As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 4/30/03  Axcess International Inc/TX       10KSB/A    12/31/02    1:40                                     Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB/A     Amendment to Annual Report -- Small Business        HTML    248K 

U.S. SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-KSB/A

(Amendment No. 1)

 

ý    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

 

or

 

o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

COMMISSION FILE NUMBER: 0-11933

 

AXCESS INTERNATIONAL INC.

(formerly AXCESS Inc.)

(Exact name of small business issuer as specified in its charter)

 

 

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:

 

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý No o

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B 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. o

 

The issuer’s revenues for the fiscal year ended December 31, 2002 were $1,596,221.

 

On March 14, 2003, the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $2,181,738. This amount was calculated by reducing the total number of shares of the registrant’s common stock outstanding by the total number of shares of common stock held by officers and directors, and stockholders owning in excess of 5% of the registrant’s common stock, and multiplying the remainder by the average of the bid and asked price for the registrant’s common stock on March 14, 2003, as reported on the Over-The-Counter Bulletin Board Market. The information provided shall in no way be construed as an admission that any officer, director or more than 5% stockholder of the issuer may be deemed an affiliate of the issuer or that such person is the beneficial owner of shares reported as being held by such person, and any such inference is hereby disclaimed.

 

Documents Incorporated by Reference:  None.

 

Transitional Small Business Disclosure Format: Yes o No ý

 

 

AXCESS INTERNATIONAL INC.

INDEX

 

PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;

Item 10. EXECUTIVE COMPENSATION

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SIGNATURES

CERTIFICATIONS

 

2

 

EXPLANATORY NOTE

 

This Amendment No. 1 to the Annual Report on Form 10-KSB of AXCESS International Inc. (the “Company”) amends Item 5 of Part II as described herein, and amends and restates in its entirety items 9 through 12 of Part III of the Company’s Annual Report on Form 10-KSB filed with the Commission on April 15, 2003. Unless otherwise expressly stated, this Amendment No. 1 does not reflect events occurring after the filing of the original Form 10-KSB, or modify or update in any way disclosures contained in the original Form 10-KSB.

 

 PART II

 

 Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

 

Item 5 is hereby amended to add the information contained in Item 12 hereof regarding the issuance of a convertible promissory note and shares of common stock to the wife of Richard C.E. Morgan.

 

 PART III

 

 Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

 

Management of the Company

 

The board elects executive officers annually at its first meeting following the annual meeting of stockholders. The following table sets forth, as of December 31, 2002, the Company’s directors, executive officers and significant employees, their ages, and their positions within the Company.

 

Name		Age		Position		Committee
Richard C.E. Morgan		58		Chairman of the Board of Directors		(1) (3)
Allan Griebenow		50		Director, President and Chief Executive Officer		(1)
Allan L. Frank		38		Vice President, Secretary and Chief Financial Officer (4)
Michael Uremovich		49		Vice President, Sales and Marketing (5)
Robert J. Bertoldi		53		Directors		(2)
Paul J. Coleman, Jr.		71		Director		(2)
Robert F. Hussey		53		Director		(2)

 

(1) Executive Committee

 

(2) Audit Committee

 

(3) Compensation Committee

 

(4) On March 20, 2002, the board of directors appointed Allan L. Frank to the positions of Vice President, Secretary and Chief Financial Officer.

 

(5) During April 2003, Mr. Uremovich elected to leave his position with the Company to pursue other professional opportunities.

 

RICHARD C.E. MORGAN has served as a director and Chairman of the Board of the Company since 1985.  Since 1986 he has been a managing member of Antiope Partners L.L.C. and Amphion Partners L.L.C.  In November 1999, Mr. Morgan co-founded VennWorks LLC and since then, has served as its Chairman and Chief Executive Officer.  In 1995, Mr. Morgan co-founded Amphion Capital Management L.L.C., a private equity and venture capital firm, and since then has served as one of its Managing Partners.  From 1986 to 1998, Mr. Morgan was the Managing General Partner of Wolfensohn Partners L.P., the predecessor to Amphion Capital Management.  Mr. Morgan serves on the board of directors of Celgene Corp., which develops and markets biotechnology products.  Mr. Morgan is also a director of several private and non-profit companies, including Orbis International, Inc. a non-profit organization dedicated to fighting blindness worldwide.

 

ALLAN GRIEBENOW has served as a director, President and Chief Executive Officer of the Company since July 1999. He founded Prism Video, Inc. in 1994 and was Chief Executive Officer of Prism Video, Inc. from 1994 to July 1999.  Mr. Griebenow is currently President, CEO and Director of PVHoldings, (a current holder of equity and debt of AXCESS).  Mr. Griebenow spent the past 20 years in the telecommunications and advanced applications industries. He started his career in 1979 as a Presidential Management Intern with NASA, and holds a B.S. in Business Administration from the University of Maryland and an MBA from San Francisco State University.

