Form 10-QSB for AMERICAN ACCESS TECHNOLOGIES, INC. filed on August 12, 1998 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB [XX] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ________________ * * * * * * * * * * * * * * * * * * * * * * Commission File No. 333-43589 AMERICAN ACCESS TECHNOLOGIES INCORPORATED A Florida corporation (Exact name of registrant as specified in charter, and state incorporated) * * * * * * * * * * * * * * * * * * * * * * Employer Identification No. 59-3410234 Altamonte Springs Florida 238 N. Westmonte Dr. Suite 210 32714 (Address of principal executive offices of registrant) (407) 865-7696 (Registrant's telephone number, including area code) * * * * * * * * * * * * * * * * * * * * * * Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X]. NO [ ]. The number of shares of AMERICAN ACCESS TECHNOLOGIES INC. Common Stock (Par Value $0.001) outstanding at June 30, 1998 was 2,990,000 American Access Technologies PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN ACCESS TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) Consolidated Balance Sheets Assets Condensed from Audited Financial June 30, 1998 Statements UNAUDITED Dec. 31, 1997 Current Assets: CASH AND CASH EQUIVALENTS $334,013 $442,555 ACCOUNTS RECEIVABLE 111,429 11,436 INVENTORY 73,986 21,586 PREPAID EXPENSES 5,005 3,547 Total Current Assets 524,433 479,124 Property, Plant, and Equipment: FURNITURE AND EQUIPMENT 44,697 41,903 ACCUMULATED DEPRECIATION (12,185) (6,626) Total Property, Plant, & Equip 32,512 35,277 Other Assets PATENT COST 23,243 22,583 OTHER ASSETS 3,797 3,598 Total Other Assets 27,040 26,181 Total Assets $583,985 $540,582 Liabilities and Stockholders' Equity Current Liabilities: ACCOUNTS PAYABLE $48,810 $17,705 ACCRUED EXPENSES 37,883 83,120 Total Current Liabilities 86,693 100,825 COMMITMENTS AND CONTINGENCIES ---- ---- Stockholders' Equity: PREFERRED STOCK $ .001 par value; authorized, 1,000,000 shares; none issued COMMON STOCK $ .001 par value; authorized 10,000,000 shares; issued & outstanding, 2,990,000 shares at 6/30/98, 2,970,000 at 12/31/97 2,990 2,970 ADDITIONAL PAID IN CAPITAL 1,089,470 929,490 DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (595,168) (492,703) Total Stockholders' Equity 497,292 439,757 Total Liabilities and Stockholders' Equity $583,985 $540,582 831,048 See accompanying notes to financial statements. AMERICAN ACCESS TECHNOLOGIES, INC. (A DEVELOPMENT STAGE ENTERPRISE) Consolidated Statements of Operations Unaudited Three Three Six Six Cumulative Months Months Months Months From Ended Ended Ended Ended Inception 06/30/98 06/30/97 06/30/98 06/30/97 Income Revenues $187,252 $169,012 $317,051 $169,012 $548,673 Costs and Expenses DIRECT COSTS 73,597 46,550 134,715 46,550 200,196 MARKETING & PROMOTIONS 30,032 62 46,647 62 85,468 PRODUCT DEVELOPMENT 2,977 (2,261) 16,100 3,241 33,774 GENERAL & ADMINISTRATIVE 134,078 121,324 228,321 300,793 831,048 Total Costs & Expenses 240,684 165,675 425,783 350,646 1,150,486 Operating Income (Loss) (53,432) 3,337 (108,732) (181,634) (601,813) Other Income (Expense) Interest Income 1,464 0 6,268 0 10,260 Interest Expense 0 0 0 2,414 3,621 Total Other Income (Expense) 1,464 0 6,268 (2,414) 6,639 Income (Loss) from continuing operations (51,968) 3,337 (102,464) (184,048) (595,174) Income from discontinued operations 0 0 0 0 4,606 Net Income ( Loss) ($51,968) $3,337 ($102,464) ($184,048) ($590,568) Net Income ( Loss) Per Common Share ($0.02) $0.00 ($0.03) ($0.06) See accompanying notes to financial statements AMERICAN ACCESS TECHNOLOGIES, INC. (A Development Stage Enterprise) Consolidated Statements of Cash Flows Unaudited Six Six Months Months Cumulative Ended Ended from 6/30/98 6/30/97 Inception Cash Flows from operating activities: Net income (loss) ($102,464) ($184,048) ($590,561) Adjustments to reconcile net income (loss) to net cash provided by (use in) operating activities: Depreciation and amortization 5,559 3,061 12,185 Common stock issued for services 75,000 (Increase)/ decrease in assets: Accounts receivable (99,993) (162,832) (111,429) Inventory (52,400) (5,737) (73,986) Prepaid expenses (1,458) (33,919) (5,005) Other (860) (1,076) (4,458) Increase/ decrease in liabilities: Accounts payable and accrued expenses: (14,132) 51,844 86,585 Total adjustments (163,284) (148,659) (21,108) Net cash provided by (used in) operating activities (265,748) (332,707) (611,669) Cash flows from investing activities: Expenditures for development of patent (14,500) Acquisition of property and equipment (41,903) Purchase of furniture and fixtures (2,794) (26,657) (2,794) Net cash provided by (used in) investing activities (2,794) (26,657) (59,197) Cash flows from financing activities: Increase (decrease) notes payable 0 (100,000) Proceeds from issuance of common stock and exercise of warrants 160,000 569,377 1,010,777 Repayment of loan payable, stockholder (1,000) (1,000) Distribution to stockholder (4,606) Other (400) Net