-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N4gdHadE9fzQc6V19o95P5HoO8ace0vSzUvOntJVl2l54VoznKjKa18rbYTvOPas SZgRyTQgI080GxlxC1812A== 0001042910-00-000683.txt : 20000421 0001042910-00-000683.hdr.sgml : 20000421 ACCESSION NUMBER: 0001042910-00-000683 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ACCESS TECHNOLOGIES INC CENTRAL INDEX KEY: 0001043186 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 593410234 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 000-24575 FILM NUMBER: 605393 BUSINESS ADDRESS: STREET 1: 37 SKYLINE DR STREET 2: SUITE 1101 CITY: LAKE MARY STATE: FL ZIP: 32746 BUSINESS PHONE: 4078657696 10KSB40 1 ANNUAL REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______________ to _____________ Commission file number: ___________ AMERICAN ACCESS TECHNOLOGIES, INC. (Name of small business issuer specified in its charter) Florida 59-3410234 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 37 Skyline Drive, Suite 1101, Lake Mary, Florida 32746 (Address of principal executive offices, including zip code) (407) 333-1446 (Issuer's telephone number, including area code) John Presley, President American Access Technologies, Inc. 37 Skyline Drive, Suite 1101 Lake Mary, FL 32746 (407) 333-1446 ------------------------------------------------------------------ (Name, address and telephone number of agent for service) Securities registered under Section 12(b) of the Exchange Act: Name of each exchange Title of each class on which registered None None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value per share (Title of Class) Check whether the issuer: (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. Yes__X___ No ____ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The issuer's revenues for the fiscal year ended December 31, 1999 were $5,247,683. The number of shares outstanding of the issuer's common stock as of April 11, 2000 was 4,314,773 shares. The aggregate market value of the common stock (3,630,953 shares) held by non-affiliates, based on the average of the bid and asked prices ($10.44) of the common stock as of April 11, 2000 was $37,907,149. Transitional Small Business Disclosure Format (Check one): Yes No X ----- ----- This Annual Report on Form 10-KSB (the "Report") may be deemed to contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Forward-looking statements in this Report or hereafter included in other publicly available documents filed with the Securities and Exchange Commission (the "Commission"), reports to the Company's stockholders and other publicly available statements issued or released by the Company involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, the risks set forth herein, each of which could adversely affect the Company's business and the accuracy of the forward-looking statements contained herein. ITEM 1. DESCRIPTION OF THE BUSINESS GENERAL American Access Technologies, Inc. manufactures patented zone cabling enclosures for the telecommunications industry, enabling businesses and government to Move, Add, and Change copper and fiber optic cabling to keep pace with changes in high-speed communications networks. 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. Our wholly-owned subsidiary, Omega Metals, Inc., continues to manufacture zone cabling cabinets along with other metal fabricating jobs, ensuring quality and cost control. The highly prized ability to powder coat metals is also now facilitated at our plant, as we completed installation in March 2000 of a state-of-the-art powder coating system. HISTORY OF THE COMPANY 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, leading to 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 has gained a reputation as one of the top agencies in the field of wire management, having consulted on, designed and supplied product for a wide range of building projects throughout the world. THE COMPANY'S BUSINESS American Access develops solutions to open office architecture, routing high speed and cost effective telecommunications equipment into and through office buildings, hospitals, convention centers, schools, hotels, entertainment and theme parks, government buildings, and industrial complexes. As the need increases for high-speed communications in the work place, the streamlined distribution of cables and wires that carry that information is also important. Called zone cabling, because cables are routed into specific areas as needed, our cabinets conveniently house all equipment in the ceiling, raised floors and in modular furniture. This dedication to providing total and flexible cabling solutions places the company at the forefront of the telecommunications cabling industry. In January 2000, American Access expanded its traditional marketing focus by entering a joint venture with Vulcan Microsystems, Inc. to create a Business to Business e-commerce portal. We will market telecommunications systems on the Internet, becoming a distributor for companies that are recognized industry leaders. On our site, AATK.com, architects, engineers, and systems designers will be able to create and facilitate any telecommunications project. Contractors will be able to bid jobs. Systems, which may or may not include zone cabling, can be ordered from our B2B site, building more profit into our company. A preliminary site is scheduled to debut in June, 2000. We have a partnership agreement with Herman Miller, Inc., a leading manufacturer of modular office furniture systems. We developed zone cabling solutions encased in select units of Herman Miller furniture. Herman Miller sells the concept of zone cable distribution to markets it developed over the past 30 years, which is an immediate entrance for American Access into the boardrooms of the Fortune 1000 companies. The roll-out with Herman Miller began April 12, 2000. Industry leaders are now addressing the need for new and faster cabling methods and equipment. These companies, industry associations and individual experts have joined together to create revolutionary standards. Companies such as Lucent Technologies, Sun Microsystems, Ortronics, AT&T, Krone, Belden, Siecor, Hubbell, Leviton Telcom, and American Access Technologies, Inc., have joined with various organizations that set industry standards. Together they are developing and introducing innovations in wire/cabling design and routing. This partnership is providing for efficient transmission of telecommunication signals into the zone in which it is needed. The method of zone cabling is called Open Office Architecture. Open Office Architecture is endorsed under Telecommunications Systems Bulletin 75, by the American National Standards Institute, the Telephone Industry Association and the Electrical Industry Association. The purpose of this design is to locate the bundled cables closer to the individual workstations. THE COMPANY'S 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, the company consulted with many of the leading telecommunications specialists and engineers and all were in agreement. No one had developed a device that met all of the industry standards and could effectively and efficiently be used to house and route telecommunications cables and wiring. However, some sort of device was absolutely required to complete the Open Office Architecture design. American Access Technologies, Inc. researched and verified that no such enclosure existed. In fact, such research indicated that no one was even developing such a zone device. The company has designed an enclosure to house and distribute telecommunications in equipment in buildings. This enclosure is called a Zone Cabling Termination Cabinet. We currently hold a Utility Patent issued June 15, 1999, for this cabinet that may be installed 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 brain of the telecommunications system. Less cable is used. Installation is easier and quicker, causing fewer disruptions and down time for office workers. The floor unit provides the same solution in a floor installation. The EthoCom system provide the same solution in modular office furniture. The company believes its products are the only enclosures manufactured that can function to 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 any and all low voltage wiring systems including but not limited to voice, data, video, building controls, security, and fire/life/safety wiring systems. The cabinet was designed to accommodate all manufacturers' equipment including various panels as well as fiber optic cables. Product Application The 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, a raised floor panel, or through a panel in modular furniture. The cabinet is designed to accommodate all of the newly developed Open Office Architecture wiring equipment and distribution connections. This enclosure is mounted in a standard 2ft. x 4 ft. ceiling grid system or raised floor 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 or above the floor for easy maintenance, installations and changes. Specially trained, highly-paid technicians will no longer be required to make those changes when systems grow or are reconfigured. The new equipment just plugs in, creating less down time and less loss of productivity. It can be easily re-routed and reused. The initial installation of the cabinet is approximately the same as the old method of distribution cabling. However, we believe that the short term and long term cost savings are very significant. Costs will be reduced by: o Less cable resulting in reduced material cost. o Cable can be re-routed for re-use. o Labor costs are reduced with shorter cable runs when systems are changed. The Zone Cable Termination Cabinet makes better use of the telecommunications closets and provides the building owners more usable space. It significantly reduces the physical mass of cables to be run throughout the building. Product Standards The standards, regulations and various industry association guidelines are very specific. The company believes its Zone Cabling Termination Cabinet is the only product that meets the standards and requirements of the telecommunications industry, including the Building Industrial Consulting Services International (BICSI), National Electric Code regulations NEC 300-22 B & C, American National Standards Institute/Telephone Industry Association/Electrical Industry Association publication 568 A, as well as the Zone Cabling guidelines as specified in the newly released Telecommunications Systems Bulletin - TSB 75.. This product is the only product that has been tested by Underwriter's Laboratories for this application. Therefore, Underwriter's Laboratories has assigned this product to a new category listing. This listing is identified as UL 1863 (Telecommunications Cabinets) under 31RF, and is further identified as a Type 12 rated enclosure for Plenum type installations. The cabinet is also listed as UL2043 and is currently the only enclosure manufactured to these standards. Future Product Development As the company identified the specific product needs of the telecommunications industry, products were developed to meet these needs. The products assist equipment manufacturers in marketing their own products. The company's first design was a low-voltage Zone Cabling Termination Cabinet which mounts within the ceiling grid system. The company developed accessory equipment to permit cable penetrations and maintain fire-rating. The second phase was to develop a cabinet that serves as a termination, distribution or consolidation point within a raised floor data center. The third phase includes a high-voltage termination cabinet that mounts into the ceiling grid system to house active electronics, including computer hubs, routers and switches. This unit accommodates fiber optics as well as conventional copper wiring. The fourth phase was in partnership with Herman Miller Inc., to house a cabinet inside select modular office furniture. The roll-out for this system was April 12, 2000. There can be no assurance that any new products will be successfully developed or marketed. Intellectual Property The company on September 24, 1996 filed with the United States Department of Commerce, Patent and Trademark Office application for patent, pending No. 08785006, for Zone Cabling Termination Cabinet and Communications Cable Interconnection Apparatus and Associated Method for an Open Office Architecture. The utility patent application contained approximately 67 various claims associated with zone cabling techniques. On April 26, 1998, the Patent and Trademark Office approved the patent for the cabling termination cabinet. Patent No. 5,911,661 was issued on June 15, 1999. On June 5, 1998 the company was informed that the patent was approved for a communication cable interconnection apparatus and associated method for Open Office Architecture. Patent No. 5,842,313 was issued on December 1, 1998. American Access has made a formal filing under the Patent Cooperation Treaty, Paris, France. The National Phase Entry is completed. The company has applied for and our Patent is pending for our Communications Cable Interconnection Apparatus and Associated Method for an Open Office Architecture in Australia, Canada, China, Europe, Mexico and Japan. Manufacturing The company has developed all of its products utilizing computer assisted design drawings (CADD). Master copies of its products are safeguarded at the home office and certain copies are available to outsource firms. On November 12, 1998, the company acquired all the outstanding common stock of Omega Metals, Inc.(Omega), in exchange for 226,470 shares of the company's common stock. Omega has been a manufacturer of various products used in the telecommunications industry. Omega is a precision sheet metal fabrication and assembly company located in Northeast Florida midway between Jacksonville and Gainesville. The company was established in 1981, serving a diverse client base of over 300, including engineering, technology and electronic companies, mostly in the Southeastern markets. Clients include CSX Railroad and the U.S. military. Omega Metals, Inc. operates from its 67,500 sq. ft. manufacturing facility situated on 8 1/2 acres of land that it owns. The manufacturing process is run by a state-of-the-art computer control system. Manufacturing services include precision stamping, bending, assembling, painting and silk screening. Quality control at Omega Metals is based on the Department of Defense military standard MIL-1-45208A. Inspection equipment is strictly maintained to assure consistent quality. In August, 1999, we acquired the assets of Genco, Inc., a manufacturer of generator covers. In March, 2000, our new powder coating system began operations with $1,500,000 in booked orders. The powder coating system imparts the highest quality finish to fabricated metal. Diversified facilities and equipment allow Omega Metals, Inc. to handle a broad range of customer requirements. Strict attention to quality assures our customers of consistent production and conformity to their specific requirements. Omega's manufacturing capacity, (including AATK), has grown from about $4.5 million to $20 million annually after the expansion. 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. The company acquired 6 acres adjacent to Omega's site and by the end of 1999, had completed a plant expansion of 37,500 sq. ft to supplement assembly capabilities, add a clean room powder coating operation and expand office space. The capital cost to complete this expansion was funded from cash flows and working capital. SALES AND 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. This new cabling architecture provides the LAN broader band width, increased speeds, and reduced costs associated with moves, adds, and changes (MACs). Although our previous marketing strategy had focused on "channel distribution" whereby distributors entered partnership programs to stock products in regional warehouses and to promote that product through the distribution channel, we have expanded this focus to include our own regional managers in the development of sales through independent rep firms. Our three regional managers, now in place, are making joint calls with the independent rep agencies on Value Added Resellers, corporate accounts and the Herman Miller sales staff. Based on feedback from the field, training and support can be tailored for the sales force as needed. We have begun to add project managers to our marketing plan. They will orchestrate the weekly calls of the regional managers with the vice president of sales. The regional managers are working planned calls in their respective geographic areas. Project managers coordinate all literature and required samples sent in advance. Sales training involves hands on approaches covering all segments of the market, with the ultimate objective being to close sales in the company of the rep agency and/or Herman Miller representatives so that they may duplicate all sales techniques and product information for more sales and projects. Concurrently, Omega Metals, Genco and our powder coating process utilize manufacturers' representative firms to generate sales. 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 are constructing an Internet portal to serve as our Business to Business e-commerce site, whereby the infrastructure designer or engineer can plan a project and log on to order a portion of, or all of a system at a price allowing a competitive edge in presenting the plan to an end-user. This expands our presence in the marketplace for those designers that would prefer to "do it themselves" rather than order through a traditional distributor. American Access has developed a comprehensive informational CD, which is sent to engineers, reps, consultants, project designers and anyone in the telecommunications industry with an interest in our products. The CD can also be shown on a laptop computer by our managers and reps presenting our products to a prospective customer. We also use several brochures to assist in marketing. These pieces range from one page to an eight page full color product and application brochure. We also maintain a World Wide Web site for the casual visitor, telecommunications expert, and the investor. All of these marketing/media materials provide company information, product information, engineering specifications, drawings, application for use, installation instruction, and features and benefits tailored to each individual market need. Additionally the World Wide Web site provides marketing support materials that can be downloaded and printed at individual locations throughout the world. Questions and answers can be transmitted via e-mail feedback capability, query analysis for tracking of inquiries, lead generation for the distributors, distribution of marketing materials to end-users not normally addressed by the individual distributors. The largest and most recognized telecommunications training and certification organization (BICSI) is currently using the ZCTC line of products as an integral part of its Zone Cabling Training and Certification course. The company is participating with its business partners in trade shows as a component in their individual booths and hospitality suites. Also, the company individually participates in three or four trade shows per year. Two of the shows are focused around standards, training and certifications. The remaining two shows are industry product shows. The end users of our products contract with specialized, 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 advent of our B2B site in the summer of 2000 will enhance this potential. Distribution and Sales American Access Technologies maintains a national distribution contract with Anixter International, Inc. (NYSE: AXE). Anixter is a leading value-added provider of integrated cabling and networking solutions that support business information and network infrastructure requirements. Anixter teams with customers to implement these solutions by combining a variety of customized pre- and post-sale services, products from the world's leading manufacturers, and superior logistics management through a global network of 37 countries with 205 domestic operating locations. American Access Technologies has partnered with modular furniture giant Herman Miller, Inc. for distribution of the Ethospace zone cabling unit housed in select Herman Miler modular office furniture systems. The agreement provides entrance into the corporate offices of current and future Herman