 

3

 

ALLAN L. FRANK has served as Vice President, Secretary and Chief Financial Officer of the Company since March 2002.  From July 1999 through June 2001, Mr. Frank was Vice President, Chief Financial Officer and Secretary for Vast Solutions, Inc. a spin-off from Paging Network Inc. (“PageNet”).  Vast Solutions, Inc. filed for bankruptcy in April of 2001.  From September 1993 through July 1999, Mr. Frank severed in numerous positions at PageNet, including as Vice President Corporate Development and Director of Financial Analysis, and as Director of International Finance for Paging Network International, a subsidiary of PageNet.  Prior to PageNet, Mr. Frank worked at FoxMeyer Corporation, OrNda HealthCare and Dalfort Aviation Services.  Mr. Frank holds a B.S. in Business Administration from The Ohio State University and an MBA from the University of North Texas.

 

MICHAEL UREMOVICH has served as Vice President of Sales & Marketing of the Company since July 1999.  He was Vice President Sales & Marketing of Prism Video, Inc. from 1997 until 1999, when the Company acquired Prism Video, Inc.’s digital video technology. From 1992 to 1996, Mr. Uremovich held positions of Regional Sales Manager, Director of Sales, and Vice President, Sales & Marketing for Computrac, Inc. and for Amtech, both Dallas-based technology companies.  Mr. Uremovich earned his B.S. in Business Administration and marketing from the University of Texas at Dallas.

 

ROBERT J. BERTOLDI has been a director of the Company since June 2000.  Since January 2000, Mr. Bertoldi has been the President of VennWorks LLC, a venture capital limited liability company that he co-founded.  Since before 1995, Mr. Bertoldi has been a Managing Partner of Amphion Capital Management, LLC., and co-manager of Amphion Ventures, LP, an early-stage technology life sciences fund.

 

PAUL J. COLEMAN, JR. has served as a director of the Company since 1982. He is president and chief executive officer of the Girvan Institute of Technology, a non-profit, public benefit corporation engaged in research, technology development, and education related to the nation’s aerospace program.  Dr. Coleman is a professor of space physics emeritus at the University of California at Los Angeles (“UCLA”). He currently serves as a director of Biocentric Solutions, Inc. Knowledge Vector, Inc. and the Girvan Institute.  He is a former director of CACI International, Fairchild Space and Defense Corporation, the Universities Space Research Association and others.  His earlier positions include those of assistant director, Los Alamos National Laboratory; president and chief executive officer, Universities Space Research Association; director, Institute of Geophysics and Planatary Physics as UCLA; and director, National Institute for Global Environmental Change of the U.S. Department of Energy.

 

ROBERT F. HUSSEY has served on the board since September 2002.  Mr Hussey currently serves as the Chief Operating Officer and Director of H.C. Wainwright & Co.  Mr. Hussey also services on the boards of Digital Data Networks, Inc., Digital Lightwave Inc., NUR Corporation and on the board of advisors for Argentum Capital Partners and Kaufman Fund.  From 1991 through 1996, Mr. Hussey served as President, CEO and Director of MetroVision of North America.  From 1984 through 1991 Mr. Hussey was Founder, President, CEO and Director of POP Radio Corp.  Prior to POP Radio, Mr. Hussey worked at Grey Advertising, Inc., E.F. Hutto and American Home Products, Inc.  Mr. Hussey received a B.S. in Business Administration from Georgetown University and an MBA in International from George Washington University.

 

Subsequent Events

 

In April 2003, Michael Uremovich, then the Company’s Vice President of Sales & Marketing, elected to leave his position with the Company to pursue other professional opportunities.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, directors, certain officers and beneficial owners of 10% or more of the Company’s Voting Common Stock are required from time to time to file with the Securities and Exchange Commission reports on Forms 3, 4 or 5, relating principally to transactions in Company securities by such persons.  Based solely upon a review of Forms 3, 4 and 5 submitted to the Company during and with respect to 2002, all of these individuals or entities timely filed their respective Forms 3, 4 or 5 required by Section 16(a) of the Exchange Act during 2002, except for Allan Griebenow, Allan Frank, Michael Uremovich, Robert Hussey, Amphion Ventures, L.P. and VennWorks LLC.

 

Allan Griebenow failed to file a Form 4 for June 2002 to report the issuance to him of an employee stock option to purchase a total of 85,000 shares of common stock of the Company, at an exercise price of $1.70 per share, where one-fourth of the option vests on each of June 5, 2003, 2004, 2005 and 2006.

 

Richard Morgan failed to file a Form 4 for July 2002 to report the issuance to his wife of 25,000 shares of Common Stock pursuant to the terms of a convertible promissory note made to the Company on July 30, 2002.