cash provided by (used in) financing activities 160,000 468,377 1,004,771 Net increase (decrease) in cash and cash equivalents (108,542) 109,013 333,905 Cash and Cash equivalents, Beginning 442,555 61,761 108 Cash and Cash equivalents, Ending $334,013 $170,774 $334,013 Supplemental Disclosure of Cash Flow Information: Cash paid for interest $2,424 See accompanying notes to financial statements. AMERICAN ACCESS TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 Unaudited 1. Basis of Presentation The accompanying unaudited consolidated condensed financial statements at June 30, 1998 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position as of June 30, 1998 and results of operations for the six months ended June 30, 1998 and 1997. All adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. The statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 1997 included in the company's Registrations Statement Form SB-2 filing. 2. Nature of Business and Summary of Significant Accounting Policies. BUSINESS American Access Technologies, Inc. develops specialized products for the telecommunications industry. The company recently introduced its first proprietary product, a Zone Cabling Termination Cabinet (the "Product") which it plans to manufacture and distribute to the telecommunications industry. The Product is a Device that is used in voice, computer and data transmission systems throughout the world. DEVELOPMENT STAGE ENTERPRISE As noted above, the Company was incorporated on October 21, 1996. To date, the Company has been principally engaged in organizational activities, the promotion of its product and raising capital. Planned operations, as described above, have commenced but revenue generated to date is not considered significant in relation to the Company's business plan. Accordingly, the Company is considered to be in the development stage, and the accompanying consolidated financial statements represent those of a development stage enterprise. COMMON STOCK On June 30, 1998, 20,000 warrants were exercised, at $8.00 per warrant, which resulted in 20,000 common stock shares being issued. In August, 1998 an additional 40,000 warrants were exercised at $8.00 per share. The company has a remaining 570,000 warrants. NET LOSS PER COMMON SHARE In 1997, the Company adopted Statements of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which requires the presentation of both basic and diluted earnings (loss) per share. Basic net loss per common share has been computed based upon the weighted average number of shares of common stock outstanding during the periods. The shares of common stock issued in connection with the stock split effected in February 1997, have been considered outstanding for all periods. In addition, the shares of common stock issued to a Director in February 1997, prior to an initial registration of the Company's common stock and at a price at that time have been treated as outstanding during the entire period, pursuant to the Securities and Exchange Commission Staff Accounting Bulletins. The number of shares used in the computation were 2,990,000 and 3,083,000 for 1998 and 1997 respectively. Diluted net loss per common share, assuming exercising of the warrants granted, is not presented as the effect of conversion is anti-dilutive. 3. Contingencies PENDING LITIGATION The Company is a defendant in a suit filed in January 1998 in the 18th Judicial Circuit Court of Florida by Steve R. Jones, the Company's President from April to August 1997, which seeks damages of $17,000 and a declaratory judgment as to the enforceability of a consulting agreement with the Company. The Company is vigorously defending the case and does not believe it has any liability to the plaintiff. The case is in the early stages, and there can be no assurance of the ultimate outcome. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS ENDED JUNE 30, 1997 AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1997. REVENUES Revenues for the three months ended June 30, 1998 increased by $18,240 or 10.8%, to $187,252, compared to $169,012 for the three months ended June 30, 1997. Revenues for the six months ended June 30, 1998 increased by $148,039 or 87.6% to $317,051 compared to $169,012 for the six months ended June 30, 1997. The initial distribution of the Company's product did not occur until the second quarter of 1997, as the Company was primarily involved in training distributor's personnel in the operation, functioning and marketing of the Company's product. COSTS AND EXPENSES Direct costs represent the cost incurred by the Company to have its product manufactured and assembled by outside contractors. These costs represented 39.3% of revenues for the three months ended June 30, 1998, 27.5% of revenues for the three months ended June 30, 1997, 42.5% of revenues for the six months ended June 30, 1998 and 27.5% of revenues for the six months ended June 30, 1997. Product development costs