Miler clients, giving Herman Miller a competitive advantage and a product differentiator. The multi-city rollout for the project began the week of April 11, 2000. The Herman Miller retrofit client base is estimated at $3.5 billion. COMPETITION The market for telecommunications products is highly competitive and subject to rapid technological change, regulatory developments and emerging industry standards. The company believes that the principal competitive factors in its markets are conformance to standards, reliability, safety, product features, price, performance and quality of customer support. There can be no assurance that the company will compete successfully in the future with respect to these or other factors. REGULATION OF THE COMPANY'S BUSINESS Markets for the company's products are characterized by the need to meet governmental and industry standards. In the U.S., the company's products must comply with various regulations established by the Federal Communications Commission and Underwriters Laboratories, as well as standards established by Bell Communications research and local building codes. The ZCTC has been approved by Underwriters Laboratories for low voltage communications and meets or exceeds the national electrical code requirements when used with appropriate fire foam kits in association with cable access penetration models The company maintains membership in trade organizations such as the Telecommunications Industry Association, International Association of Electrical Inspectors and Building Industrial Consulting Services International. RISK FACTORS This report may be deemed to contain forward-looking statements within the meaning of the Reform Act. Forward-looking statements in this report or hereafter included in other publicly available documents filed with the Commission, reports to the company's stockholders and other publicly available statements issued or released by the company, involve known and unknown risks, uncertainties and other factors which could cause actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, risks set forth here, each of which could adversely affect the company's business and the accuracy of the forward-looking statements contained in this report. FINANCIAL RISK Reliance on Affiliates As Source of Business Alliances with telecommunications companies such as Lucent Technologies, Ortronics, Amp, Belden, Krone, Bay Networks, and 3 Com, have enhanced American Access' position in the industry. Our agreement with Herman Miller will strengthen the company's position as an innovative leader. However, there are no guarantees these affiliations will be permanent. Alliances may switch over to future competition or terminate for other reasons, which may adversely affect the company. Reliance on Distributors The company relies upon three distributors for a large portion of gross revenues. If one or more of these three customers were to cease doing business with the company, it could have a material adverse effect on the company's business. GENERAL BUSINESS OPERATIONS RISKS 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. 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. Operating losses Our ability to operate profitably depends on increasing our sales and achieving sufficient gross profit margins. We cannot assure that American Access will operate profitably. Omega Metals has operated profitably. Competitors May Copy our Products Although we have received patents in the United States on aspects of our products, 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. 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. ITEM 2. DESCRIPTION OF PROPERTIES The company maintains offices at 37 Skyline Drive, Suite 1101, Lake Mary, FL 32746. The 10,472 square feet of office space is leased for 4 years, expiring May 30, 2003, at a rent of $9,599.33 per month.. Management of the company believes that the terms of its lease are at least as good as may be obtained from an unaffiliated third party. Omega Metals operates from its 67,500 sq. ft. manufacturing facility situated on 8 1/2 acres of land that it owns in Northeast Florida, midway between Jacksonville and Gainesville. ITEM 3. LEGAL PROCEEDINGS The company is a involved in litigation that could potentially develop into a class action filing precipitated by the fall of the price of common stock in August, 1999. The suit was filed in United States District Court, Eastern District of New York. Plaintiff alleges in the Amended Complaint that the defendants participated in a conspiracy to inflate the price of the Company's common stock for the purpose of allowing "insiders" to enrich themselves by selling personal holdings at the inflated price. The Company denies not only any wrongdoing, but most of the material factual allegations as well, and intends to vigorously defend this case. To date, the Company has paid for legal services as incurred, and retaining our attorneys has not included the advancing of any legal fees for indemnification of defendants who are principals of the Company. However, there is no guarantee that expenses for indemnification of Company principals will not occur in the future. Company defendants have signed Conflict Waivers and Undertaking to Repay Expenses for Defense for indemnification under Florida Statutes Section 607.0850(6). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the quarter ended December 31, 1999, the Company's stockholders did not adopt any resolutions at a meeting or by written consent. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Common Stock The company's common stock is listed for trading on the NASDAQ Stock Exchange (Small Cap: AATK) maintained by the National Association of Securities Dealers under the symbol "AATK." The Company's Common Stock has a limited trading history and has only been quoted on the NASDAQ since April 13, 1999. From August 1997 until April 13, the stock traded on the OTC Bulletin Board. The following table sets forth quotations for the high and low bid prices for the company's common stock for the periods indicated below: High Low High Low Year Ending Year Ending December 31, 1998 December 31, 1999 1st Quarter $12.25 $11.00 $21.50 $17.25 2nd Quarter $18.50 $12.25 $22.75 $17.5625 3rd Quarter $21.50 $19.00 $18.875 $6.00 4th Quarter $20.50 $17.75 $8.25 $4.25 The above represents inter-dealer quotations which do not include retail mark-ups, markdowns, or commissions, and do not necessarily represent actual transactions. Approximately 1910 investors held the company's common stock as of April 11, 2000. No dividend has been declared or paid by the company since inception. The company does not anticipate that any dividends will be declared or paid in the future. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview American Access was formed in October 1996 to acquire the assets of Vic Murray and Associates, Inc. American Assets purchased VMA to obtain the pending patent for the Zone Cabling Termination Cabinet, which the company has since developed and marketed. Shortly after the acquisition of VMA, American Access decided to discontinue the operations and business activities of VMA, which was a manufacturer's representative of various products. Today, we develop, design, and manufacture products for the telecommunications industry. Our cabling cabinets store and efficiently distribute the wiring for computer, telephone, and television systems installed in office buildings, hospitals, schools, conventions centers, and any building that needs an efficient system to route information. In November 1998, American Access acquired Omega Metals, Inc., a precision sheet metal fabrication operation, which has and will continue to provide product prototyping, manufacturing, assembling and packaging operations to the company. Omega operates as a wholly owned subsidiary with sales and manufacturing intact. The company for $80,000 acquired six acres adjacent to Omega's north Florida site for a plant expansion to 67,500 sq. ft. The capital cost of $450,000 to complete this expansion, was funded from cash flows and working capital. The company also acquired in August, 1999 the assets of Genco, Inc., a manufacturer of generator covers. A powder coating system was added at the expanded plant, to facilitate custom coating jobs. The company also in January, 2000 entered into a joint venture with Vulcan Microsystems, Inc. to build a Business to Business e-commerce portal that would facilitate the distribution of zone cabling products and other manufacturers' products used in telecommunications projects. In October and November 1998, American Access issued 50,000 shares of Series A 10% senior convertible preferred stock with gross proceeds of $5,000,000. All preferred shares were converted between April 14, 1999 and the end of the first quarter in 2000. 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, 1999 increased by $311,479 to $5,247,683 as compared to $4,936,204 for the year ended December 31, 1998. Sales of zone cabling termination cabinets more than doubled in 1999. Costs and Expenses Direct costs for the year ended December 31, 1999 represented 43.8% of revenues. For the year ended December 31, 1998 these costs represented 45.7% of revenues. Compensation and related benefits expenses decreased by $280,971 to $1,134,502 for the year ended December 31, 1999. These costs totaled $1,415,473 for the year ended December 31, 1998. There was an increase in staff and related expenses, but this was more than offset by the reduction of year end bonus paid to the former owner of Omega Metals Inc. of $782,300 in 1998. Selling, general and administrative expenses for the year ended December 31, 1999 amounted to $2,701,705. This was an increase of $1,040,226 over the December 31, 1998 amount of $1,661,479. This increase was a result of the company's continuing effort to market and sell its products. Marketing, trade shows, commissions and sales representative costs increased approximately $300,000. The office facilities and operations were also expanded in 1999. This expansion increased office rent, insurance and office supplies by approximately $225,000. There were also increased costs of approximately $325,000 in legal and accounting, amortization, shop supplies and freight. Stock-based compensation was $616,000 for the year ended December 31, 1999. Notes 13 and 14 to the consolidated financial statements provide a detailed explanation of this item. The company did not have any stock-based compensation in 1998. LIQUIDITY AND CAPITAL RESOURCES Net cash [used] by operating activities was [$1,201,041] and [$391,889] for the years ended December 31, 1999 and 1998 respectively. Net cash [used] by operating activities during the year ended December 31, 1999 primarily consisted of net losses, increases in accounts receivables, inventories and prepaid expenses, offset by depreciation and amortization, common stock and warrants issued for services, realized/unrealized losses on investments and increases in accounts payable. Net cash [used] by operating activities during the year ended December 31, 1998 primarily consisted of net losses, increase in accounts receivable, offset by depreciation and amortization, gains on sales of investments and equipment, decrease in income tax refund receivable and decreases in inventories. Net cash provided by investing activities for the year ended December 31, 1999 was $408,407. Funds provided mainly consisted of sales of investments of $1,791,871 less amounts used for the acquisition of property and equipment totaling $1,354,610. In the preceding year ended December 31, 1998, net cash [used] by investing activities was [$3,285,999]. The company used $85,635 to purchase equipment, $4,281,803 for the acquisition of investments and $500,000 in notes receivable, offset by funds provided from the sale of investments of $1,450,073. Net cash provided by financing activities was $868,967 for the year ended December 31, 1999, and $3,677,531 for the year ended December 31, 1998. In the year ended December 31, 1999, the company received proceeds of $1,973,000 from the sale of common stock. The company utilized $222,190 to reduce the line of credit and $881,843 for the purchase of treasury stock. For the year ended December 31, 1998, the company received proceeds of $480,000 from the sale of common stock, $4,262,180 from the sale of preferred stock, $296,002 from the line of credit. The company utilized $100,000 to reduce notes payable, $1,256,625 in payments on capital lease obligations, which eliminated high interest rates up to 14%, and the remaining amounts were used to finance the company's business operations and investing activities. The company's operating and capital requirements in connection with its operations have been and will continue to be significant. Based on its current plans, the company anticipates that revenues earned from product sales will be the primary source of funds for operating activities. The company believes that revenues in addition to existing cash and cash equivalents, in addition to bank borrowing, the exercise of warrants and the purchase of common stock, will be sufficient to meet its basic capital and liquidity needs for the next 12 months, but additional capital is being sought to fund the operations of new projects, such as the joint venture the company entered in January for the construction and maintenance of a B2B portal. The company also believes that cash required to fulfill purchase orders will be available through bank borrowing or factoring, if required. The company's primary customers are substantial corporations with credit ratings that will support such credit arrangements. Management's plans include the following: o Although sales of zone cabling products more than doubled in 1999, over 1998, the company posted a net loss in 1999 that we attribute to three factors: an inadequate sales and marketing effort; a training school that would ultimately prove to be unprofitable; a system of compensation by stock and warrants for services that is not the most beneficial to the company or to the employee. We have already made changes in operations to rectify of our net loss. o The company has revamped its sales strategy. We have replaced a costly campaign that was based solely on channel distribution and was top-heavy with ineffectual management. Our new team of regional managers and project managers, coordinated by a vice president of sales, spend more field time working as support for our distributors, Value Added Resellers, and end-users. We found that our distributors and end-users knew little about the value of using our products, so we put a premium on educating our team and our representatives in the merits of zone cabling. We realize that our competition is actually `the old way of doing things'. Part of our new strategy is education about the benefits of zone cabling over traditional home run cabling. o We will also market through our B2B e-commerce portal, currently under construction. o Our President and Vice President of Sales continue to meet with Herman Miller Inc. to ensure a smooth and effective rollout of our joint marketing project. o The company has streamlined bookkeeping procedures and taken its loss in 1999 for endeavors that may have been good ideas, but that we do not think would be ultimately profitable, such as the BICSI training school. o The company completed all capital expenditures in 1999. We have moved from an acquisition and expansion phase into one of focused growth for sales and revenue. Our purchase and expansion of Omega Metals, our acquisition of the assets of Genco, Inc., our implementation of a powder coating system all are in place. We remain virtually debt free and have the capacity for the manufacture of American Access products and other metal fabricating jobs with potential revenues three times our current revenues. The combined operation provides a greater diversification of facilities and equipment o American Access in 2000 implemented a Qualified Stock Option Incentive Plan for Employees and Directors. The plan must be approved by shareholders at the 2000 annual meeting. The plan eliminates some audited treatment of stock warrants that contributed to our loss in 1999. It is also more beneficial to the employee as incentive to make the company grow profitably. o The company 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. The company between October 1, 1998 and December 10, 1998 the company has had a $5 million private placement of its Series A 10% Senior Convertible Preferred Stock. All shares as of April 11, 2000 have been converted to commons stock and sold on the open market. Nevertheless, the company continues to be subject to a number of risk factors, including the uncertainty of market acceptance for its product line, the need for additional funds, competition, technological obsolescence and the difficulties faced by young companies in general. ITEM 7: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. Part III ITEM 8: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS The directors, executive officers, and key employees of the Company are as follows:
Name Age Position John Presley 59 President, Director Bobby E. Story 58 Sec/Treasurer, Director John W. Cooney 63 Director Erik Wiisanen 53 Director, VP Marketing, Omega Metals, Inc. Oscar de la Guardia 42 Director Ray Kirk 53 Vice President of Sales
JOHN PRESLEY, Director of the company since November 1998, and President since April 12, 1999, Presley is a graduate registered professional Engineer. He graduated from the University of Florida in January of 1961 with a BSME, and attended a number of colleges for graduate work. He worked in many industries as an engineer and manager before founding Omega metals in 1981. Omega became a wholly-owned subsidiary of American Access in November, 1998. BOBBY E. STORY, secretary/treasurer, CFO and director, has been a former practicing CPA and real estate developer during the past 30 years. He worked for Arthur Young & Company CPA (now Ernst & Young, LLP), Treasurer for Condev Corporation an international developer located in Winter Park, Florida, and directed the real estate operations in Florida for Drexel Burnham Lambert & Company. He functions as the Chief Financial Officer for the corporation. Employment history for the past five years is: October 1996 to Present: Sec/Treasury, CFO - American Access Technologies, Inc. August 1996 to October 1996: Financial Advisor - Self employed. March 1996 to August 1996: George S. May Co. Project Manager April 1987 to March 1996: NACEX, Inc. Controller, Vice President Finance JOHN W. COONEY, Director since February 15, 1997, is a certified public accountant. He was Senior Tax Partner at Coopers & Lybrand until he retired in 1986. He has practiced as a tax and financial consultant since then. Employment history for the past five years is: January 1987 to Present: Operates J. W. Cooney, CPA as a sole proprietorship. ERIK WIISANEN, Vice-President-Marketing of Omega. Mr. Wiisanen was elected a director in December, 1999. He graduated from Cornell University in 1965. He worked in Banking as a Vice President of Barnett Bank until 1970 and was a representative for shipping interests until helping to found Omega Metals in 1981. He was co-founder and President of the Board of Directors for a private kindergarten. He has been vice president in charge of sales for Omega since 1981. OSCAR de la GUARDA, Director Mr. De la Guardia was elected to the Board of Directors in December, 1999. He is Executive Vice President and general counsel of RT21 Radiation Systems Corp., a development stage company involved in the international development of cancer treatment centers. He was Senior Vice President and General Counsel to Quality Oncology, Inc. and for American Disease Management, Inc. He was also an executive with Physician Corporation of America, and an attorney in private practice specializing in corporate mergers and acquisitions. RAY KIRK, Vice President of Sales Mr. Kirk has been vice president of sales for American Access since October 1, 1999. He graduated from the University of Missouri School of Business, and after a brief stint as a Field Artillery officer, began his career marketing commercial office furniture systems. Throughout his career he has developed corporate, state and GSA contracts. He has represented companies such as Herman Miller, Alma Desk, Corry-Hiebert, and Knoll International. ITEM 9: 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.