 

4

 

Allan Frank failed to file a Form 4 for June 2002 to report the issuance to him of an employee stock option to purchase a total of 85,000 shares of common stock of the Company, at an exercise price of $1.70 per share, where one-fourth of the option vests on each of June 5, 2003, 2004, 2005 and 2006.

 

Michael Uremovich failed to file a Form 4 for June 2002 to report the issuance to him of an employee stock option to purchase a total of 85,000 shares of common stock of the Company, at an exercise price of $1.70 per share, where one-fourth of the option vests on each of June 5, 2003, 2004, 2005 and 2006.

 

Robert F. Hussey failed to file Form 4 for September 2002 to report the issuance to him of a director stock option to purchase a total of 50,000 shares of common stock of the Company, at an exercise price of $1.15, where one-fourth of the option vests on each of September 10, 2003, 2004, 2005 and 2006.

 

Each of Amphion Ventures and VennWorks failed to file Form 4s to report the issuance in 2002 by the Company of promissory notes convertible into preferred stock, and the conversion of shares of preferred stock into common stock.  These transactions are described more fully under Item 12. “Certain Relationships and Related Transactions —Amphion Ventures, L.P. Promissory Note Issuances and Conversions,” Item 12. “Certain Relationships and Related Transactions—VennWorks LLC Promissory Note Issuances and Conversions,” and Item 12. “Certain Relationships and Related Transactions—Preferred Stock Conversions.”

 

 Item 10. EXECUTIVE COMPENSATION.

 

The following table summarizes the compensation earned by the Company’s Chief Executive Officer and the Company’s two other most highly compensated executive officers (whose annualized compensation exceeded $100,000), collectively called the “named executive officers,” for services rendered in all capacities to the Company during the fiscal years ended December 31, 2002, 2001, and 2000.

 

Summary Compensation Table

 

								Long-Term Compensation
								Securities Underlying Options (#)		All Other Compensation ($) (1)
				Annual Compensation
Name and Principal Positions		Year		Salary ($)		Bonus ($)
Allan Griebenow		2002	(2)	182,090		—		85,000		—
President and Chief		2001		230,009		—		150,392		4,250
Executive Officer		2000		220,438		35,014		124,112		4,250
Allan L. Frank		2002	(3), (4)	103,039		—		285,000		—
Vice President, Secretary		2001		—		—		—		—
and Chief Financial Officer		2000		—		—		—		—
Michael Uremovich		2002	(5)	109,314		—		35,000		—
Vice President of Sales		2001		138,080		28,099(6	)	50,132		1,662
		2000		133,417		15,227(6	)	41,372		1,334

 

(1) Represents the Company’s contributions to 401(k) plans.

 

(2) Includes $14,374 of accrued salary expense that the Company has not paid.  However, it does not include the period Mr. Griebenow was furloughed.  The Company furloughed all of its employees without compensation from October 16, 2002 through December 31, 2002.

 

(3) Represents compensation earned from March 2002, when Mr. Frank joined the Company.

 

(4) Includes $11,249 of accrued salary expense that the Company has not paid.  However, it does not include the period Mr. Frank was furloughed.  The Company furloughed all of its employees without compensation from October 16, 2002 through December 31, 2002.

 

(5) Includes $8,629 of accrued salary expense that the Company has not paid.  However, it does not include the period Mr. Uremovich was furloughed.  The Company furloughed all of its employees without compensation from October 16, 2002 through December 31, 2002.

 

(6) Represents commission based on the Company’s revenue.

 

5

 

Stock Option Grants in 2002 to the Company’s Named Executive Officers

 

The following table provides information regarding the stock options granted by the Company to the named executive officers during the fiscal year ended December 31, 2002.  Other than those persons listed in the following table, the Company did not grant any stock options to any other named executive officers.  One-fourth of each of the options listed in the table below vests on the anniversary of the date of the option grant, beginning on the first anniversary of the date of the option grant, through the fourth anniversary of the date of the option grant.

 

		Option Grants in Last Last Fiscal Year Individual Grants
		Number of Securities Underlying Options Granted (#)
				% of Total Options Granted to Employees
						Exercise or Base Price ($/Sh) (1)
								Expiration Date
Name
Allan Griebenow		85,000		9	%	1.70		06/05/2012
Allan L. Frank		200,000		20	%	3.00		03/23/2012
Allan L. Frank		85,000		9	%	1.70		06/05/2012
Michael Uremovich		35,000		4	%	1.70		06/05/2012

 

(1)           The exercise price is equal to the closing price of the Common Stock on the date of the grant.

 

Aggregate Option Exercises in 2002 by the Company’s Executive Officers

 

The following table provides information as to options exercised, if any, by each of the named executive officers in 2002 and the value of options held by those officers at year-end measured in terms of the last reported sale price for the shares of the Company’s Voting Common Stock on December 31, 2002 ($0.52 as reported on the Over-The-Counter Bulletin Board).