incurred in the three months ended June 30, 1998 was $2,977 and for the six months ended June 30, 1998 was $16,100 as compared to $3,241 for the same six month period in 1997. This increase in costs occurred in the Company's continuing efforts to modify and update its design to vendor specifications. Marketing and Promotion expenses increased by $29,970 to $30,032 for the three months ended June 30, 1998 compared to $62 for the three months ended June 30, 1997. The expenses of $46,647 for the six months ended June 30, 1998 was an increase of $46,585 over expenses for the same six months ended June 30, 1997, which only totaled $62. This was a result of the company's effort to continue to develop and market their product. General and Administrative expenses increased by $12,754 to $134,078 for the three months ended June 30, 1998 compared to $121,324 for the three months ended June 30, 1997. This increase was the result of costs associated with the continued development growth of the company including efforts in the pending acquisition of Omega Metals, Inc. Expenses for the six months ended June 30, 1998 decreased by $72,472 to $228,321 as compared to total expenses to $300,793 for the six months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company required cash for the operating activities of $265,748 during the six months ended June 30, 1998 as compared to $332,707 during the six months ended June 30, 1997. The major source of cash for the six months ended June 30, 1998, was funded from financing activities through the exercising of warrants to purchase common stock of $160,000. The use of cash is due primarily to support expenditures for start up operations and manufacture, promotion and distribution of its products. 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 remaining from proceeds of it private offering, will be sufficient to meet its capital and liquidity needs for the next 12 months. The Company also believes that cash required to fulfill purchase orders will be available through bank borrowings or factoring, if required. The company's primary customers are substantial corporations with credit ratings that will support such credit arrangements. The Company is still in the process of emerging from the development stage and, therefore, has generated little revenue to date. As reflected in the accompanying financial statements, the Company incurred a net loss of $51,968 for the quarter ended June 30, 1998 compared to a net income of $3,337 for the same quarter in 1997. Management's plans include the following: 1. The Company has arranged for marketing in association with manufacturers and distributors of telecommunications equipment, which will enable the Company to obtain orders for its products with a minimal expenditure of the Company's resources. The Company is presently organizing a manufacture's rep program to assist in the distribution of their equipment. 2. The Company has arranged for manufacture of its products by an outside supplier in order to minimize the financial requirements necessary for production. The Company is intending to purchase this manufacturer. The status of this acquisition is discussed in the Other Matters note included in this filing. 3. The company believes that it can acquire working capital through sale of additional securities (including exercise of outstanding warrants), or borrowings, including bank borrowing, in view of the nature of its customer base. 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 start up companies in general. OTHER MATTERS On July 15, 1998 the company entered into a letter of intent to purchase all the issued common stock of Omega Metals, Inc. The company utilizes Omega Metals, Inc. as its source of most of its manufactured products. There are various contingencies associated with this purchase and no assurance that the acquisition will be completed at this date. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a defendant in a suit filed in January 1998 in the 18th Judicial Circuit Court of Florida by Steve R. Jones, the Company's President from April to August 1997, which seeks damages of $17,000 and a declaratory judgment as to the enforceability of a consulting agreement with the Company. The Company is vigorously defending the case and does not believe it has any liability to the plaintiff. The case is in the early stages, and there can be no assurance of the ultimate outcome. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 12, 1998 AMERICAN ACCESS TECHNOLOGIES, INC. (Registrant) By: ---------------------------------------- Bobby E. Story Secretary/Treasurer Chief Financial Officer By: ---------------------------------------- Victor E. Murray President EX-27 FDS --
'5 '3-MOS DEC-31-1997 APR-01-1998 JUN-30-1998 334,013 0 111,429 0 73,986 524,433 44,697 (12,185) 583,985 86,693 0 0 0 2,990 494,302 583,985 187,252 187,252 73,597 240,684 0 0 0 (51,968) 0 (51,968) 0 0 0 (51,968) (0.02) (0.02)