- --------------------------------------------------------------------------------------------------- Name and Position Year Total Income Other Annual Bonus Other Annual Compensation - --------------------------------------------------------------------------------------------------- Victory E. Murray, 1997 $60,000 -0- -0- President - --------------------------------------------------------------------------------------------------- Victory E. Murray, 1998 $60,000 $30,000 -0- President - --------------------------------------------------------------------------------------------------- John E. Presley, 1999 $175,000 -0- -0- President - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (Individual Grants) - ---------------------------------------------------------------------------------------------------------------------- Name Number of Securities Percent of Total Options/SARs Exercise Price Expiration Underlying Options/SARs Granted to Employees in Fiscal Year Date Granted - ---------------------------------------------------------------------------------------------------------------------- John Presley, 150,000 20% $22.00 July 1, 2004 President - ----------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR and FY-END OPTIONS/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------- Name Shares Acquired Value Number of Unexercised Value of Unexercised On Exercise Realized Securities Underlying In-The-Money Options/SARs At Options/SARs at FY-End FY-End - ---------------------------------------------------------------------------------------------------------------------- John Presley, President --0-- --0-- 150,000 --0-- - ----------------------------------------------------------------------------------------------------------------------
DIRECTOR COMPENSATION Directors are paid $500 for meetings attended at our corporate headquarters and $250 for telephonic meetings. All travel and lodging expenses associated with directors' meeting(s) are reimbursed by the company. On January 10, 2000, the Board of Directors voted to implement a 2000 Directors Stock Option Plan as incentive for continued and future service. Each director will be awarded 50,000 options to purchase American Access stock at the January 10 closing price, automatically renewable each year on the anniversary date of the Board decision. The plan must be approved by shareholders at the 2000 annual meeting. The Board allocated 300,000 shares to the plan. The Board of Directors also on January 10, 2000 voted to implement a qualified Employee Incentive Stock Option Plan for 2000. The plan must be approved by shareholders at the 2000 annual meeting. The Board allocated 500,000 shares to the employee plan. EMPLOYMENT AGREEMENTS On November 11, 1998 two officers of Omega Metals, Inc. have entered into employment agreements with Omega Metals, Inc. The individuals and their titles are as follows: John Presley President, Omega Erik Wiisanen Secretary/Treasurer, V.P. Marketing, Omega Each officer is authorized a salary of $125,000 per year plus a profit participation of 10% of Omega's net profits in excess of $1,200,000 per year. The term of the agreements is for two years, ending November 14, 2000. It may be terminated by action of the Board of Directors for cause on thirty days prior notice. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Based solely on its review of Forms 3, 4 and 5 received by the company, or written representations from certain reporting persons that no Forms 5 were required for such persons, the company believes that, during the fiscal year ended December 31, 1999, all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 applicable to officers, directors and 10% shareholders were satisfied. ITEM 10: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of April 11, 2000, 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 of Shareholder Number of Shares Percent of Outstanding Common Stock (1) Bobby E. Story 422,850 9.8 % John Presley 113,235 2.62% Richard A. Murray 411,575 9.54% Victor E. Murray 251,000 5.81% John W. Cooney 33,500 .08% Erik Wiisanen 113,235 2.62% Oscar de la Guardia -0- 0% Bridge Bank, Ltd. 437,000 10.13% Ray Kirk 1,000 .02% Officers and Directors as a group (6 persons) 683,820 shares 15.85%
(1) Based upon 4,314,773 shares outstanding on April 11, 2000. Does not include warrants to purchase Common Stock at $22.00 per share as follows: Richard A. Murray - 133,375 shares; Bobby E. Story - 100,000 shares; John Presley - 150,000, John Cooney - 20,000; Ray Kirk - 50,000. Does not include warrants to purchase Common Stock at $8.00 per share, issued in January, 2000, as follows: Richard A. Murray - 133,375 shares; Bobby E. Story - 100,000 shares; John Presley - 150,000, John Cooney - 20,000; Ray Kirk - 50,000. Does not include directors options issued January 10, 2000 at $5.67 per share as follows: Bobby E. Story - 50,000 shares; John Presley - 50,000 shares, John Cooney - 50,000; Oscar de la Guardia - 50,000. ITEM 11: 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. PART 1V ITEM 12: EXHIBITS AND REPORTS ON FORM 8-K a.) FINANCIAL STATEMENTS b.) REPORTS ON FORM 8-K Three reports on Form 8-K are incorporated by reference, as filed with the Securities and Exchange Commission on March 29, 1999, March 30, 1999 and October 7, 1999. As a subsequent event, a Form 8-K was filed on February 11, 2000, as noted in Other Exhibits. c.) OTHER EXHIBITS: o 3(a) Amended and Restated Articles of Incorporation of the Registrant (Incorporated by Reference to Exhibit 3(a) to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 3(b) Bylaws of the Registrant (Incorporated by Reference to Exhibit 3(b) to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 3(c) Form of $8 Stock Purchase Warrant expiring February 11, 2000 (Incorporated by Reference to Exhibit 3(c) to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 3(d) Form of $3 Stock Purchase Warrant expiring February 11, 2000 (Incorporated by Reference to Exhibit 3(d) to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 3(e) Articles of Amendment to Articles of Incorporation (Incorporated by Reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10Q-SB for quarter ended September 30, 1998.) o 3(f) Form of Stock Purchase Warrant expiring October 14, 2003 (Incorporated by Reference to Exhibit 3(f) to Amendment No. 1 to Registrant's Registration Statement on Form SB-2A File No. 333-68791. o 8.2 Composite Exhibit of Stocking Distributor Agreements with Anixter, Inc. State Electric Supply Company, and DataCom, Inc. (Incorporated by Reference to Exhibit 8.2 to Amendment 1 to Registrant's Registration Statement on Form SB-2 - File No. 333-43589). o 8.3 Value Added Reseller Agreement with DataStar Computer Systems, Inc (Incorporated by Reference to Exhibit 8.3 to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.5 Composite Exhibit of Management Agreements with Vic Murray and Sons, Steve R. Jones, Steven K. Robinson and Nacex, Inc. Inc (Incorporated by Reference to Exhibit 8.5 to Amendment No. 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.6 Consulting Agreement dated August 28, 1997 between Registrant and Steve R. Jones. (Incorporated by Reference to Exhibit 8.6 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.7 Management Termination Agreement dated December 9, 1997 between Steven K. Robinson and Registrant. (Incorporated by Reference to Exhibit 8.7 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.8 Purchase Agreement dated October 21, 1996 between Registrant and Victor E. Murray. (Incorporated by Reference to Exhibit 8.8 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.9 Promissory Note dated December 2, 1996. (Incorporated by Reference to Exhibit 8.9 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-43589). o 8.10 Agreement and Plan of Reorganization dated November 11, 1998 relating to the acquisition of Omega Metals, Inc. (Incorporated by Reference to Exhibit 2.1 to Registrant's Form 10QSB for the Quarter ended September 30, 1998.) o 8.12 Employment Agreements between Omega Metals, Inc. and John Presley and Erik Wiisanen. (Incorporated by Reference to Exhibit 8.12 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-68791). o 8.13 Letter of Intent to Purchase additional land from Troy Fornshell and Anna Fornshell. (Incorporated by Reference to Exhibit 8.13 to Amendment 1 to Registrant's Registration Statement of Form SB-2 - File No. 333-68791). o 8.14 Consulting Agreement with Erik Gray and Bill Wetmore. (Incorporated by Reference to Form 8-K as filed on February 11, 2000.) o 8.15 Joint Venture Letter Agreement with Vulcan Microsystems. (Incorporated by Reference to Form 8-K as filed on February 11, 2000.) o 8.16 Employee 2000 Stock Option Plan. o 8.17 Directors 2000 Stock Option Plan. o 11.1 Computation of net loss per common share o 27.0 Financial Data Schedule SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN ACCESS TECHNOLOGIES, INC. By /s/ John Presley ------------------------- President/ principal executive officer Date: April 17, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. By /s/ Bobby E. Story ------------------------- Secretary/Treasurer, Chief Financial Officer Date: April 17, 2000
Signature Title Date /s/ John Presley President and Director April 17, 2000 - ------------------------- (Principal Executive Officer) John Presley /s/ Bobby E. Story Treasurer, (Principal Accounting April 17, 2000 - ------------------------- Officer,) Director Bobby E. Story /s/ John Cooney Director April 17, 2000 - ------------------------- John Cooney /s/ Erik Wiisanen Director April 17, 2000 - ------------------------- Erik Wiisanen /s/ Oscar de la Guardia Director April 17, 2000 - ------------------------- Oscar de la Guardia
AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY INDEX TO FINANCIAL STATEMENTS ----------------------------- PAGE ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1 CONSOLIDATED FINANCIAL STATEMENTS Balance Sheet F-2 Statements of Operations F-3 Statements of Stockholders' Equity F-4 Statements of Cash Flows F-5 Notes to Financial Statements F-6 - F-24 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- Board of Directors and Stockholders American Access Technologies, Inc. We have audited the accompanying consolidated balance sheet of American Access Technologies, Inc. and Subsidiary as of December 31, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Access Technologies, Inc. and Subsidiary as of December 31, 1999, and the results of their operations and their cash flows for each of the two years ended December 31, 1999, in conformity with generally accepted accounting principles. RACHLIN COHEN & HOLTZ LLP Fort Lauderdale, Florida March 15, 2000 F-1 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999
ASSETS ------ Current Assets: Cash and cash equivalents $ 714,109 Investments, including restricted cash of $300,000 833,344 Accounts receivable, net of allowance 1,014,913 Notes receivable, related parties (including accrued interest) 585,615 Inventories 570,594 Prepaid expenses and other current assets 62,307 ----------- Total current assets 3,780,882 Property, Plant and Equipment 2,547,483 Goodwill 407,686 Patent Costs 62,561 ----------- Total assets $ 6,798,612 =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable 375,788 Retirement plan 75,000 Line of credit 73,812 Compensation due to officers/directors/stockholders 66,394 Accrued expenses 90,004 ----------- Total current liabilities 680,998 ----------- Commitments, Contingencies, Other Matters and Subsequent Events -- Stockholders' Equity: Series A 10% Senior Convertible Preferred stock, $.001 par value; authorized 1,000,000 shares; issued and outstanding 10,600 shares at liquidation value (subsequently 1,060,000 converted into 215,534 shares of common stock) Common stock, $.001 par value; authorized 10,000,000 shares; issued 4,094,239 shares 4,094 Additional paid-in capital 9,144,508 Deficit (3,208,875) ----------- 6,999,727 Treasury stock, 136,100 common shares at cost (881,843) Stock subscription receivable, net of allowance (270) ----------- 6,117,614 ----------- Total liabilities and stockholders' equity $ 6,798,612 ===========
See notes to consolidated financial statements. F-2 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- Net Sales Formed metal $ 3,882,841 $ 4,344,118 Zone cabling termination cabinet 1,364,842 592,086 ----------- ----------- 5,247,683 4,936,204 ----------- ----------- Costs and Expenses: Cost of sales 2,298,923 2,257,169 Selling, general and administrative 2,701,705 1,661,479 Compensation and related benefits 1,134,502 1,415,473 Stock-based compensation 616,000 -- ----------- ----------- 6,751,130 5,334,121 Loss Before Other Income (Expense) (1,503,447) (397,917) ----------- ----------- Other Income (Expense): Interest income 250,822 89,731 Interest expense (18,594) (139,527) Abandoned project development costs (352,531) -- Realized and unrealized loss on investments (200,627) -- Other income 77,794 158,346 Lease termination costs -- (239,447) ----------- ----------- (243,136) (130,897) Loss before Income Taxes (1,746,583) (528,814) Income Tax (Benefit) (69,000) (36,000) ----------- ----------- Net Loss $(1,677,583) $ (492,814) =========== =========== Basic Net Loss Per Common Share $ (.59) $ (.43) =========== =========== Weighted Average Common Shares Outstanding 3,638,983 3,218,970 =========== ===========
See notes to consolidated financial statements. F-3 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Series A Capital Preferred Stock Common Stock in --------------- ------------ Excess Shares Amount Shares Amount of Par ------ ------ ------ ------ ------ Balance December 31, 1997 -- $ -- 3,196,470 $ 3,196 $ 989,264 Year Ended December 31, 1998: Sale of preferred stock in private placement, 50,000 5,000,000 -- -- (737,820) net of related costs Exercise of warrants -- -- 60,000 60 479,940 Dividend related to beneficial conversion feature -- -- -- -- 781,250 of preferred stock Net loss -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1998 50,000 5,000,000 3,256,470 3,256 1,512,634 Year Ended December 31, 1999: Purchase of 136,100 shares of treasury stock -- -- -- -- -- Issuance of common stock for services -- -- 9,000 9 179,991 Conversion of preferred stock to common stock, (39,400) (3,940,000) 289,981 290 4,131,146 including dividends Purchase of Genco assets -- -- 22,163 22 443,234 Warrants granted for services -- -- -- -- 436,000 Exercise of warrants: Cash -- -- 246,625 247 1,972,753 Notes receivable, net of allowance -- -- 270,000 270 -- Dividend related to beneficial conversion feature of -- -- -- -- 468,750 preferred stock Net loss -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1999 10,600 $ 1,060,000 4,094,239 $ 4,094 $ 9,144,508 =========== =========== =========== =========== ===========
[RESTUBBED TABLE]
Stock Subscription Treasury Receivable Stock Deficit Total ---------- ----- ------- ----- Balance December 31, 1997 $ -- $ -- $ 402,958 $ 1,395,418 Year Ended December 31, 1998: Sale of preferred stock in private placement, -- -- -- 4,262,180 net of related costs Exercise of warrants -- -- -- 480,000 Dividend related to beneficial conversion feature -- -- (781,250) -- of preferred stock Net loss -- -- (492,814) (492,814) ----------- ----------- ----------- ----------- Balance, December 31, 1998 -- -- (871,106) 5,644,784 Year Ended December 31, 1999: Purchase of 136,100 shares of treasury stock -- (881,843) -- (881,843) Issuance of common stock for services -- -- -- 180,000 Conversion of preferred stock to common stock, -- -- (191,436) -- including dividends Purchase of Genco assets -- -- -- 443,256 Warrants granted for services -- -- -- 436,000 Exercise of warrants: Cash -- -- -- 1,973,000 Notes receivable, net of allowance (270) -- -- -- Dividend related to beneficial conversion feature of -- -- (468,750) -- preferred stock Net loss -- -- (1,677,583) (1,677,583) ----------- ----------- ----------- ----------- Balance, December 31, 1999 $ (270) $ (881,843) $(3,208,875) $ 6,117,614 =========== =========== =========== ===========