 

							Number of Securities Underlying Unexercised Options at December 31, 2002				Value of Unexercised In-the-Money Options at December 31, 2002
		Shares Acquired On Exercise
				Value Realized
Name							Exercisable		Unexercisable		Exercisable			Unexercisable
Allan Griebenow		—		$	—		437,154		372,349		$	—		$	—
Allan L. Frank		—		$	—		—		285,000		$	—		$	—
Michael Uremovich		—		$	—		125,718		130,784		$	—		$	—

 

Compensation of the Company’s Directors

 

The current policy of the Company is to pay each director who is not employed by the Company and who does not beneficially own more than 5% of the shares of common stock outstanding the compensation set forth in the Director Compensation Plan. Under the Director Compensation Plan, each eligible director receives an annual grant of 10,000 options to acquire common stock at an exercise price equal to the fair market value per share of the common stock at the time the option is granted. The annual grant customarily takes place shortly after each annual meeting of the Company’s stockholders. All new board members receive 50,000 options to acquire common stock at an exercise price equal to the fair market value per share of the common stock on the date the board member is elected by the Company’s stockholders.  All new board members will also be eligible to receive the annual grant. The Company has temporarily suspended paying any cash to eligible directors for preparing and attending meetings of directors and committees until the Company reports quarterly net earnings. Once the Company has reported net earnings for a fiscal quarter, the Company will reconsider paying additional cash consideration to eligible directors. While directors do not receive additional compensation for attending meetings, the Company pays ordinary and necessary out-of-pocket expenses for directors to attend board and committee meetings. Directors who are officers or employees of the Company receive no fees for service on the board or committees thereof.

 

Employment Agreement with Mr. Griebenow

 

On July 16, 1999, the Company entered into an agreement with Allan Griebenow, under which Mr. Griebenow agreed to be the Company’s president and chief executive officer.  The agreement provides that Mr. Griebenow will receive a salary equal to $17,917 per month, a bonus payable within 90 days after the end of the Company’s fiscal year of up to 30% of his base salary, and option grants to acquire 450,000 shares of the Company’s Common Stock.  If the Company terminates Mr. Griebenow’s employment at any time without cause, as defined in the employment agreement, then Mr. Griebenow will be entitled to continue to receive his then current salary for the six-month period following his termination.

 

6

 

 Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

 

The following table sets forth the number of shares of each class of stock beneficially owned as of April 1, 2003 by each person known by the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities as of April 1, 2003.  Except as noted below, to the Company’s knowledge, each stockholder listed below has sole voting and investment power with respect to all shares of stock shown beneficially owned by the stockholder.

 

Name and Address of Beneficial Owner		Title of Class		Amount and Nature of Beneficial Owner		Percentage of Class		Percentage of Common Voting Power
Amphion Group (1)		Voting Common Stock		14,002,178	(2)	74.0	%	70.6	%
350 Madison Avenue		Series I Preferred Stock		65		51.6	%	1.2	%
New York, NY 10021		Series J Preferred Stock		157		89.1	%	3.0	%
PV Proceeds Holdings, Inc.		Voting Common Stock		500,000	(3)	2.6	%	2.4	%
3208 Commander Dr.		Series 1999 Preferred Stock		152		100.0	%	2.9	%
Carrollton, TX 75006
H.T. Ardinger		Voting Common Stock		31,491		*		*
9040 Governors Row		Series I Preferred Stock		52		41.6	%	1.0	%
Dallas, TX 75247		Series J Preferred Stock		2		1.1	%	*
Jackson Hole		Voting Common Stock		3,437		*		*
667 Madison Avenue		Series C Preferred Stock		11,522		100.0	%	1.9	%
New York, NY 10021		Series J Preferred Stock		15		8.5	%	*

 

*   Less than 1%.

 

(1)   See the following table regarding the beneficial ownership of the Amphion Group.

 

(2)   Includes 719,358 shares that the Amphion Group has the right to acquire pursuant to warrants and options that are exercisable within 60 days.

 

(3)   All 500,000 shares represent shares that PV Proceeds Holdings, Inc. has the right to acquire pursuant to warrants that are exercisable within 60 days.

 

The following table sets forth the number of shares beneficially owned by the Amphion Group, which is defined to include Mr. Richard C.E. Morgan, a British citizen and Chairman of the board of directors of the Company (“Mr. Morgan”), Mrs. Anna Morgan, a British citizen and wife of Richard C.E. Morgan (Mrs. Morgan”), Robert J.  Bertoldi, a U.S. citizen and director of the Company (“Mr. Bertoldi”), Amphion Ventures, L.P., a Delaware limited partnership (“Amphion Ventures”), Amphion Partners L.L.C., a Delaware limited liability company  (“Amphion Partners”), Amphion Investments L.L.C., a Delaware limited liability company (“Amphion Investments”), Antiope Partners L.LC., a Delaware limited liability company (“Antiope Partners”), and VennWorks LLC, a Delaware limited liability company formerly known as incuVest L.L.C., (“VennWorks”).

