UNITED STATES SECURITIES AND EXCHANGE COMMISSION LITIGATION RELEASE NO. 15872 / September 4, 1998 SECURITIES AND EXCHANGE COMMISSION v. AMERICAN AUTOMATION, INC., et al. 3:98-CV-1596-D, USDC, ND/TX (Dallas Division) On September 1, 1998, Judge Sidney A. Fitzwater, United States District Judge for the Northern District of Texas, issued an order preliminary enjoining American Automation, Inc. ("American Automation"), Kendyll R. Horton, Hazel A. Horton, and Merle B. Gross from future violations of the securities registration and antifraud provisions of the federal securities laws found in Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the court ordered the continuation of an asset freeze, previously granted in the temporary restraining order entered July 10, 1998, against all defendants, including relief defendants Musclewear, Inc., Angel World insurance Group, Inc., Lord & Kendyll Investments, Inc., Family Light Co., LLC and Direction Management Co., LLC. The court also appointed a receiver to take possession of the assets of American Automation. In its complaint, the Securities and Exchange Commission alleged the defendants raised over $4.5 million dollars in the fraudulent offer and sale of American Automation stock to over 1400 investors in several states. The complaint also alleges that the defendants told investors that American Automation would develop and place automated insurance vending machines in high traffic areas, and that projected profits would be almost $100 million by the end of its third year of operation; apparently, however, no automated vending machines have been sold and American Automation's only source of revenue has come from investors' funds. Additionally, according to the complaint, the defendants used investor funds to pay for their personal expenses, and for business expenses unrelated to American Automation's operations. PRELIMINARY INJUNCTION ENTERED AND RECEIVER APPOINTED IN AMERICAN AUTOMATION, INC. ACTION On September 1, Judge Sidney A. Fitzwater, United States District Judge for the Northern District of Texas, issued an order preliminary enjoining American Automation, Inc. (American Automation), Kendyll R. Horton, Hazel A. Horton, and Merle B. Gross from future violations of the securities registration and antifraud provisions of the federal securities laws. In addition, the court ordered the continuation of an asset freeze, previously granted in the temporary restraining order entered July 10, against all defendants, including relief defendants Musclewear, Inc., Angel World insurance Group, Inc., Lord & Kendyll Investments, Inc., Family Light Co., LLC and Direction Management Co., LLC. The court also appointed a receiver to take possession of the assets of American Automation. In its complaint, the Commission alleged the defendants raised over $4.5 million dollars in the fraudulent offer and sale of American Automation stock to over 1400 investors in several states. The complaint also alleges that the defendants told investors that American Automation would develop and place automated insurance vending machines in high traffic areas, and that projected profits would be almost $100 million by the end of its third year of operation; apparently, however, no automated vending machines have been sold and American Automation's only source of revenue has come from investors' funds. Additionally, according to the complaint, the defendants used investor funds to pay for their personal expenses, and for business expenses unrelated to American Automation's operations.[Securities and Exchange Commission v. American Automation, Inc., et al., 3:98-CV-1596-D, USDC, ND/TX] (LR- ) Phillip W. Offill Trial Counsel Fort Worth District Office 817/978-6450