See notes to consolidated financial statements. F-4 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ---- ---- Cash Flows from Operating Activities: Net loss $(1,677,583) $ (492,814) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 299,164 256,159 Common stock and warrants issued for services 616,000 -- Realized and unrealized losses on investments 199,962 6,553 Gain on sale/abandonment of assets -- (137,238) Provision for doubtful accounts 89,000 28,000 Deferred income taxes (69,000) (36,000) Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable (403,697) (270,624) Income tax refund receivable -- 137,899 Inventories (273,154) 97,967 Prepaid expenses and other assets (87,456) (18,229) Increase in accounts payable and accrued expenses 105,723 36,438 ----------- ----------- Net cash used in operating activities (1,201,041) (391,889) ----------- ----------- Cash Flows from Investing Activities: Proceeds from sale of investments 1,791,871 1,450,073 Acquisition of investments -- (4,281,803) Increase in notes receivable -- (500,000) Acquisition of property and equipment (1,354,610) (85,635) Proceeds from sale of equipment -- 145,000 Patent costs (28,854) (13,634) ----------- ----------- Net cash provided by (used in) investing activities 408,407 (3,285,999) ----------- ----------- Cash Flows from Financing Activities: Proceeds from sale of preferred stock -- 4,262,180 Proceeds from exercise of warrants 1,973,000 480,000 Payments on capital lease obligations -- (1,256,625) Repayment of note payable -- (100,000) Proceeds (repayments) from line of credit (222,190) 296,002 Payments on loans -- (4,026) Acquisition of treasury stock (881,843) -- ----------- ----------- Net cash provided by financing activities 868,967 3,677,531 ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents 76,333 (357) Cash and Cash Equivalents, Beginning 637,776 638,133 ----------- ----------- Cash and Cash Equivalents, Ending $ 714,109 $ 637,776 =========== ===========
See notes to consolidated financial statements. F-5 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999 AND 1998 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Capitalization American Access Technologies, Inc. ("Company") was incorporated on October 21, 1996, under the laws of the State of Florida. The Company's Articles of Incorporation, as amended on November 25, 1996, authorizes the Company to issue and have outstanding at any one time 10,000,000 shares of common stock, par value $.001 per share and 1,000,000 shares of preferred stock, par value $.001 per share. On October 2, 1998, the previously amended Articles of Incorporation were further amended to provide for the issuance of 60,000 shares of Series A 10% Senior Convertible Preferred stock. The amendment provided, among other things, that the holders of the Series A Preferred stock shall be entitled to voting rights equal to the votes that would be cast by the holders of the number of shares of common stock into which the Series A Preferred stock could be converted immediately prior to the taking of such votes, including any shares which would be issuable in payment of accrued and unpaid dividends. In addition, so long as the Series A Preferred stock is outstanding, the holders of at least a majority of the shares of then outstanding Series A Preferred stock shall be entitled to elect two directors, and five directors shall be elected by the holders of common and Series A Preferred stock, voting together as a single class. The Series A Preferred has a liquidating preference equal to the greater of $100.00 per share plus an amount equal to all accrued and unpaid dividends or an amount equal to the property to be distributed to the holders of Common Stock. The holders of the Series A Preferred stock shall be entitled to receive cumulative dividends at a rate of 10% payable in cash or common shares. If dividends are declared on the common shares, the Series A Preferred stock holders shall be entitled to receive the dividend as if the Series A Preferred stock were converted into common shares immediately prior to the record date. The holders of the Series A Preferred stock shall have the right, at their option, to convert any and all Series A Preferred shares into common shares at the lower of $17.00 per share or eighty percent of market value at any time on or after the earlier of the four month anniversary of the earliest issuance date or the first date upon which the shelf registration statement registering the underlying common stock is declared effective by the Securities and Exchange Commission. During 1999, holders of the Series A Preferred stock converted 39,400 of the Series A Preferred shares into 289,981 common shares. Subsequent to December 31, 1999, the remaining 10,600 shares of Series A Preferred were converted into 215,534 shares of common stock. F-6 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) F-24 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business American Access Technologies, Inc. ("AAT") develops specialized products for the telecommunications industry. The Company has introduced its first proprietary product, a Zone Cabling Termination Cabinet (the "Product") which is manufactured and distributed to the telecommunications industry. The Product is a device that is used in voice, computer and data transmission systems throughout the world. Omega Metals, Inc. ("Omega"), a wholly-owned subsidiary of the Company, shears and molds metal and manufactures metal-formed products for customers principally in Florida and Georgia. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Revenue Recognition The Company recognizes revenue from product sales at the time the product is shipped to the customer. The Company does not generally grant return privileges to customers. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and Cash Equivalents The Company maintains deposit balances at financial institutions that, from time to time, may exceed federally insured limits. At December 31, 1999, the Company had deposits in excess of federally insured limits of approximately $714,000. The Company maintains its cash with high quality financial institutions, which the Company believes limits these risks. F-7 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentrations of Credit Risk (Continued) Cash and Cash Equivalents (Continued) In addition, the Company maintains an investment account with a financial institution which is not insured by the FDIC. These funds, which were invested primarily in money market instruments and mutual funds at December 31, 1999, may be subject to insurance by SPIC, Securities Investor Protection Corporation, subject to various limitations. At December 31, 1999, approximately $519,000 was held in this account. Accounts Receivable The Company does business and extends credit based on an evaluation of the customers' financial condition generally without requiring collateral. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. Cash and Cash Equivalents The Company considers all highly liquid investments, including short-term securities, with an original maturity of three months or less to be cash equivalents. Short-term securities (generally commercial paper maturing in approximately 30 days) are stated at cost plus accrued income, which approximates market value. Investments The Company classifies its investment securities in one of three categories: trading, available for sale, or held to maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity are those securities in which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available for sale. Trading and available for sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums and discounts. Investment securities at December 31, 1999 consist of mutual funds, which are classified as trading. Unrealized holding gains and losses on trading securities, net of the related tax effect, are included in earnings. Realized gains and losses from the sale of trading securities are determined on a specific identification basis. Dividend and interest income are recognized when earned. F-8 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories, which are primarily composed of raw materials, parts, supplies and certain product components, are stated at the lower of cost or market, with cost determined using an average cost method. Inventory costs for finished goods and work-in-process include material, labor, production overhead, and outside services. Property, Plant and Equipment Property, plant and equipment are recorded at cost and depreciated, using the straight-line method over the estimated useful lives of the assets. Gain or loss on disposition of assets is recognized currently. Repairs and maintenance are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the assets. Patent The Company has capitalized certain incremental costs incurred related to acquiring two patents on the Company's products. In 1998, one of the patents was finalized and issued by the United States Patent Department. The Company then began amortizing the cost of the patent over the patent's life, 18 years. Another patent is still pending at December 31, 1999 and, therefore, amortization of this patent has not commenced. Product Development Costs Costs in connection with the development of the Company's product are comprised of design, production, consulting and other related professional fees. These costs are charged to expense as incurred. Advertising Advertising costs are charged to expense as incurred. Advertising costs incurred for the year ended December 31, 1999 were approximately $43,000 and were not material for the year ended December 31, 1998. Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the recognition of deferred tax liabilities and assets for temporary differences, operating loss carryforwards, and tax credit carryforwards existing at the date of the financial statements. An effective tax rate of 37% was used to calculate the deferred income taxes. F-9 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes (Continued) A temporary difference is a difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the asset is recovered or the liability is settled. Deferred taxes represent the future tax return consequences of these differences. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and displaying comprehensive income, its components, and accumulated balances. SFAS No. 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. Both SFAS No. 130 and SFAS No. 131 are effective for periods beginning after December 15, 1997. The Company adopted these new accounting standards in 1998, and their adoption had no effect on the Company's financial statements and disclosures. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of the gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133, as amended by SFAS 137, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standard on January 1, 2000 to affect its financial statements. Reclassifications Certain amounts in prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. F-10 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2. STOCK SUBSCRIPTION RECEIVABLE During June, 1999, an individual affiliated with the preferred stock private placement agent exercised options to purchase 270,000 shares of Company common stock at $8.00 per share for a total of $2,160,000. The Company accepted as payment for these shares three notes receivable totaling $2,160,000. The notes receivable, as amended, are due on December 31, 2001, bear interest at 10% and are collateralized by a 5% interest in the newly created joint venture AATK.com (see Note 20). The Company can require the notes be paid in full sooner if the Company stock price equals or exceeds $35 (the market price of the Company's common stock was $5.13 at December 31, 1999). The Company has recorded the exercise of these warrants, net of an allowance, by increasing common stock outstanding and increasing stock subscriptions receivable, a separate component of stockholders' equity, as follows: Notes receivable $ 2,160,000 Accrued interest receivable 119,978 ------------ 2,279,978 Less allowance 2,279,708 ------------ $ 270 ============ The interest earned on the notes receivable has been recorded as an increase in stockholders' equity rather than included in operations, because the transaction giving rise to the notes was an equity transaction. NOTE 3. INVESTMENTS Gross Unrealized Fair Cost Loss Value ---- ---- ----- Mutual funds $543,769 $25,177 $518,592 Certificate of deposit 314,752 -- 314,752 -------- ------- -------- $858,521 $25,177 $833,344 ======== ======= ======== Gross unrealized loss on the trading securities portfolio amounted to $25,177 in 1999, and is included in other income in the accompanying consolidated statement of operations, together with realized losses incurred in 1999 on the trading securities portfolio. F-11 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4. ACQUISITIONS OF ASSETS AND GOODWILL Genco, Inc. In August 1999, the Company acquired selected property and equipment, outstanding sales agreements, and goodwill from a customer, Genco, Inc. for a total of $584,838. The purchase price was allocated as follows: Property and equipment $126,191 Goodwill 458,647 -------- $584,838 ======== The selected property and equipment is being depreciated over the useful lives, 3 - 5 years. Goodwill is being amortized over three years. Depreciation and amortization on these assets were $11,410 and $50,961, respectively, for the year ended December 31, 1999. Payment was made by forgiveness of accounts receivable, assumption of a debt, and the issuance of 22,163 shares of Company common stock, as follows: Accounts receivable forgiveness $106,744 Loan payable 34,838 Common stock 443,256 -------- $584,838 ======== NOTE 5. NOTES RECEIVABLE, RELATED PARTY Note receivable, interest at 15%; due March 3, 1999, as extended; secured by a chattel mortgage on certain equipment owned by the debtor company and guaranteed by a stockholder of the debtor company who is also a major stockholder of the Company $500,000 Notes receivable, stockholder, interest at 10%, interest and principal due December 31, 2001 as extended 20,000 Accrued interest 65,615 -------- $585,615 ======== On April 4, 2000, the note receivable in the amount of $500,000 plus 15% interest, of which approximately $63,000 at December 31, 1999 was unpaid, was sold without recourse for a total of $575,000. The purchaser paid an initial cash payment of $250,000, with the balance of $325,000 due on October 31, 2000 with interest at 15%. The new note has been guaranteed by a third party. The chattel mortgage and the personal guarantee previously in place were released by the Company (see Note 15). F-12 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6. INVENTORIES Raw materials $448,830 Work-in-process 121,764 -------- $570,594 ======== NOTE 7. PROPERTY, PLANT AND EQUIPMENT Estimated Useful Lives (Years) ------------- Land - $103,860 Building and improvements 30 367,736 Machinery and equipment 5-7 2,673,941 Vehicles 3-5 31,415 Tools 3-5 28,065 Construction-in-progress - 1,078,150 ---------- 4,283,167 Less accumulated depreciation 1,735,684 ---------- $2,547,483 ========== Depreciation expense for the years ended December 31, 1999 and 1998 was $246,948 and $254,902, respectively. NOTE 8. OBLIGATIONS UNDER CAPITAL LEASES In December 1998, the Company satisfied in full the obligations under various capital leases, which had original terms extending to various years through 2005, and which provided for implicit interest rates ranging from approximately 10.5% to 14.5%. The aggregate sum paid was approximately $1,284,000, of which approximately $239,000 represented prepayment penalties. NOTE 9. LINE OF CREDIT The Company has available a bank line of credit for $300,000, with interest at 7.75%. The line is collateralized by a $300,000 certificate of deposit. F-13 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 10. PROFIT SHARING PLAN The Company has a 401(k) Profit Sharing Plan covering all non-leased employees who meet minimum length of service and age requirements. Employer contributions are made at the discretion of management, and were $75,000 for each of the years ended December 31, 1999 and 1998. Employees are vested for purposes of the contribution as follows: Years of Service Percentage ---------------- ---------- Less than 1 0% 1-2 20 2-3 40 3-4 60 4-5 80 5 or more 100 NOTE 11. INCOME TAXES The Company accounts for income taxes under the provision of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 is an asset and liability approach for computing deferred income taxes. The provision for income taxes was computed on a consolidated return basis for the year ended December 31, 1999. For the year ended December 31, 1998, the Company was not eligible to file a consolidated return with Omega. Therefore, the income tax provision for 1998 has been computed on a separate return basis. A reconciliation of income tax computed at the statutory federal rate to income tax expense (benefit) is as follows:
1999 1998 ---- ---- Tax provision at the statutory rate of 34% $ (445,000) $ (180,000) State income taxes, net of federal income tax (15,000) (10,000) Change in valuation allowance 325,000 226,000 Stock options not exercised 66,000 - ---------- ----------- $ (69,000) $ (36,000) ========== ==========
As of December 31, 1999, the Company had consolidated net operating loss carryforwards for federal income tax reporting purposes amounting to approximately $1,854,000, which expire in varying amounts to the year 2019. The Company has not recognized any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements in accordance with the provisions of SFAS No. 109 as the realization of this deferred tax benefit is not considered more likely than not. A 100% valuation allowance has been recognized to offset the entire effect of the Company's net deferred tax asset. The Company's net deferred tax asset position is composed primarily of the Company's net operating loss carryforwards. F-14 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 11. INCOME TAXES (Continued) The components of the deferred tax asset at December 31, 1999 were as follows: Net operating loss carryforward $ 687,000 Stock-based compensation 67,000 Allowance for collectibility 33,000 Depreciation and amortization (69,000) Less valuation allowance (718,000) --------- Net deferred tax asset $ - ========= In accordance with certain provisions of the Tax Reform Act of 1986, a change in ownership of greater than 50% of a corporation within a three year period will place an annual limitation on the corporation's ability to utilize its existing tax benefit carryforwards. The Company's utilization of its tax benefit carryforwards may be restricted in the event of possible future changes in the ownership of the Company from the exercise of warrants or other future issuances of common stock. The Company's federal and state income tax returns have not been examined by responsible taxing authorities for the past several years. The final determination of the amount and timing of currently payable income taxes is therefore subject to possible examination of these unexamined years by such responsible taxing authorities. NOTE 12. PREFERRED STOCK In November, 1998, the Company completed a $5,000,000 private placement of 50,000 shares of its Series A 10% Senior Convertible Preferred Stock, par value of $.001 per share, at $100.00 per share. The costs associated with the completion of the private placement, $737,820, have been recorded as a reduction of additional paid-in capital. Additionally, the placement agent received warrants to purchase 100,000 shares of common stock at $25.00 per share, which expire October 14, 2003. The Series A Preferred are valued at $100.00 per share ("liquidation value"), and, if converted, the Series A Preferred shall be converted into common shares (See Note 1) at the price per share equal to the then applicable Conversion Price. This conversion feature results in a discount between the market value of the common shares that would be issued if the conversion option were exercised, and the liquidation value of the preferred shares surrendered upon that conversion. The resulting dividend has been amortized over the period up to the date that exercise of the conversion feature was first possible. As a result, $781,250 of the total $1,250,000 dividend was recognized in 1998; the balance has been recognized in the accompanying 1999 financial statements. During 1999, preferred stockholders owning 39,400 shares of preferred stock elected to convert those shares, including cumulative dividends of $191,436 into shares of Company common stock. The conversion price, which varied based upon date of conversion, ranged from $5.10 to $15.03. As a result of these conversions, the Company issued 289,981 shares of Company common stock. F-15 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 12. PREFERRED STOCK (Continued) The preferred stockholders representing the remaining 10,600 preferred shares elected to convert those shares, including cumulative dividends, in 2000. These conversions resulted in the issuance of 215,534 shares of Company common stock. Dividends in arrears on the Series A Preferred Stock amounted to $121,884 as of December 31, 1999. NOTE 13. COMMON STOCK Issuance of Common Stock for Services In January, 1999, the Company issued 9,000 shares of Company common stock to certain employees as an incentive for services rendered. This resulted in a charge to compensation expense of approximately $180,000 in 1999. NOTE 14. STOCK-BASED COMPENSATION The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Compensation cost for stock options and warrants, if any, is measured as the excess of the estimated market price of the Company's common stock at the date of grant, over the amount the recipient must pay to acquire the common stock. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. The Company has elected to retain its current method of accounting as described above, and has adopted the disclosure requirements of SFAS No. 123. Warrants On January 1, 1998, the Company had outstanding 570,000 warrants to purchase Company common stock at $8.00. During 1998, warrants to purchase 60,000 shares of Company common stock were exercised at $8.00 per share. During 1999, warrants to purchase a total of 516,625 shares of Company common stock were exercised, 246,625 for a total of $1,973,000 in cash and 270,000 in exchange for three notes receivable (see Note 2). F-16 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14. STOCK-BASED COMPENSATION (Continued) During 1999, the Company issued 750,000 warrants to employees and officers/directors to purchase Company common stock for $22 per share. Also during 1999, the Company issued 60,000 warrants to outside directors to purchase Company common stock for $25 per share, 115,000 warrants in connection with services provided to the Company with exercise prices ranging from $6.375 to $28.875 and 329,000 warrants in connection with equity transactions with exercise prices of $11.00 and $23.00. As of December 31, 1999, the Company has remaining outstanding 1,307,375 warrants to purchase common stock at exercise prices ranging from $6.375 to $28.875, 843,375 of which warrants are outstanding to officer/directors. The granting of the 1999 warrants to consultants resulted in a charge to consulting fees in the amount of $436,000 representing the fair value of the 115,000 warrants issued. The warrants issued in connection with the conversion of preferred stock and the negotiation of the proposed sale of common stock (see Note 20), which have a fair value of $3,269,000 represent an increase and a decrease to additional paid-in capital and have been netted in the accompanying financial statements. Fair Value Disclosures Had compensation cost for the 810,000 warrants issued to employees and directors been determined based on the fair value at the grant date consistent with SFAS No. 123, the Company's net loss would have been as follows: Net Loss: As reported $ (1,677,583) ============ Pro forma $(11,547,583) ============ Loss Per Share: Basic: As reported $ (.59) ============ Pro forma $ (3.17) ============ The Company used the Black-Scholes option pricing model to determine the fair value of grants made in 1999. The following assumptions were applied in determining the pro forma compensation cost: Risk Free Interest Rate 6.00% Expected Dividend Yield - Expected Option Life 5 years Expected Stock Price Volatility 85% F-17 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS Former Consultant As of December 1997, the Company was involved in litigation with a former officer/stockholder of the Company in connection with a modified consulting agreement with the Company (see Note 14) whereby he surrendered 200,000 shares of common stock and cancelled 70,000 stock warrants previously held. The former officer/stockholder sought rescission of the consulting agreement he signed with the Company in August 1997, declaratory judgment regarding the consulting agreement, damages for breaching the consulting agreement and damages for fraud. The plaintiff was seeking damages of $150,000 plus costs. On March 17, 1999, a formal settlement agreement was reached on the above matter. Under this settlement, the consulting agreement dated August 28, 1997 was amended to provide, among other things, that the former officer/stockholder was not required to provide any consulting services and the Company was not required to compensate the former officer/stockholder. The consulting agreement, as amended, provides for, among other things, a term of five years, and additional compensation in the form of an option to purchase 40,000 shares of common stock on the last day of each year of the consulting term, exercisable for three years from date of issue, at an exercise price of 125% of the closing price of the common stock on the date of issue. In addition, under the terms of the settlement agreement, the former officer/stockholder was granted a warrant to purchase 15,000 shares of common stock at an exercise price of $28.875 per share, exercisable on or before March 11, 2004. Pending Litigation The Company has been named as a defendant in litigation that could potentially develop into a class action filing. In this potential class action, the Plaintiff alleges in the Amended Complaint that the defendants participated in a conspiracy to inflate the price of the Company's common stock through market manipulation, making material misrepresentations and omissions, and other wrongful conduct for the purpose of allowing "insiders" to enrich themselves by selling their personal holdings at the inflated price. The Company denies not only any wrongdoing, but most of the material factual allegations as well and intends to vigorously defend this case. The recently filed Amended Complaint and preliminary investigations of facts appear to support the Company's position. However, no discovery has yet occurred nor has there been any information as to the position being taken by various co-defendants. The Company believes the allegations are baseless, and that it has no material exposure with respect to the matter, and intends to defend its position vigorously. Note Receivable Foreclosure The Company is a Plaintiff in a lawsuit against the maker and guarantors of a $500,000 promissory note. This is an action for foreclosure of a security interest. The lawsuit was first filed in February, 2000. In April 2000, the Company settled this lawsuit and the promissory note was purchased by another party (see Note 5). F-18 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued) Major Customers The Company's subsidiary (Omega) has two customers which purchased products that represented approximately 25% of sales of formed metal products for the year ended December 31, 1999. The Company relies on two distributors for a large portion of gross revenues. These distributors generated approximately 75% of sales for each of the years ended December 31, 1999 and 1998, respectively. Major Vendors The Company purchases sheet metal from a vendor that represented approximately 53% and 77% of purchases for each of the years ended December 31, 1999 and 1998, respectively. Employment Contracts The Company entered into employment agreements with two members of management of Omega. These agreements are for a term of two years commencing in November 1998. The agreements provide, among other things, for total annual compensation of $250,000 plus profit participation equal to 10% of the net profits of Omega, as defined, in excess of $1,200,000 annually. Contracts With Distributors During 1997, the Company entered into Distributor Agreements with seven distributors. The agreements set forth terms whereby the distributors may purchase products from the Company for resale to their customers within the U.S. and Canada and Mexico when the Company releases its products for sale in those countries. During 1999, the Company entered into additional Distributor Agreements with five distributors. The prices for the products covered by the agreements are based upon the intention of the distributors to purchase a minimum number of units as specified in the agreements. Revenue is recorded at such time as the units are shipped to the distributors. The agreements are for a term of one year and are automatically renewed each year thereafter unless terminated by either party, and contain, among other things, a warranty effective for one year after the date of sale. Co-Marketing Alliance Agreement On August 3, 1999, the Company entered into a Co-Marketing Alliance Agreement with a leading manufacturer of modular office furniture systems (the Manufacturer). The companies jointly promote the use of products in Herman Miller Ethospace and Systems Bridge products. The agreement is for a term of two years, commencing June 1, 1999, and is to be automatically renewed unless terminated by either party. In conjunction with this agreement, the Company agrees to pay the manufacturer an alliance fee equal to 5% of qualifying net sales, as defined. F-19 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued) Co-Marketing Alliance Agreement (Continued) If, during the period of this agreement, the Company proposes to enter into any agreement or transaction which will result in a change in control of the Company, as defined, the Company shall give the Manufacturer the right to enter into such transaction on the same terms, but for a consideration equal to or higher than the proposed transaction. Consulting Agreement In December 1998, the Company entered into a consulting agreement to acquire technical expertise in developing and marketing products. The agreement was for a term of one year, commencing January 1999, and was to be automatically renewed unless terminated by either party. Annual fees were to be $80,000 in cash payable semi-monthly, plus $40,000 in Company common stock, measured at market. The common stock was to be distributed on or before December 31 of each year the contract is in force. This agreement was terminated on April 1, 1999. As a result of this termination, there was no common stock issued in relation to this agreement. Land Purchase The Company entered into an agreement to purchase six acres of land adjacent to the Omega manufacturing plant. The transaction, which closed during the first quarter of 1999 at a cost of approximately $80,000, has allowed the Company to build a manufacturing facility of approximately 30,000 square feet to supplement the assembly facilities. This facility, when completed, is expected to cost approximately $846,000, substantially all of which had been incurred as of December 31, 1999. Lease Commitments The Company subleases approximately 10,000 square feet of office/warehouse space in Lake Mary, Florida. The lease, which commenced in April, 1999, provides for monthly rent of approximately $9,600 and expires May 30, 2003. Future minimum operating lease commitments are approximately as follows: Year ending December 31: 2000 $115,000 2001 115,000 2002 115,000 2003 48,000 -------- $393,000 ======== Rent charged to operations amounted to approximately $121,000 in 1999 and $45,000 in 1998. F-20 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 16. NET LOSS PER COMMON SHARE The Company computes earnings (loss) per common share in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which requires the presentation of both basic and diluted earnings (loss) per share. Basic net loss per common share has been computed based upon the weighted average number of shares of common stock outstanding during the periods. The number of common shares issued in connection with the acquisition of Omega (226,470) have been considered outstanding shares for all periods. The number of shares used in the computation were 3,638,983 and 3,218,970 for the years ended December 31, 1999 and 1998, respectively. Diluted net loss per common share, assuming exercising of the warrants granted and convertible preferred stock, is not presented as the effect of conversion is anti-dilutive.