 

The Amphion Group disclaims in its filings with the Securities and Exchange Commission that it holds any securities of the Company as a group, within the meaning of any applicable securities law or regulation.  Amphion Partners is the sole general partner of Amphion Ventures.  Messrs. Morgan and Bertoldi are the managing members of Amphion Partners, Antiope Partners and Amphion Investments.  Mr. Morgan is the Chairman of the board of directors and the chief executive officer of VennWorks.  Mr. Bertoldi is the president of VennWorks.

 

Based on an amended Schedule 13D filed by certain members of the Amphion Group with the SEC on February 10, 2000, Amphion Ventures, Amphion Partners and Mr. Morgan share voting power with respect to certain of the shares owned by them.  Also based on the Schedule 13D, Mr. Morgan shares voting power for the shares held by Amphion Investments, Antiope Partners and certain other shares held by Amphion Partners.  Mr. Morgan disclaims beneficial ownership of the shares held by each of the Amphion Group.

 

7

 

		Voting Common		Series I Preferred Stock		Series J Preferred Stock
Amphion Ventures		9,606,188	(1)	—		—
Amphion Partners		108,232		—		—
Amphion Investment		54,000		—		—
Antiope Partners		86,534		65		157
VennWorks		3,774,824		—		—
Richard Morgan		337,400	(2)	—		—
Robert Bertoldi		35,000	(3)	—		—
Total of Amphion Group		14,002,178		65		157

 

(1)           Includes warrants to purchase 681,358 shares of Common Stock that are exercisable within 60 days.

 

(2)           Includes options to purchase 3,000 shares of Common Stock that are exercisable within 60 days and 25,000 shares of Common Stock issued to Mrs. Morgan the wife of Mr. Morgan.

 

(3)           Includes options to purchase 35,000 shares of Common Stock that are exercisable within 60 days.

 

The following table sets forth the number of shares of each class of stock beneficially owned as of April 1, 2003 by each director who beneficially owns equity securities and the executive officers of the Company, and all of the Company’s directors and executive officers as a group.  The business address of each director and executive officer is c/o AXCESS International Inc., 3208 Commander Drive, Carrollton, Texas 75006.  To the Company’s knowledge, each stockholder listed below has sole voting and investment power with respect to all shares of stock shown beneficially owned by the stockholder, except for Mr. Morgan’s beneficial ownership, which is discussed in the introduction to the previous table above.

 

Name of Beneficial Owner		Title of Class		Amount and Nature of Beneficial Owner		Percentage of Class		Percentage of Common Voting Power
Richard C.E. Morgan (1)		Voting Common Stock		13,967,178		73.8	%	66.3	%
		Series I Preferred Stock		65		51.6	%	1.2	%
		Series J Preferred Stock		157		89.1	%	3.0	%
Robert J. Bertoldi (2)		Voting Common Stock		13,664,778		72.2	%	64.8	%
		Series I Preferred Stock		65		51.6	%	1.2	%
		Series J Preferred Stock		157		89.1	%	3.0	%
Allan Griebenow (3)		Voting Common Stock		537,330		2.8	%	2.5	%
Paul J. Coleman, Jr. (4)		Voting Common Stock		61,830		*		*
Allan L. Frank (5)		Voting Common Stock		71,250		*		*
Robert F. Hussey		Voting Common Stock		—		*		*
Michael Uremovich (6)		Voting Common Stock		188,545		1.0	%	*
All Directors, Director		Voting Common Stock		14,861,133		78.5	%	70.5	%
Nominees and		Series I Preferred Stock		65		51.6	%	1.2	%
Executive Officers as		Series J Preferred Stock		157		89.1	%	3.0	%
a group (7 individuals)

 

*      Less than 1%.

 

(1)   The number of shares of Voting Common Stock includes 309,400 shares held directly, 3,000 shares that Mr. Morgan has the right to acquire pursuant to options that are exercisable within 60 days, 12,948,420 shares held by other entities within the Amphion Group (defined in Note 1 to the immediately preceding table above), 681,358 shares that entities within the Amphion Group have the right to acquire pursuant to options and warrants that are exercisable within 60 days, 25,000 shares owned by Mr. Morgan’s wife.  As detailed in Note 1 to the immediately preceding table above, Mr. Morgan disclaims beneficial ownership of all shares beneficially owned by entities within the Amphion Group.

 

8

 

(2)   Includes 35,000 shares that Mr. Bertoldi has the right to acquire pursuant to options that are exercisable within 60 days. Includes 12,948,420 shares held by other entities within the Amphion Group (defined in Note 1 to the immediately preceding table above), and 681,358 shares that entities within the Amphion Group have the right to acquire pursuant to options and warrants that are exercisable within 60 days.  As detailed in Note 1 to the immediately preceding table above, Mr. Bertoldi disclaims beneficial ownership of all shares beneficially owned by entities within the Amphion Group.

