in accordance
with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share" which requires the presentation of
both basic and diluted earnings (loss) per share.
Basic net loss per common share has been computed based upon the
weighted average number of shares of common stock outstanding during
the periods. The number of shares used in the computation were
4,797,251 and 4,540,847 for the years ended December 31, 2001 and 2000,
respectively. Diluted net loss per common share, assuming exercising of
the options and warrants granted and convertible preferred stock, is
not presented as the effect of conversion is anti-dilutive.
2001 2000
---- ----
Net Loss $(1,441,069) $(2,033,793)
Cumulative Preferred Stock Dividend -- (14,631)
----------- -----------
Net Loss Allocated to Common Stockholders $(1,441,069) $(2,048,424)
=========== ===========
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair value. These instruments include
cash and cash equivalents, accounts receivable, notes receivable, line
of credit and accounts payable. Fair values were assumed to approximate
carrying values for these financial instruments since they are
short-term in nature and their carrying amounts approximate fair values
or they are receivable or payable on demand.
F-29
NOTE 19. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998 which changes the way the
Company reports information about its operating segments.
The Company has two reportable segments, zone cabling products and
formed metal products. As discussed in Note 1, the Company markets zone
cabling products which are manufactured by Omega, a wholly-owned
subsidiary. Omega manufactures formed metal products of varying designs
for customers, including the Company.
2001 2000
--------------------------------------- --------------------------------------
Zone Formed Zone Formed
Cabling Metal Cabling Metal
Products Products Total Products Products Total
Revenue from external customers $1,345,796 $2,722,428 $4,068,224 $1,855,889 $3,415,564 $5,271,453
Intersegment revenue 152,923 230,854 383,777 79,808 580,278 660,086
Investment income 40,662 - 40,662 72,945 - 72,945
Interest expense - 68,413 68,413 1,963 - 1,963
Depreciation and amortization 152,038 202,695 354,733 259,196 163,965 423,161
Segment profit (loss) (1,180,840) (260,229) (1,441,069) (2,655,803) 622,010 (2,033,793)
Segment assets $4,881,468 $2,368,450 $7,249,918 $3,252,035 $2,681,327 $5,933,362
NOTE 20. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
2001 2000
---- ----
Cash paid during the year for:
Interest $ 68,413 $ 1,963
========== ==========
Non-Cash Investing and Financing Activities:
Equipment acquired through capital lease $ -- $ 244,379
========== ==========
Deposit of inventory for product line $ 129,780 $
========== ==========
Note receivable for loan of 197,600 shares treasury stock, at cost $ -- $1,205,599
========== ==========
Conversion of 10,600 shares of preferred stock to common
(see Note 13) $ -- $1,060,000
========== ==========
Cashless exercise of 60,000 warrants $ -- $ 17
========== ==========
Common stock in exchange for domain name $ -- $ 10,000
========== ==========
F-30
NOTE 21. SUBSEQUENT EVENT
On January 11, 2002, the Company entered into an Agreement for the
Acquisition of Product Rights ("Agreement") from Bill Sherer
Corporation ("BSC") and its principal, Bill Sherer. All rights,
entitlements, logos, trademarks, good will and designs pursuant to the
Northern Lights/Eclipse Ultraviolet Light Air Cleansing Systems (the
"Products") were acquired by the Company in exchange for a one-time
cash payment of $50,000, $500,000 in restricted American Access Common
Stock, and forgiveness of approximately $123,000 in outstanding
accounts receivables carried by the Company on BSC's account.
In accordance with the agreement, the shares of restricted stock are to
be issued upon request by the seller. However, no shares are due and no
shares may be requested until January 11, 2003. All shares must be
requested by January 11, 2007. Interest on the balance of the $500,000
shall accrue at 5% and is payable in common stock. In no event during
the five-year period will BSC or Sherer request or own more than 19.9%
of the outstanding stock of the Company.
Additionally, the Company entered into a Sales and Marketing Agreement
with Mr. Sherer, in which Mr. Sherer will provide his services as a
consultant and in marketing the Ultraviolet Light Air Cleansing System
in exchange for a commission on the sales of those products.
F-31
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No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in this
prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company.
--------------------------------------------------------------------------------
This Prospectus does not constitute an offer of any securities other than those
to which it relates or an offer to sell or a solicitation of any offer to buy
any securities in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction. The delivery of this Prospectus at any time
does not imply that the information herein is correct as of any time subsequent
to its date. Notwithstanding the foregoing, the Company has undertaken to amend
this Prospectus in the event of any fundamental changes in the affairs of the
Company.
TABLE OF CONTENTS
Prospectus Summary ...................................................... 2
Risk Factors ............................................................ 4
Use of Proceeds ......................................................... 4
Market for Securities.................................................... 4
Dividend Policy.......................................................... 4
Management's Discussion and Analysis of Results of Operation
and Financial Condition................................................ 5
Business ................................................................ 8
Management ..............................................................15
Indemnification .........................................................17
Certain Relationships and Related Transactions ..........................18
Security Ownership of Certain Beneficial
Owners and Management .................................................19
Description of Securities ...............................................20
Selling Shareholder......................................................21
Plan of Distribution/Selling Security Holders ...........................22
Legal Matters ...........................................................23
Experts .................................................................23
Additional Information ..................................................23
Index to Financial Statements ...........................................F-1
UNTIL JULY 31, 2002 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION DESCRIBED HEREIN, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THE OFFERING HEREIN.
AMERICAN ACCESS
TECHNOLOGIES, INC.
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PROSPECTUS
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