1999 1998 ---- ---- Net Loss $(1,677,583) $ (492,814) Cumulative Preferred Stock Dividend (17,717) (104,167) Beneficial Conversion Preferred Stock Dividend (468,750) (781,250) ----------- ------------ Net Loss Allocated to Common Stockholders $(2,164,050) $ (1,378,231) =========== ============
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These instruments include cash and cash equivalents, accounts receivable, line of credit and accounts payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. NOTE 18. SEGMENT INFORMATION The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, in 1998 which changes the way the Company reports information about its operating segments. The Company has two reportable segments, zone cabling products and formed metal products. As discussed in Note 1, American Access, the parent company, markets zone cabling products which are manufactured by Omega. Omega manufactures formed metal products of varying designs for customers, including American Access. F-21 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 18. SEGMENT INFORMATION (Continued)
1999 1998 ---------------------------------------- ------------------------------------ Zone Formed Zone Formed Cabling Metal Cabling Metal Products Products Total Products Products Total -------- -------- ----- -------- -------- ----- Revenue from external customers $1,364,842 $3,882,841 $5,247,683 $592,086 $4,344,118 $4,936,204 Intersegment revenue - 580,787 580,787 - 234,496 234,496 Investment revenue 250,822 - 250,822 89,731 - 89,731 Interest expense 18,595 - 18,595 2,110 376,864 378,974 Depreciation and amortization 95,324 203,840 299,164 14,701 241,458 256,159 Income tax expense (credit) - (36,000) (36,000) Segment profit (loss) (2,305,304) 558,271 (1,746,583) (350,533) (142,281) (492,814) Segment assets $4,148,925 $2,649,687 $6,798,612 $3,858,092 $2,618,319 $6,476,411
NOTE 19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1999 1998 ---- ---- Cash paid during the year for: Interest $ 19,260 $ 139,257 ========== =========== Income taxes $ $ 25,500 ========== =========== Non-Cash Investing and Financing Activities: Purchase of Genco assets (see Note 4) $ 443,256 $ - ========== =========== Conversion of 39,400 shares of preferred stock to common (see Note 12) $3,940,000 $ - ========== =========== Exercise of 270,000 warrants in exchange for notes receivable (see Note 2) $2,160,000 $ - ========== ===========
NOTE 20. SUBSEQUENT EVENTS Joint Venture Agreement On January 26, 2000, the Company entered into a Joint Venture Agreement with Vulcan Microsystems and Grovegate Capital Partners, LLC. The Joint Venture was organized for the purpose of entering into the business of developing and marketing an e-based value added distributor of communications equipment. Pursuant to the Joint Venture agreement, the Company is obligated to provide the following in exchange for a 76% ownership interest in the Joint Venture. o Provide $395,000 of cash to fund operating costs within the first sixty days. o Issue 135,000 shares of Company common stock to Vulcan upon successful alpha testing. F-22 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 20. SUBSEQUENT EVENTS (Continued) Joint Venture Agreement (Continued) o Guarantee any contracts or obligations for ongoing commitments in connection with technology or management, not to exceed $25,000 per month. o Issue to Vulcan 1,000,000 three-year warrants to purchase Company common stock at $25 per share upon acceptance of the alpha site. Vulcan has the right to convert its 19% interest in the Joint Venture into Company common stock at any time through January 2005. Immediately following the Joint Venture agreement, the Company entered into a twelve-month technology consulting agreement with two principals of Vulcan, whereby they receive warrants to purchase 200,000 shares of Company common stock. These warrants are exercisable for cash only, at an exercise price of $10 per share for the first 180 days and an exercise price of $15 for the remainder of the one-year life, up to January 26, 2001. Proposed Equity Financing In 2000, the Company entered into a letter of understanding, whereby it has agreed to sell up to $15,000,000 of Company common stock in exchange for cash payments in monthly allotments of up to $1,150,000 with an initial allotment of $2,250,000. The sales price will be the lowest three day average bid price during the twenty-two days preceding the sales, less a discount of 8%. The Company will pay a 1% fee on the total at the initial purchase. In addition, there will be a 1% fee on each sale. The Company will pay all legal fees in excess of $10,000 and due diligence fees not to exceed $15,000. Stock Option Plan In February 2000, the Board of Directors of the Company (the "Board") authorized the 2000 Employee Stock Option Plan (the "Stock Option Plan") for those employees, consultants, and advisors (the "Participants") of the Company who, in the judgment of the Company are or will become responsible for the direction and financial success of the Company. The adoption of the Stock Option Plan has not yet been ratified by the stockholders. The purpose of the Stock Option Plan is to provide the Participants with an increased incentive to make significant contributions to the long-term performance and growth of the Company. F-23 AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 21. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
Unadjusted net loss $ 281,000 ---------- Record stock-based compensation 616,000 Expense abandoned project development costs 352,000 Reclassify interest on stock subscription receivable to equity 120,000 Deferred tax benefit (69,000) Reverse demo units/samples included in sales 52,000 Record allowance for bad debts 61,000 Record amortization of goodwill 51,000 Correct cost of sales 73,000 Other adjustments 141,000 ---------- Total 4th quarter adjustments 1,397,000 ---------- Adjusted net loss $1,678,000 ==========
F-24 EX-8.16 2 2000 EMPLOYEE STOCK OPTION PLAN AMERICAN ACCESS TECHNOLOGIES, INC. 2000 EMPLOYEE STOCK OPTION PLAN 1. Purposes. 2. 3. The American Access Technologies, Inc. 2000 EMPLOYEE STOCK OPTION PLAN (the "Plan") is intended to provide the employees (including employees who are also directors), independent contractors and consultants of American Access Technologies, Inc. (the "Company") with an added incentive to provide their services to the Company and to induce them to exert their maximum efforts toward the Company's success. By thus encouraging employees, directors, independent contractors and consultants and promoting their continued association with the Company, the Plan may be expected to benefit the Company and its stockholders. The Plan allows the Company to grant Incentive Stock Options ("ISOs") (as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended [the "Code"]), and Non-Qualified Stock Options ("NQSOs"), not intended to qualify under Section 422(b) of the Code (ISOs and NQSOs hereinafter collectively the "Options"), to employees, directors, independent contractors and consultants of the Company. 4. 5. Shares Subject to the Plan. 6. 7. The total number of shares of Common Stock of the Company, $.001 par value per share, that may be subject to Options granted under the Plan shall be the greater of 500,000 shares or 8% of the number of shares of the Company's Common Stock which are from time to time outstanding, in the aggregate, subject to adjustment as provided in Paragraph 8 hereunder. The Company shall at all times while the Plan is in force reserve such number of shares of Common Stock as will be sufficient to satisfy the requirement of outstanding Options granted under the Plan, except as otherwise provided below. In the event any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject thereto shall again be available for the granting of Options under the Plan. 8. In a given fiscal year, the maximum number of Options that can be granted hereunder to a single person shall be limited to 25,000 Options, as adjusted for future stock dividends and/or stock splits. Further, such limitation shall not be deemed exceeded in the event subsequent to the date of grant of Options under the Plan, the Company effectuates a stock split and/or stock dividend which results in an adjustment to the number of Options previously granted. The aforesaid limitation is intended to comply with Section 162(m) of the Code. To the extent any provision of the Plan or action by the Board of Directors or Committee, as hereinafter defined, fails to comply with Section 162(m), it shall be deemed null and void to the extent required by statute and to the extent deemed advisable by the Board of Directors and/or such Committee. 1. Eligibility. 2. ISOs may be granted from time to time under the Plan to one or more employees of the Company or of a "subsidiary" or "parent" of the Company, as the quoted terms are defined within Section 424 of the Code. An Officer is an employee for the above purposes. NQSOs may be granted from time to time under the Plan to one or more employees of the Company, Officers, members of the Board of Directors, independent contractors, consultants and other individuals who are not employees of, but are involved in the continuing development and success of the Company and/or of a subsidiary of the Company. 1. Administration of the Plan. 2. 3. (a) The Plan shall be administered by a Compensation Committee of the Board of Directors of the Company (the "Committee") comprised of at least two outside directors (as described under Rule 16b-3, promulgated under the Securities Exchange Act of 1934 [the "1934 Act"]), and in accordance with the requirement of Section 162(m) of the Code, appointed by the Board of Directors of the Company. In the event such Committee is not comprised of said outside directors, any Option granted hereunder shall not be deemed automatically null and void, except as otherwise provided below. Within the limits of the express provisions of the Plan, the Committee shall have the authority, in its discretion, to determine the individuals to whom, and the time or times at which, Options shall be granted, the character of such Options (whether ISOs or NQSOs), and the number of shares of Common Stock to be subject to each Option, and to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of option agreements that may be entered into in connection with Options (which need not be identical), subject to the limitation that option agreements granting ISOs must be consistent with the requirements for the ISOs being qualified as "incentive stock options" as provided in Section 422 of the Code, and to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of the services rendered by such individuals, their present and potential contributions to the Company's success, and such other factors as the Committee, in its discretion, shall deem relevant. The Committee's determinations on the matters referred to in this Paragraph shall be conclusive. 4. 5. (b) Notwithstanding anything contained herein to the contrary, the Committee shall have the exclusive right to grant Options to persons subject to Section 16 of the 1934 Act and set forth the terms and conditions thereof. With respect to persons subject to Section 16 of the 1934 Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3, as amended from time to time (and its successor provisions, if any), under the 1934 Act. To the extent any provision of the Plan or action by the Board of Directors or Committee fails to so comply, it shall be deemed null and void to the extent required by law and to the extent deemed advisable by the Board of Directors and/or such Committee. 6. 7. Terms of Options. 8. 9. Within the limits of the express provisions of the Plan, the Committee may grant either ISOs or NQSOs. An ISO or an NQSO enables the optionee to purchase from the Company, at any time during a specified exercise period, a specified number of shares of Common Stock at a specified price (the "Option Price"). The character and terms of each Option granted under the Plan shall be determined by the Committee consistent with the provisions of the Plan, including the following: 10. 11. (a) An Option granted under the Plan must be granted within 10 years from the date the Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. 12. 13. (b) The Option Price of the shares of Common Stock subject to each ISO shall not be less than the fair market value of such shares of Common Stock as of the time such ISO is granted. Such fair market value shall be determined by the Committee, and if the shares of Common Stock are then listed on any national securities exchange or traded on the over-the-counter market, the fair market value shall be the closing price on such exchange, or the mean of the closing bid and asked prices of the shares of Common Stock on the over-the-counter market, as reported by Nasdaq, the National Association of Securities Dealers OTC Bulletin Board or the National Quotation Bureau, Inc., as the case may be, on the day on which the Option is granted or, if there is no closing price or bid or asked price on that day, the closing price or mean of the closing bid and asked prices on the most recent day preceding the day on which the Option is granted for which such prices are available. If an ISO is granted to an individual who, immediately before the ISO is to be granted, owns directly or through attribution) more than 10% of the total combined voting power of all classes of capital stock of the Company or a subsidiary or parent of the Company, the Option Price of the shares of Common Stock subject to such ISO shall not be less than 110% of the fair market value per share of the shares of Common Stock at the time such ISO is granted. 14. 15. (c) The Option Price of the shares of Common Stock subject to an NQSO granted pursuant to the Plan shall be determined by the Committee, in its sole discretion. 16. 17. (d) In no event shall any Option granted under the Plan have an expiration date later than ten (10) years from the date of its grant, and all Options granted under the Plan shall be subject to earlier termination as expressly provided in Paragraph 6 hereof. If an ISO is granted to any individual who, immediately before the ISO is granted, owns (directly or through attribution) more than 10% of the total combined voting power of all classes of capital stock of the Company or of a subsidiary or parent of the Company, such ISO shall by its terms expire and shall not be exercisable after the expiration of five (5) years from the date of its grant. 18. 19. (e) Unless otherwise provided in any option agreement under the Plan, and except as otherwise provided below, an Option granted under the Plan shall become exercisable, in whole at any time or in part from time to time, but in no case may an Option (i) be exercised as to less than one hundred (100) shares of Common Stock at any one time, or the remaining shares of Common Stock covered by the Option if less than one hundred (100), and (ii) become fully exercisable more than ten years from the date of its grant. 20. 21. (f) An Option granted under the Plan shall be exercised by the delivery by the holder thereof to the Company at its principal office (to the attention of the Secretary) of written notice of the number of full shares of Common Stock with respect to which the Option is being exercised, accompanied by payment in full, in cash or by certified or bank check payable to the order of the Company, of the Option Price for such shares of Common Stock, or, by the delivery of unexercised Options and/or shares of Common Stock having a fair market value equal to the Option Price, or by a combination of cash and such unexercised Options and/or shares held by an optionee that have a fair market value equal to the Option Price, and, in the case of a NQSO, by having the Company withhold from the shares of Common Stock to be issued upon exercise of the Option that number of shares having a fair market value equal to the tax withholding amount due, or otherwise provide for withholding as set forth in Paragraph 9(c) hereof. The Option Price may also be paid in full by a broker-dealer to whom the optionee has submitted an exercise notice consisting of a fully endorsed Option, or through any other medium of payment as the Committee, in its discretion, shall authorize. 22. 23. (g) The holder of an Option shall have none of the rights of a stockholder with respect to the shares of Common Stock covered by such holder's Option until such shares of Common Stock shall be issued to such holder upon the exercise of the Option. 24. 25. (h) All Options granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution, and any Option granted under the Plan may be exercised during the lifetime of the holder thereof only by the holder. No Option granted under the Plan shall be subject to execution, attachment or other process. 26. 27. (i) Subject to the provisions of Section 6 hereof, each Option shall become exercisable with respect to one third of the total number of shares of Common Stock subject to the Option on the date of its grant and with respect to each additional one-third at the end of each one-year period thereafter during the succeeding two years. Notwithstanding the foregoing, the Committee may in its discretion (i) specifically provide for another time or times of exercise at the time the Option is granted; (ii) accelerate the exercisability of any Option subject to such terms and conditions as the Committee deems necessary and appropriate; or (iii) at any time prior to the expiration or termination of any Option previously granted, extend the term of any Option for such additional period as the Committee in its discretion shall determine. In no event, however, shall the aggregate term of any Option, including the original term of the Option and any extensions thereof, exceed ten years. Subject to the foregoing, and except as otherwise provided herein, all or any part of the shares underlying the Option with respect to which the Option is exercisable may be purchased commencing at the time and to the extent such Option became exercisable or at any time or times thereafter during the term of the Option. 28. 29. (j) The aggregate fair market value, determined as of the time any ISO is granted and in the manner provided for by Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect to which ISOs granted under the Plan are exercisable for the first time during any calendar year and under incentive stock options qualifying as such in accordance with Section 422 of the Code granted under any other incentive stock option plan maintained by the Company or its parent or subsidiary corporations, shall not exceed $100,000. Any grant of Options in excess of such amount shall be deemed a grant of a NQSO. In addition, and notwithstanding anything contained herein to the contrary, in the event an ISO granted hereunder does not, for any reason, at the time of grant or during the term of the ISO satisfy all of the conditions under the Code with respect to being deemed an ISO, then said ISO shall be deemed a NQSO, but only to the extent, if applicable, said ISO exceeds any such conditions, and any said determination that said ISO is deemed an NQSO shall not be deemed the grant of a new Option hereunder. 30. 31. (k) Whenever an optionee holding any Option outstanding under this Plan (including Reload Options, as hereinafter defined, previously granted under this Paragraph 5(k)), exercises the Option and makes payment of the Option Price pursuant to Paragraph 5(b) hereof, in whole or in part, by tendering shares of Common Stock previously held by the optionee, then the Company shall grant to the optionee a Reload Option ("Reload Option"), for the number of shares of Common Stock that is equal to the number of shares of Common Stock tendered by the optionee in payment of the Option Price of the Option being exercised. The Reload Option Price per share shall be an amount equal to the fair market value per share of the Company's Common Stock, as determined as of the date of receipt by the Company of the notice by the optionee to exercise the option, and as determined in accordance with Paragraph 5(b) above. Subject to Paragraph 6 hereof, the term of the Reload Option shall expire and the Reload Option shall no longer be exercisable, on the later to occur of (i) the expiration date of the originally exercised Option or (ii) ten years from the date of grant of the Reload Option. Any Reload Option granted under this Paragraph 5(b) shall vest immediately upon grant. All other terms of the Reload Options granted hereunder shall be identical to the terms and conditions of the original Option, the exercise of which gives rise to the grant of the Reload Option. Notwithstanding anything contained herein to the contrary, no Reload Options should be granted hereunder if an optionee is no longer employed and/or retained by the Company as of the date of the exercise of the Options giving rise to the grant of Reload Options hereunder. In addition, and notwithstanding anything contained herein to the contrary, in the event there is not a sufficient number of shares of Common Stock authorized for issuance upon exercise of Reload Options under the Plan, the Company shall use its best efforts to cause such number of authorized shares of Common Stock underlying the Plan to be increased, provided, however, that if the Company is unable to so cause such increase in the authorized number of shares of Common Stock underlying the Plan to be effectuated, the ability of the optionee to exercise such Reload Options may be delayed indefinitely until such time as the requisite number of shares of Common Stock is so authorized. 32. 