 

(3)   Includes 10,300 shares of Common Stock held directly by Mr. Griebenow and 527,030 shares that Mr. Griebenow has the right to acquire pursuant to options that are exercisable within 60 days.  Mr. Griebenow is the president and chief executive officer, and an 11% owner of the stock of PV Proceeds Holdings, Inc., a beneficial owner of more than 5% of the Company’s Common Stock.  Mr. Griebenow denies beneficial ownership of the shares of the Company’s Common Stock owned by PV Proceeds Holdings, Inc.

 

(4)   Includes 80 shares of Common Stock held directly by Mr. Coleman and 61,750 shares that Mr. Coleman has the right to acquire pursuant to options that are exercisable within 60 days.

 

(5)   All 71,250 shares represent shares that Mr. Frank has the right to acquire pursuant to options that are exercisable within 60 days.

 

(6)   Includes 11,200 shares of Common Stock held directly by Mr. Uremovich and 177,345 shares that Mr. Uremovich has the right to acquire pursuant to options that are exercisable within 60 days.  Mr. Uremovich resigned his position with the Company in April 2003.

 

Additional information regarding the Company’s Equity Compensation Plans is contained in Item 5.

 

 Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

 

VennWorks

On January 12, 2001, the Company entered into a 9.0% convertible demand note (“9% Demand Note”) with VennWorks. The principal outstanding under this note may be converted into securities of the Company at the option of VennWorks. The borrowings are unsecured and are due and payable on demand by VennWorks.  On March 30, 2001, VennWorks elected to convert $2,000,000 of demand note borrowings into 200 shares of Series 2000 non-voting Preferred Stock, leaving a balance of $16,106 under the 9% Demand Note outstanding at March 31, 2001. During the three months ended June 30, 2001, the Company borrowed an additional $1,070,000 under the 9% Demand Note. On June 29, 2001, VennWorks elected to convert $1,080,000 of the principal balance and $80,000 of accrued interest payable on this note into 116 shares of Series 2000 non-voting Preferred Stock, leaving a balance of $6,106 under this note outstanding at June 30, 2001. During the three months ended September 30, 2001, the Company borrowed an additional $600,000 under the 9% Demand Note. On September 28, 2001, VennWorks elected to convert $600,000 of the principal balance on this note into 60 shares of Series 2000 non-voting Preferred Stock, leaving a balance of $6,106 under this note outstanding at September 30, 2001. During the three months ended December 31, 2001, the Company borrowed an additional $797,149 under this note, leaving a balance of $803,255 under this note outstanding at December 31, 2001.  No borrowings were made under this note during 2002.  On December 31, 2002 there was an outstanding balance of $803,255 on this note.

 

The Company entered into a 6.75% convertible note with VennWorks LLC dated February 14, 2002. During 2002 the Company borrowed $814,000 under this note. The principal outstanding under this note may be converted into securities of the Company at the option of VennWorks on terms yet to be specified. The borrowings are unsecured and are due and payable on demand by VennWorks.

 

Amphion Ventures, L.P.

On June 29, 2001, Amphion Ventures, L.P. elected to convert $580,000 of the outstanding principal balance and $140,000 of accrued interest of a 10% note payable, dated April 30, 1998, issued by the Company to Amphion Ventures, L.P. The borrowings and interest payable were converted into 72 shares of the Company’s Series 2000 Non-Voting Preferred Stock.

 

On September 28, 2001, the Amphion Group elected to convert (a) 306.25 shares of Series 2000 Non-Voting Preferred Stock with an issue price of $10,000 per share and a conversion price of $3.50 per share, into 875,000 shares of the Company’s common stock, (b) 214 shares of Series J Preferred Stock with an issue price of $10,000 per share and a conversion price of $4.00 per share, into 535,000 shares of the Company’s common stock, and (c) 556.55 shares of Series I Preferred Stock with an issue price of $10,000 per share and a conversion price of $4.00 per share, into 1,391,374 shares of the Company’s common stock.

 

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On December 31, 2001, the Amphion Group elected to convert (a) 1,497.04 shares of Series 2000 Non-Voting Preferred Stock with an issue price of $10,000 per share and a conversion price of $3.50 per share, into 4,277,264 shares of the Company’s common stock, (b) 1,783.34 shares of Series J Preferred Stock with an issue price of $10,000 per share and a conversion price of $4.00 per share, into 5,095,254 shares of the Company’s common stock, (c) 70,356 shares of Series A Preferred Stock with an issue price of $26 per share and a conversion price of $1.00 per share into 70,356 shares of the Company’s common stock, (d) 64,410 shares of Series B Preferred Stock with an issue price of $28.40 per share and a conversion price of $1.00 per share, into 64,410 shares of the Company’s common stock and (e) 31,087 shares of Series C Preferred Stock with an issue price of $30.20 per share and a conversion price of $1.00 per share, into 31,087 shares of the Company’s common stock.

 

On November 14, 2001, the Company entered into a 4.5% convertible demand note with Amphion Ventures, L.P. During the three months ended December 31, 2001, the Company borrowed $300,000 under this note, leaving a balance of $300,000 outstanding at December 31, 2001. The principal outstanding under this note may be converted into securities of the Company at the option of Amphion Ventures, L.P. The borrowings are unsecured and are due and payable on demand by Amphion Ventures, L.P.

 

The Company entered into a 6.75% convertible note with Amphion Ventures L.P. (“Amphion Ventures”), dated February 28, 2002. During 2002 the Company borrowed $1,255,000 under this note. The principal outstanding under this note may be converted into securities of the Company at the option of Amphion Ventures on terms yet to be specified. The borrowings are unsecured and are due and payable on demand by Amphion Ventures.

 

Amphion Investment, LLC

The Company entered into a 6.75% convertible note with Amphion Investments LLC dated January 25, 2002. During the nine months ended September 30, 2002, the Company borrowed $355,000 under this note. The principal outstanding under this note may be converted into securities of the Company at the option of Amphion Investments on terms yet to be specified. The borrowings are unsecured and are due and payable on demand by Amphion Investments.

 

IVEX Asset Purchase

Effective November 30, 2001, the Company completed its acquisition of certain of the assets of IVEX Corporation (“IVEX”), a privately held corporation engaged in the design, manufacture and marketing of video security technology and video storage products. The purchase price for the assets included 148,000 shares of the Company’s common stock.

 

Dividends

The holders of the Company’s Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock are entitled to receive quarterly dividends on each such share held at the annual rate of 10% of the original issue price of each share payable in arrears, when, as and if declared by the Company’s board of directors, in cash or additional shares of preferred stock. The holders of Series I Preferred Stock, Series J Preferred Stock, Series 1999 Voting Preferred Stock, and Series 2000 Non-Voting Preferred Stock are entitled to receive semi-annual dividends on each such share at the annual rate of 8% of the original issue price of each share payable in arrears, when, as and if declared by the Company’s board of directors, in cash or additional shares of preferred stock.

 

In 2002, the Company issued no preferred stock in lieu of dividends.

 

Preferred Stock Conversion Terms

Series A, B and C Preferred Stock. Each share of Series A, B, and C Convertible Preferred Stock is convertible at the option of the holders into voting common stock on a share-for-share basis. The Company may redeem the Series A, B and C Convertible Preferred Stock at any time at the $26.00, $28.40 and $30.20 stated value, respectively, plus accrued dividends, subject to the stock holder’s right to convert to voting common stock for 10 business days following receipt of the Company’s notice of redemption. As of December 31, 2002, no shares of Series A and B Convertible Preferred Stock were outstanding.

 

Series I and J Preferred Stock. Each Share of Series I Preferred Stock and Series J Preferred Stock is convertible in whole or in part at any time at the option of the holder into shares of voting or non-voting common stock of the Company, respectively, equal to the quotient of (a) the aggregate original issue price of $10,000 per share divided by (b) the conversion price of $2.51 per share. The Series I Preferred Stock and the Series J Preferred Stock are both subject to the optional redemption at any time by the Company, in whole or in part, at a redemption price per share equal to the $10,000 stated value, plus any accrued, but unpaid dividends thereon. The Company’s optional right of redemption is subject to each Series I Preferred Stock or Series J Preferred Stock holder’s right to convert such preferred stock into voting or non-voting common stock, as the case may be, within 10 business days after the Company’s notice of redemption.  The Series I Preferred Stock and the Series J Preferred Stock are also subject to the mandatory conversion by the Company into shares of the Company’s voting or non-voting common stock, as the case may be, if the closing bid price of the Company’s common stock on the NASDAQ SmallCap Market is at least $10.00 per share for a period of at least 90 consecutive trading days.