33. Death, Termination of Employment, or Disability. 34. 35. (a) Except as otherwise provided herein, upon termination of employment or retention with the Company, a holder of an Option under the Plan may exercise such Options to the extent such Options were exercisable as of the date of termination at any time within three (3) months after the date of such termination, subject to the provisions of Subparagraph (c) of this Paragraph 6. For purposes hereof, termination of employment or retention shall include, but shall not be limited to, termination due to retirement, layoffs, or the permanent disability of the optionee. Notwithstanding anything contained herein to the contrary, any Options granted hereunder to an optionee and then outstanding shall immediately terminate in the event the optionee is convicted of a felony committed against the Company, and the provisions of this Subparagraph (a) shall not be applicable thereto. In addition, and anything contained herein to the contrary notwithstanding, the term during which an optionee may exercise Options subsequent to the date of termination may, in the Committee's discretion, be modified, subject to applicable law and regulation, from the term specified above, as of the date of grant and as specified in an option agreement evidencing the grant of Options under the Plan. 36. 37. (b) If the holder of an Option granted under the Plan dies (i) while employed by the Company or a subsidiary or parent corporation or (ii) within three (3) months after the termination of such holder's employment or retention, such Options may, subject to the provisions of Subparagraph (c) of this Paragraph 6, be exercised by a legatee or legatees of such Option under such individual's last will or by such individual's personal representatives or distributees at any time within six (6) months after the individual's death, to the extent, except as otherwise provided herein, such Options were exercisable as of the date of death or date of termination of employment, whichever date is earlier. 38. 39. (c) An Option may not be exercised pursuant to this Paragraph 6 except to the extent that the holder was entitled to exercise the Option at the time of termination of employment or retention or death, and in any event may not be exercised after the original expiration date of the Option. 40. 41. (d) Notwithstanding anything in this Plan to the contrary, any Options granted hereunder and then outstanding shall become immediately exercisable in full in the event the optionee's employment with the Company is terminated by the Company subsequent to the consummation of a tender offer or exchange offer made by any "person" within the meaning of Section 14(d) of the 1934 Act or subsequent to a Change in Control, as defined below. For purposes of this Subparagraph, a "Change in Control" shall have occurred if: 42. (1) any "person" within the meaning of Section 14(d) of the 1934 Act becomes the "beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly, of more than 20% of the Company's Common Stock (or, with respect to the holders of the Company's Common Stock on the effective date of the Company's registration statement with respect to its initial public offering, if any such "person" acquires more than 35% of the Common Stock). (2) any "person" acquires by proxy or otherwise the right to vote more than 20% of the Company's Common Stock for the election of Directors (or, with respect to the holders of the Company's Common Stock on the effective date of the Company's registration statement with respect to its initial public offering, if any such "person" acquires the right to vote more than 35% of the Common Stock for the election of Directors), other than solicitation of proxies by the Incumbent Board (as hereinafter defined), for any merger or consolidation of the Company or for any other matter or question. (3) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director during such period whose election or nomination for election by the Company's stockholders was approved by a vote of at least three quarters of the Incumbent Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be, for purposes of this clause (3), considered as though such person were a member of the Incumbent Board. (4) the Company's stockholders have approved the sale of all or substantially all of the assets of the Company. (5) Notwithstanding the foregoing, a Change of Control shall not occur if the event causing the Change of Control is a repurchase by the Company of its own shares (although subsequent acquisitions of shares of Common Stock by any "person" owning more than the percentage interest set forth above shall constitute a Change of Control). (e) In addition, and notwithstanding anything contained herein to the contrary, in the event an optionee dies during such time as the optionee is employed or retained by the Company, then fifty percent (50%) of any outstanding Options which have not vested and are not exercisable by the optionee as of the date of death shall be automatically deemed vested and exercisable by the optionee's estate and/or his legatees in accordance with Subparagraph 6(b) hereof. 1. Leave of Absence. 2. 3. For the purposes of the Plan, an individual who is on military or sick leave or other bona fide leave of absence (such as temporary employment by the Government) shall be considered as remaining in the employ of the Company or of a subsidiary or parent corporation for ninety (90) days or such longer period as such individual's right to re-employment is guaranteed either by statute or by contract. 4. 5. Adjustment Upon Changes in Capitalization. 6. 7. (a) In the event that the outstanding shares of Common Stock are hereafter changed by reason of recapitalization, reclassification, stock split, combination or exchange of shares of Common Stock or the like, or by the issuance of dividends payable in shares of Common Stock, an appropriate adjustment shall be made by the Committee, in the aggregate number of shares of Common Stock available under the Plan, in the number of shares of Common Stock issuable upon exercise of outstanding Options, and the Option Price per share. In the event of any consolidation or merger of the Company with or into another company, or the conveyance of all or substantially all of the assets of the Company to another company, each then outstanding Option shall upon exercise thereafter entitle the holder thereof to such number of shares of Common Stock or other securities or property to which a holder of shares of Common Stock of the Company would have been entitled to upon such consolidation, merger or conveyance; and in any such case appropriate adjustment, as determined by the Committee shall be made as set forth above with respect to any future changes in the capitalization of the Company or its successor entity. In the event of the proposed dissolution or liquidation of the Company, all outstanding Options under the Plan will automatically terminate, unless otherwise provided by the Board of Directors of the Company or any authorized committee thereof. 8. 9. (b) Any adjustment in the number of shares of Common Stock shall apply proportionately to only the unexercised portion of the Options granted hereunder. If fractions of shares of Common Stock would result from any such adjustment, the adjustment shall be revised to the next higher whole number of shares of Common Stock. 10. 11. Further Conditions of Exercise. 12. 13. (a) Unless the shares of Common Stock issuable upon the exercise of an Option under the Plan have been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, prior to the exercise of the Option, an optionee must represent in writing to the Company that such shares of Common Stock are being acquired for investment purposes only and not with a view towards the further resale or distribution thereof, and must supply to the Company such other documentation as may be required by the Company, unless in the opinion of counsel to the Company such representation, agreement or documentation is not necessary to comply with said Act. 14. 15. (b) The Company shall not be obligated to deliver any shares of Common Stock until they have been listed on each securities exchange on which the shares of Common Stock may then be listed or until there has been qualification under or compliance with such state or federal laws, rules or regulations as the Company may deem applicable. The Company shall use reasonable efforts to obtain such listing, qualification and compliance. 16. 17. (c) The Committee may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes that the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with the exercise of any Option, including, but not limited to, (i) the withholding of delivery of shares of Common Stock upon exercise of Options until the holder reimburses the Company for the amount the Company is required to withhold with respect to such taxes, (ii) the cancelling of any number of shares of Common Stock issuable upon exercise of such Options in an amount sufficient to reimburse the Company for the amount it is required to so withhold, or (iii) withholding the amount due from any such person's wages or compensation due such person. 18. Termination, Modification and Amendment. 19. 20. (a) The Plan (but not Options previously granted under the Plan) shall terminate ten (10) years from the earliest of the date of its adoption by the Board of Directors, or the date the Plan is approved by the stockholders of the Company, or such date of termination, as hereinafter provided, and no Option shall be granted after termination of the Plan. 21. 22. (b) The Plan may from time to time be terminated, modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company voting as a single class, and entitled to vote thereon. 23. 24. (c) The Board of Directors of the Company may at any time, prior to ten (10) years from the earlier of the date of the adoption of the Plan by such Board of Directors or the date the Plan is approved by the stockholders, terminate the Plan or from time to time make such modifications or amendments of the Plan as it may deem advisable; provided, however, that the Board of Directors shall not, without approval by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company, voting as a single class, and entitled to vote thereon, increase (except as provided by Paragraph 8) the maximum number of shares of Common Stock as to which Options may be granted under the Plan, materially change the standards of eligibility under the Plan or materially increase the benefits which may accrue to participants under the Plan. Any amendment to the Plan which, in the opinion of counsel to the Company, will be deemed to result in the adoption of a new Plan, will not be effective until approved by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company, voting as a single class, and entitled to vote thereon. 25. (d) No termination, modification or amendment of the Plan may adversely affect the rights under any outstanding Option without the consent of the individual to whom such Option shall have been previously granted and/or awarded. 1. Effective Date of the Plan. 2. The Plan shall become effective upon adoption by the Board of Directors of the Company. The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company entitled to vote thereon within one year before or after adoption of the Plan by the Board of Directors. 1. Not a Contract of Employment. 2. 3. Nothing contained in the Plan or in any option agreement executed pursuant hereto shall be deemed to confer upon any individual to whom an Option is or may be granted hereunder any right to remain in the employ of the Company or of a subsidiary or parent of the Company or in any way limit the right of the Company, or of any parent or subsidiary thereof, to terminate the employment of any employee, or to terminate any other relationship with an Optionee, including that of independent contractor or consultant. Notwithstanding anything contained herein to the contrary, and except as otherwise provided at the time of grant, all references hereunder to termination of employment shall with respect to consultants and independent contractors mean the termination of retention of their services with or for the Company. 4. 5. Other Compensation Plans. 6. 7. The adoption of the Plan shall not affect any other stock option plan, incentive plan or any other compensation plan in effect for the Company, nor shall the Plan preclude the Company from establishing any other form of stock option plan, incentive plan or any other compensation plan. 8. 9. 10. This 2000 Employee Stock Option Plan was adopted 11. by the Company's Board of Directors on ____________, 2000. 12. 13. _____________________________________ 14. Secretary 15. This 2000 Employee Stock Option Plan was approved by the Company's stockholders on ____________, 2000. ------------------------------------- Secretary EX-8.17 3 2000 DIRECTOR STOCK OPTION PLAN AMERICAN ACCESS TECHNOLOGIES, INC. 2000 DIRECTOR STOCK OPTION PLAN 1. Purposes. 2. The AMERICAN ACCESS TECHNOLOGIES, INC. 2000 DIRECTOR STOCK OPTION PLAN (the "Plan") is intended to provide the directors of AMERICAN ACCESS TECHNOLOGIES, INC. (the "Company") with an added incentive to provide their services to the Company and to induce them to exert their maximum efforts toward the Company's success. By thus encouraging directors and promoting their continued association with the Company, the Plan may be expected to benefit the Company and its stockholders. The Plan allows the Company to grant Incentive Stock Options ("ISOs") (as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended [the "Code"]), and Non-Qualified Stock Options ("NQSOs"), not intended to qualify under Section 422(b) of the Code (ISOs and NQSOs hereinafter collectively the "Options"), to directors of the Company, irrespective of whether they are employees of the Company. 1. Shares Subject to the Plan. 2. The total number of shares of Common Stock of the Company, $.001 par value per share, that may be subject to Options granted under the Plan shall be the greater of 300,000 shares or 5% of the number of shares of the Company's Common Stock which are from time to time outstanding, in the aggregate, subject to adjustment as provided in Paragraph 8 hereunder. The Company shall at all times while the Plan is in force reserve such number of shares of Common Stock as will be sufficient to satisfy the requirement of outstanding Options granted under the Plan, except as otherwise provided below. In the event any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject thereto shall again be available for the granting of Options under the Plan. In a given fiscal year, the maximum number of Options that can be granted hereunder to a single person shall be limited to 100,000 Options, as adjusted for future stock dividends and/or stock splits. Further, such limitation shall not be deemed exceeded in the event subsequent to the date of grant of Options under the Plan, the Company effectuates a stock split and/or stock dividend which results in an adjustment to the number of Options previously granted. The aforesaid limitation is intended to comply with Section 162(m) of the Code. To the extent any provision of the Plan or action by the Board of Directors or Committee, as hereinafter defined, fails to comply with Section 162(m), it shall be deemed null and void to the extent required by statute and to the extent deemed advisable by the Board of Directors and/or such Committee. 1. Eligibility. 2. ISOs may be granted under the Plan to one or more directors who are employees of the Company or of a "subsidiary" or "parent" of the Company, as the quoted terms are defined within Section 424 of the Code. An Officer is an employee for the above purposes. NQSOs may be granted from time to time under the Plan to one or more directors of the Company, irrespective of whether they are employees of the Company. 1. Administration of the Plan. 2. (a) The Plan shall be administered by a Compensation Committee of the Board of Directors of the Company (the "Committee") comprised of at least two outside directors (as described under Rule 16b-3, promulgated under the Securities Exchange Act of 1934 [the "1934 Act"]), and in accordance with the requirement of Section 162(m) of the Code, appointed by the Board of Directors of the Company. In the event such Committee is not comprised of said outside directors, any Option granted hereunder shall not be deemed automatically null and void, except as otherwise provided below. Within the limits of the express provisions of the Plan, the Committee shall have the authority, in its discretion, to determine the character of such Options (whether ISOs or NQSOs), and to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of option agreements that may be entered into in connection with Options (which need not be identical), subject to the limitation that option agreements granting ISOs must be consistent with the requirements for the ISOs being qualified as "incentive stock options" as provided in Section 422 of the Code, and to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of the services rendered by such individuals, their present and potential contributions to the Company's success, and such other factors as the Committee, in its discretion, shall deem relevant. The Committee's determinations on the matters referred to in this Paragraph shall be conclusive. (b) Notwithstanding anything contained herein to the contrary, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3, as amended from time to time (and its successor provisions, if any), under the 1934 Act. To the extent any provision of the Plan or action by the Board of Directors or Committee fails to so comply, it shall be deemed null and void to the extent required by law and to the extent deemed advisable by the Board of Directors and/or such Committee. 1. Terms of Options. 2. Within the limits of the express provisions of the Plan, each Director of the Company shall be awarded 50,000 five-year options as of January 1, 2000 and 50,000 of Options on each anniversary date thereof, provided as of such anniversary date such optionee is still a Director of the Company and the availability of shares subject to the Plan. Each Director who is the Chairman of one or more standing committees of the Board of Directors as of each such grant date shall be awarded an additional 10,000 five-year options for each committee for which he serves as Chairman as of such date, and each Director who is a member of one or more standing committees (other than the Chairman of such committee(s)) shall be awarded an additional 5,000 five-year options for each committee of which he is a member as of such date. Additionally, each Director of the Company who is a director on the date this Plan is adopted by the Board of Directors shall be awarded 10,000 five-year options on that date at an exercise price equal to the fair market value (as defined in subparagraph (b) below) of the Common Stock as of such date, and each Director who is appointed to the Board of Directors of the Company subsequent to the date this Plan is adopted by the Board of Director shall receive a grant of 10,000 five-year options as of the date on which such person is appointed to the Board of Directors, at an option exercise price equal to the fair market value of the Common Stock as of the date such person is appointed to the Board of Directors. Directors who are employees of the Company shall be awarded ISOs and Directors who are not employed by the Company shall be awarded NQSOs. An ISO or an NQSO enables the optionee to purchase from the Company, at any time during a specified exercise period, a specified number of shares of Common Stock at a specified price (the "Option Price"). The character and terms of each Option granted under the Plan shall be subject to the following: (a) An Option granted under the Plan must be granted within 10 years from the date the Plan is adopted, or the date the Plan is approved by the stockholders of the Company, whichever is earlier. (b) The Option Price of the shares of Common Stock subject to each ISO shall be the fair market value of such shares of Common Stock as of the time such ISO is granted. Such fair market value shall be determined by the Committee, and if the shares of Common Stock are then listed on any national securities exchange or traded on the over-the-counter market, the fair market value shall be the closing price on such exchange, or the mean of the closing bid and asked prices of the shares of Common Stock on the over-the-counter market, as reported by Nasdaq, the National Association of Securities Dealers OTC Bulletin Board or the National Quotation Bureau, Inc., as the case may be, on the day on which the Option is granted or, if there is no closing price or bid or asked price on that day, the closing price or mean of the closing bid and asked prices on the most recent day preceding the day on which the Option is granted for which such prices are available. If an ISO is granted to an individual who, immediately before the ISO is to be granted, owns directly or through attribution) more than 10% of the total combined voting power of all classes of capital stock of the Company or a subsidiary or parent of the Company, the Option Price of the shares of Common Stock subject to such ISO shall be equal to 110% of the fair market value per share of the shares of Common Stock at the time such ISO is granted. (c) The Option Price of the shares of Common Stock subject to an NQSO granted pursuant to the Plan shall be the fair market value of the shares of Common Stock, as determined above. (d) In no event shall