 

10

 

Series 1999 Preferred Stock and Series 2000 Preferred Stock. Each share of Series 1999 and Series 2000 Preferred Stock is convertible in whole or in part at any time at the option of the holder into a number of shares of voting or non-voting common stock of the Company, as the case may be, equal to the quotient of (a) the aggregate original issue price of $10,000 per share divided by (b) the conversion price of $2.50 or $3.50, respectively.  The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are both subject to the optional redemption at any time by the Company, in whole or in part, at a redemption price per share equal to the $10,000 stated value, plus any accrued, but unpaid dividends thereon. The Company’s optional right of redemption is subject to each Series 1999 Preferred Stock or Series 2000 Preferred Stock holder’s right to convert such preferred stock into voting or non-voting common stock, as the case may be, within 10 business days after the Company’s notice of redemption.   The Series 1999 Preferred Stock and the Series 2000 Preferred Stock are also subject to the mandatory conversion by the Company into shares of the Company’s voting or non-voting common stock, as the case may be, if (a) the closing bid price of the Company’s common stock on the NASDAQ SmallCap Market is at least $7.50 per share for a period of at least 20 consecutive trading days and (b) the trading volume of the common stock on the NASDAQ SmallCap Market is at least 50,000 shares per day as measured by NASDAQ during each of such 20 consecutive trading days.  As of December 31, 2002 there were no Series 2000 Preferred shares outstanding.

 

Other Matters

 

On July 30, 2003, the wife of Richard C. E. Morgan invested $100,000 in the Company pursuant to the terms of a bridge financing agreement.  Mrs. Morgan acquired a convertible promissory note in the principal amount of $100,000 and 25,000 unregistered shares of the Company’s common stock.  The Company agreed to use reasonable efforts to register the shares within 60 days of the transaction, and Mrs. Morgan agreed not to sell more than one-third of the shares in any calendar month.  The Company and Mrs. Morgan made certain representations and warranties in the bridge financing agreement.  The convertible promissory note bears interest at a rate of 7% compounded annually. At each of July 30, 2003; July 30, 2004; and July 30, 2005 the holder may elect to convert one-third of the principal amount of the note (plus accrued interest thereon) into shares of the Company’s common stock, provided that the Company has not, on or prior to each such conversion date retired one-third of the principal amount of the Note. The conversion price initially is 65% of the average closing price of a share of the Company’s common stock for the 20 trading days preceding the given anniversary date, provided that the maximum conversion price shall be $4.00 per share and the minimum conversion price shall be $1.00 per share, and the conversion price is subject to adjustment from time to time to reflect any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s shares of common stock.  Subject to the holder’s right to convert the note in accordance  with its terms, the note may be prepaid without penalty.

 

Richard C.E. Morgan, the Chairman of the Company’s board of directors, is the owner of 41.5% of Antiope Partners L.L.C., 41.643% of Amphion Partners L.L.C., 49.5% of Amphion Investments L.L.C., and, on a fully-diluted basis, 2.6258% of VennWorks LLC.  Mr. Morgan disclaims beneficial ownership of all of the Company’s shares held by these entities.

 

Robert J. Bertoldi, a director of the Company, is the owner of 23.5% of Antiope Partners L.L.C., 23.5823% of Amphion Partners L.L.C., 33.0% of Amphion Investments L.L.C., and, on a fully-diluted basis, 0.5442% of VennWorks LLC.  Mr. Bertoldi disclaims beneficial ownership of all of the Company’s shares held by these entities.

 

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 SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 30^th day of April 2003.

 

	AXCESS INTERNATIONAL INC.
	By:	/s/ Allan Griebenow
		Allan Griebenow, Director, President and
		Chief Executive Officer
		(Principal Executive Officer)

 

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 CERTIFICATIONS

 

I, Allan Griebenow, certify that:

 

1.     I have reviewed this amended annual report on Form 10-KSB of Axcess International Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and we have:

a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report  (the  “Evaluation Date”); and

c)     presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the   registrant’s auditors and the audit committee of registrant’s board of directors  (or persons performing the equivalent function):

a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 30, 2003
	/s/ ALLAN GRIEBENOW
	Allan Griebenow, President and Chief Executive Officer
	(Principal Executive Officer)

 

13

 

CERTIFICATIONS

 

I, Allan Frank, certify that:

 

1.     I have reviewed this amended annual report on Form 10-KSB of Axcess International Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-14 and 15d-14) for the registrant and we have:

a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidating subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report  (the  “Evaluation Date”); and

c)     presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the   registrant’s auditors and the audit committee of registrant’s board of directors  (or persons performing the equivalent function):

a)     all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 30, 2003
	/s/ ALLAN L. FRANK
	Allan L. Frank, Vice President, Chief Financial Officer and Secretary
	(Principal Accounting and Financial Officer)

 

14

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of AXCESS International Inc. (the “Company”) on Form 10-KSB for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Allan Griebenow, President, Chief Executive Officer and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

 

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

 

/S/ ALLAN GRIEBENOW
Allan Griebenow
President, Chief Executive Officer and Principal Executive Officer
Dated:  April 30, 2003

 

15

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report of AXCESS International Inc. (the “Company”) on Form 10-KSB for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Allan L. Frank, Vice President, Chief Financial Officer, Secretary and Principal Accounting and Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

 

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

 

/S/ ALLAN L. FRANK
Allan L. Frank
Vice President, Chief Financial Officer, Secretary and Principal Accounting and Financial Officer
Dated:  April 30, 2003

 

16