any Option granted under the Plan have an expiration date later than ten (10) years from the date of its grant, and all Options granted under the Plan shall be subject to earlier termination as expressly provided in Paragraph 6 hereof. If an ISO is granted to any individual who, immediately before the ISO is granted, owns (directly or through attribution) more than 10% of the total combined voting power of all classes of capital stock of the Company or of a subsidiary or parent of the Company, such ISO shall by its terms expire and shall not be exercisable after the expiration of five (5) years from the date of its grant. (e) Unless otherwise provided in any option agreement under the Plan, and except as otherwise provided below, an Option granted under the Plan shall become exercisable, in whole at any time or in part from time to time, but in no case may an Option (i) be exercised as to less than one hundred (100) shares of Common Stock at any one time, or the remaining shares of Common Stock covered by the Option if less than one hundred (100), and (ii) become fully exercisable more than ten years from the date of its grant. (f) An Option granted under the Plan shall be exercised by the delivery by the holder thereof to the Company at its principal office (to the attention of the Secretary) of written notice of the number of full shares of Common Stock with respect to which the Option is being exercised, accompanied by payment in full, in cash or by certified or bank check payable to the order of the Company, of the Option Price for such shares of Common Stock, or, by the delivery of unexercised Options and/or shares of Common Stock having a fair market value equal to the Option Price, or by a combination of cash and such unexercised Options and/or shares held by an optionee that have a fair market value equal to the Option Price, and, in the case of a NQSO, by having the Company withhold from the shares of Common Stock to be issued upon exercise of the Option that number of shares having a fair market value equal to the tax withholding amount due, or otherwise provide for withholding as set forth in Paragraph 9(c) hereof. The Option Price may also be paid in full by a broker-dealer to whom the optionee has submitted an exercise notice consisting of a fully endorsed Option, or through any other medium of payment as the Committee, in its discretion, shall authorize. (g) The holder of an Option shall have none of the rights of a stockholder with respect to the shares of Common Stock covered by such holder's Option until such shares of Common Stock shall be issued to such holder upon the exercise of the Option. (h) All Options granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution, and any Option granted under the Plan may be exercised during the lifetime of the holder thereof only by the holder. No Option granted under the Plan shall be subject to execution, attachment or other process. (i) Subject to the provisions of Section 6 hereof and except as set forth below, each Option shall become exercisable with respect to one third of the total number of shares of Common Stock subject to the Option on the date of its grant and with respect to each additional one-third at the end of each one-year period thereafter during the succeeding two years. Except as otherwise provided herein, all or any part of the shares underlying the Option with respect to which the Option is exercisable may be purchased commencing at the time and to the extent such Option became exercisable or at any time or times thereafter during the term of the Option. Mandatory grants of options to directors pursuant to Section 5 shall vest immediately upon their grant. (j) The aggregate fair market value, determined as of the time any ISO is granted and in the manner provided for by Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect to which ISOs granted under the Plan are exercisable for the first time during any calendar year and under incentive stock options qualifying as such in accordance with Section 422 of the Code granted under any other incentive stock option plan maintained by the Company or its parent or subsidiary corporations, shall not exceed $100,000. Any grant of Options in excess of such amount shall be deemed a grant of a NQSO. In addition, and notwithstanding anything contained herein to the contrary, in the event an ISO granted hereunder does not, for any reason, at the time of grant or during the term of the ISO satisfy all of the conditions under the Code with respect to being deemed an ISO, then said ISO shall be deemed a NQSO, but only to the extent, if applicable, said ISO exceeds any such conditions, and any said determination that said ISO is deemed an NQSO shall not be deemed the grant of a new Option hereunder. (k) Whenever an optionee holding any Option outstanding under this Plan (including Reload Options, as hereinafter defined, previously granted under this Paragraph 5(k)), exercises the Option and makes payment of the Option Price pursuant to Paragraph 5(b) hereof, in whole or in part, by tendering shares of Common Stock previously held by the optionee, then the Company shall grant to the optionee a Reload Option ("Reload Option"), for the number of shares of Common Stock that is equal to the number of shares of Common Stock tendered by the optionee in payment of the Option Price of the Option being exercised. The Reload Option Price per share shall be an amount equal to the fair market value per share of the Company's Common Stock, as determined as of the date of receipt by the Company of the notice by the optionee to exercise the option, and as determined in accordance with Paragraph 5(b) above. Subject to the terms of the Plan and applicable law and regulation, the term of the Reload Option shall expire and the Reload Option shall no longer be exercisable, on the later to occur of (i) the expiration date of the originally exercised Option or (ii) ten years from the date of grant of the Reload Option. Any Reload Option granted under this Paragraph 5(b) shall vest immediately upon grant. All other terms of the Reload Options granted hereunder shall be identical to the terms and conditions of the original Option, the exercise of which gives rise to the grant of the Reload Option. Notwithstanding anything contained herein to the contrary, no Reload Options should be granted hereunder if an optionee is no longer a director of the Company as of the date of the exercise of the Options giving rise to the grant of Reload Options hereunder. In addition, and notwithstanding anything contained herein to the contrary, in the event there is not a sufficient number of shares of Common Stock authorized for issuance upon exercise of Reload Options under the Plan, the Company shall use its best efforts to cause such number of authorized shares of Common Stock underlying the Plan to be increased, provided, however, that if the Company is unable to so cause such increase in the authorized number of shares of Common Stock underlying the Plan to be effectuated, the ability of the optionee to exercise such Reload Options may be delayed indefinitely, until such time as the requisite number of shares of Common Stock is so authorized. 1. Death, Termination of Membership on the Board of Directors, or Disability. 2. (a) Except as otherwise provided herein, upon termination of membership on the Company's Board of Directors, a holder of an Option under the Plan may exercise such Options to the extent such Options were exercisable as of the date of termination at any time within three (3) months after the date of such termination, subject to the provisions of Subparagraph (c) of this Paragraph 6. Notwithstanding anything contained herein to the contrary, any Options granted hereunder to an optionee and then outstanding shall immediately terminate in the event the optionee is convicted of a felony committed against the Company, and the provisions of this Subparagraph (a) shall not be applicable thereto. In addition, and anything contained herein to the contrary notwithstanding, the term during which an optionee may exercise Options subsequent to the date of termination may, in the Committee's discretion, be modified, subject to applicable law and regulation, from the term specified above, as of the date of grant and as specified in an option agreement evidencing the grant of Options under the Plan. (b) If the holder of an Option granted under the Plan dies (i) while serving as a member of the Company's Board of Directors or (ii) within three (3) months after the termination of such holder's membership on the Company's Board of Directors, such Options may, subject to the provisions of Subparagraph (c) of this Paragraph 6, be exercised by a legatee or legatees of such Option under such individual's last will or by such individual's personal representatives or distributees at any time within six (6) months after the individual's death, to the extent, except as otherwise provided herein, such Options were exercisable as of the date of death or date of termination of membership on the Board of Directors, whichever date is earlier. (c) An Option may not be exercised pursuant to this Paragraph 6 except to the extent that the holder was entitled to exercise the Option at the time of termination of membership on the Company's Board of Directors, and in any event may not be exercised after the original expiration date of the Option. (d) Notwithstanding anything in this Plan to the contrary, any Options granted hereunder and then outstanding shall become immediately exercisable in full in the event the optionee's membership on the Board of Directors is terminated by the Company subsequent to the consummation of a tender offer or exchange offer made by any "person" within the meaning of Section 14(d) of the 1934 Act or subsequent to a Change in Control, as defined below. For purposes of this Subparagraph, a "Change in Control" shall have occurred if: (1) any "person" within the meaning of Section 14(d) of the 1934 Act becomes the "beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly, of more than 20% of the Company's Common Stock (or with respect to the holders of the Company's Common Stock on the effective date of the Company's registration statement with respect to its initial public offering, if any such "person" acquires more than 35% of the Common Stock). (2) any "person," directly or indirectly, acquires by proxy or otherwise the right to vote more than 20% of the Company's Common Stock for the election of Directors (or with respect to the holders of the Company's Common Stock on the effective date of the Company's registration statement with respect to its initial public offering, if any such "person" acquires the right to vote more than 35% of the Company's Common Stock for the election of Directors), other than solicitation of proxies by the Incumbent Board (as hereinafter defined), for any merger or consolidation of the Company or for any other matter or question. (3) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority thereof, provided that any person becoming a Director during such period whose election or nomination for election by the Company's stockholders was approved by a vote of at least three quarters of the Incumbent Board (either by specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be, for purposes of this clause (3), considered as though such person were a member of the Incumbent Board. (4) the Company's stockholders have approved the sale of all or substantially all of the assets of the Company. (5) Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred if the event causing the Change of Control is a repurchase by the Company of its own shares (although subsequent acquisitions of shares of Common Stock by any "person" owning more than the percentage interest set forth above shall constitute a Change of Control). (e) In addition, and notwithstanding anything contained herein to the contrary, in the event an optionee dies during such time as the optionee is a member of the Company's Board of Directors, then fifty percent (50%) of any outstanding Options which have not vested and are not exercisable by the optionee as of the date of death shall be automatically deemed vested and exercisable by the optionee's estate and/or his legatees in accordance with Subparagraph 6(b) hereof. 1. Adjustment Upon Changes in Capitalization. 2. (a) In the event that the outstanding shares of Common Stock are hereafter changed by reason of recapitalization, reclassification, stock split, combination or exchange of shares of Common Stock or the like, or by the issuance of dividends payable in shares of Common Stock, an appropriate adjustment shall be made by the Committee, in the aggregate number of shares of Common Stock available under the Plan, in the number of shares of Common Stock issuable upon exercise of outstanding Options, and the Option Price per share. In the event of any consolidation or merger of the Company with or into another company, or the conveyance of all or substantially all of the assets of the Company to another company, each then outstanding Option shall upon exercise thereafter entitle the holder thereof to such number of shares of Common Stock or other securities or property to which a holder of shares of Common Stock of the Company would have been entitled to upon such consolidation, merger or conveyance; and in any such case appropriate adjustment, as determined by the Committee shall be made as set forth above with respect to any future changes in the capitalization of the Company or its successor entity. In the event of the proposed dissolution or liquidation of the Company, all outstanding Options under the Plan will automatically terminate, unless otherwise provided by the Board of Directors of the Company or any authorized committee thereof. (b) Any adjustment in the number of shares of Common Stock shall apply proportionately to only the unexercised portion of the Options granted hereunder. If fractions of shares of Common Stock would result from any such adjustment, the adjustment shall be revised to the next higher whole number of shares of Common Stock. 9. Further Conditions of Exercise. (a) Unless the shares of Common Stock issuable upon the exercise of an Option under the Plan have been registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, prior to the exercise of the Option, an optionee must represent in writing to the Company that such shares of Common Stock are being acquired for investment purposes only and not with a view towards the further resale or distribution thereof, and must supply to the Company such other documentation as may be required by the Company, unless in the opinion of counsel to the Company such representation, agreement or documentation is not necessary to comply with said Act. (b) The Company shall not be obligated to deliver any shares of Common Stock until they have been listed on each securities exchange on which the shares of Common Stock may then be listed or until there has been qualification under or compliance with such state or federal laws, rules or regulations as the Company may deem applicable. The Company shall use reasonable efforts to obtain such listing, qualification and compliance. (c) The Committee may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes that the Company is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with the exercise of any Option, including, but not limited to, (i) the withholding of delivery of shares of Common Stock upon exercise of Options until the holder reimburses the Company for the amount the Company is required to withhold with respect to such taxes, (ii) the canceling of any number of shares of Common Stock issuable upon exercise of such Options in an amount sufficient to reimburse the Company for the amount it is required to so withhold, or (iii) withholding the amount due from any such person's wages or compensation due such person. 10. Termination, Modification and Amendment. (a) The Plan (but not Options previously granted under the Plan) shall terminate ten (10) years from the earliest of the date of its adoption by the Board of Directors, or the date the Plan is approved by the stockholders of the Company, or such date of termination, as hereinafter provided, and no Option shall be granted after termination of the Plan. (b) The Plan may from time to time be terminated, modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company voting as a single class, and entitled to vote thereon. (c) The Board of Directors of the Company may at any time, prior to ten (10) years from the earlier of the date of the adoption of the Plan by such Board of Directors or the date the Plan is approved by the stockholders, terminate the Plan or from time to time make such modifications or amendments of the Plan as it may deem advisable; provided, however, that the Board of Directors shall not, without approval by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company, voting as a single class, and entitled to vote thereon, increase (except as provided by Paragraph 8) the maximum number of shares of Common Stock as to which Options may be granted under the Plan, materially change the standards of eligibility under the Plan or materially increase the benefits which may accrue to participants under the Plan. Any amendment to the Plan which, in the opinion of counsel to the Company, will be deemed to result in the adoption of a new Plan, will not be effective until approved by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company, voting as a single class, and entitled to vote thereon. (d) No termination, modification or amendment of the Plan may adversely affect the rights under any outstanding Option without the consent of the individual to whom such Option shall have been previously granted and/or awarded. 11. Effective Date of the Plan. The Plan shall become effective upon adoption by the Board of Directors of the Company. The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company entitled to vote thereon within one year before or after adoption of the Plan by the Board of Directors. 12. Not a Contract of Employment. Nothing contained in the Plan or in any option agreement executed pursuant hereto shall be deemed to confer upon any individual to whom an Option is or may be granted hereunder any right to remain in the employ of the Company or of a subsidiary or parent of the Company or confer any continued right to be a member of the Company's Board of Directors, or in any way limit the right of the Company, or of any parent or subsidiary thereof, to terminate the employment of any employee, or to terminate any other relationship with an Optionee, including that of independent contractor or consultant. Notwithstanding anything contained herein to the contrary, and except as otherwise provided at the time of grant, all references hereunder to termination of employment shall with respect to consultants and independent contractors mean the termination of retention of their services with or for the Company. 13. Other Compensation Plans. The adoption of the Plan shall not affect any other stock option plan, incentive plan or any other compensation plan in effect for the Company, nor shall the Plan preclude the Company from establishing any other form of stock option plan, incentive plan or any other compensation plan. This 2000 Director Stock Option Plan was adopted by the Company's Board of Directors on ___________, 2000, and was approved by the Company's stockholders on ______, 2000. ------------------------------------------- Secretary EX-11.1 4 COMPUTATION OF NET LOSS PER COMMON SHARE AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARY STATEMENT RE: COMPUTATION OF NET LOSS PER COMMON SHARE
- ----------------------------------------------------------------------- ------------------------------------------ Year Ended December 31, - ------------------------------------------------------------------------------------------------------------------ 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Net Loss $ (1,677,583) $ (492,814) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Cumulative Preferred Stock Dividend (17,717) (104,167) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Beneficial Conversion Preferred Stock Dividend (468,750) (781,250) -------------------------------------- - ------------------------------------------------------------------------------------------------------------------ $ (2,164,050) $ (1,378,231) ----------------------------------- - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Weighted Average Common Shares Outstanding 3,638,983 2,992,500 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Adjustments to Reflect Requirements of the Securities and Exchange Commission SAB 83: Common Stock issued to director within this period - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Common Shares Issued to Acquire Omega Metals, Inc. 226,470 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Total Weighted Average Number of Common Shares and Equivalents 3,638,983 3,218,970 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Net Loss Per Common Share $ (.59) $ (43) ------------------------------------ - ------------------------------------------------------------------------------------------------------------------
EX-27 5 FDS --
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 714,109 833,344 1,103,913 89,000 570,594 3,780,882 4,283,167 1,735,684 6,798,612 680,998 0 0 1,060,000 4,094 5,053,520 6,798,612 5,247,683 5,247,683 2,298,923 6,751,130 352,531 0 18,594 (1,746,583) (69,000) (1,677,583) 0 0 0 (1,677,583) (0.59) (0.59)
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