##### Table of Contents

---

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
|- | ------------------------------------------------------------------------------------



For the fiscal year ended December 31, 2004



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 number: 000-24575



---



AMERICAN ACCESS TECHNOLOGIES, INC.

(Name of small business issuer specified in its charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-3410234                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



6670 Spring Lake
Road, Keystone Heights, FL 32656

(Address of principal executive offices, including zip code)



(352) 473-6673

(Issuers telephone number, including area code)



---



Securities registered under Section 12(b) of the
Exchange Act:

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 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. ̈



The issuers revenues for the fiscal year ended December 31, 2004 were $6,740,337.



The number of shares outstanding of the issuers common stock as of March
22, 2005 was 7,382,260 shares. The aggregate market value of the common stock 7,074,790 shares held by non-affiliates, based on the closing price of the common stock on the Nasdaq Stock Market as of March 22, 2004 was $9,621,714. Transitional Small
Business Disclosure Format (Check one):    Yes ̈No  x



---



---

##### Table of Contents

TABLE OF CONTENTS



|                                 |  |                                                                                                                 |  |         
|-------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------
|                                 |  |                                                                                                                 |  | PAGE NO.
|PART I                           |  |                                                                                                                
|                                 |  |                                                                                                                
|Item 1.                          |  | Description of Business                                                                                         |  | 3       
|                                 |  |                                                                                                                
|Item 2.                          |  | Description of Property                                                                                         |  | 11      
|                                 |  |                                                                                                                
|Item 3.                          |  | Legal Proceedings                                                                                               |  | 11      
|                                 |  |                                                                                                                
|Item 4.                          |  | Submission of Matters to a Vote of Security Holders                                                             |  | 11      
|                                 | 
|PART II                          |  |                                                                                                                
|                                 |  |                                                                                                                
|Item 5.                          |  | Market for Common Equity and Related Stockholder Matters                                                        |  | 12      
|                                 |  |                                                                                                                
|Item 6.                          |  | Managements Discussion and Analysis Or Plan of Operation                                                       |  | 12      
|                                 |  |                                                                                                                
|Item 7.                          |  | Financial Statements                                                                                            |  | 17      
|                                 |  |                                                                                                                
|Item 8.                          |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                            |  | 17      
|                                 |  |                                                                                                                
|Item 8A.                         |  | Controls and Procedures                                                                                         |  | 17      
|                                 | 
|PART III                         |  |                                                                                                                
|                                 |  |                                                                                                                
|Item 9.                          |  | Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act |  | 17      
|                                 |  |                                                                                                                
|Item 10.                         |  | Executive Compensation                                                                                          |  | 20      
|                                 |  |                                                                                                                
|Item 11.                         |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                  |  | 23      
|                                 |  |                                                                                                                
|Item 12.                         |  | Certain Relationships and Related Transactions                                                                  |  | 25      
|                                 |  |                                                                                                                
|Item 13.                         |  | Exhibits                                                                                                        |  | 25      
|                                 |  |                                                                                                                
|Item 14.                         |  | Principal Accountant Fees and Services                                                                          |  | 26      
|                                 | 
|Signatures                       |  | 28                                                                                                             
|                                 | 
|Exhibit Index and Certifications |  | 29                                                                                                             



---

##### Table of Contents

PART I



ITEM 1. DESCRIPTION OF BUSINESS



GENERAL



American Access Technologies, Inc. (the Company)
develops and manufactures patented zone cabling and wireless enclosures that mount in ceilings, walls, raised floors, and custom furniture, to facilitate the routing of telecommunications network cabling, fiber optics and wireless
solutions to the workspace environment. We believe that zone cabling is a superior approach for growing and open office configurations or wherever frequent moves, additions and changes of telecommunications services are a factor. Zone cabling of the
workspace reduces both labor and material costs for initial network installation and facilitates moves, adds, changes and upgrades for the network installations of today and tomorrow.



Omega Metals, Inc. (Omega), a wholly-owned subsidiary of the Company since 1998, was merged into the
Company effective February 3, 2005 and will continue to operate as a separate division. Omega Metals is a precision sheet metal fabrication and assembly operation which manufactures our zone cabling and wireless products. It also serves a diverse
client base of over 300, including engineering, technology and electronics companies, mostly in the Southeast. Omega Metals operates from a 67,500 sq. ft. manufacturing facility situated on 81/2acres of land which is owned by the Company. Manufacturing services include precision stamping, bending, assembling, painting, powder coating and silk
screening.



We have expanded our proprietary line of
products to include several different sized enclosures, a wall mounted enclosure and a wireless enclosure. We continue to forge private labeling agreements with several manufacturers for which we custom design products to their specifications,
serving as an Original Equipment Manufacturer, or we label our standard and modified products to suit these customers needs. Our products are included in the catalog for government contracts and large private sector jobs with one of the
nations top distributors of telecommunications systems products.



On May 8, 2003 we entered into an agreement with Chatsworth Products, Inc. (CPI), Westlake Village, CA establishing a five-year strategic alliance for the manufacture and sales of zone cabling and wireless
products developed by American Access. These products, which are currently manufactured by American Access, are co-branded with the names of both American Access and Chatsworth Products and are exclusively sold and distributed by CPI. Under the
agreement, American Access will continue to manufacture the products but CPI will have manufacturing rights under certain circumstances. Currently, American Access manufactures all such products. In connection with the alliance, CPI purchased
215,517 shares of American Access common stock in a private placement at $1.16 per share.



On January 11, 2002, the Company entered into an agreement, which was amended on October 1, 2002, for the Acquisition of Product Rights (Agreement) from Bill Sherer Corporation (BSC) and its
principal, Bill Sherer. All rights, entitlements, logos, trademarks, goodwill and designs pursuant to the Northern Lights/Eclipse Ultraviolet Light Air Cleansing Systems (the Products) were acquired by the Company in exchange for cash
payments of $175,000 and forgiveness of approximately $133,000 in outstanding accounts receivables carried by the Company on BSCs account. All costs relating to this acquisition have been fully amortized as of December 31, 2004. The product is
a metal device containing an ultraviolet light designed to be placed in a home air conditioning system. It is used to kill germs and bacteria in indoor air. Our marketing strategy targets contractors and distributors who will supply the system to
the homeowner for installation in the central air conditioning system. Our current strategy includes finding a company to acquire our product rights and to distribute the product while we continue to manufacture the product.



3



---

##### Table of Contents

HISTORY OF THE COMPANY



The Company was incorporated on October 21, 1996, under the laws of the State of Florida.



THE COMPANYS BUSINESS



Businesses today strive to get and stay connected with faster and faster access to the Internet and more ways to communicate through computers, voice and
video. The Company develops telecommunications network infrastructure solutions to open office architecture, routing high speed cabling, copper wiring and telecommunications network infrastructures wireless solutions 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 communication networks 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 enclosures conveniently house equipment in the ceiling, raised floors, wall mounts and
modular furniture. This dedication to providing total and flexible cabling and wireless solutions places the Company at the forefront of the telecommunications zone cabling industry.



THE COMPANYS ZONE CABLING PRODUCTS



Our product line capitalizes on the need for zone cabling solutions. Our enclosures provide efficiency and flexibility and are plenum-rated and
Underwriters Laboratories approved as described in UL-2043.



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. The Company researched and verified that no such enclosure existed. In fact, such
research indicated that no one was even developing such a zone device.



We designed a telecommunications zone enclosure to house and distribute telecommunications wiring and cabling in buildings. We currently hold several national and foreign patents for the related technology of our zone and wireless cabling
enclosures 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 and
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. In 2002, we developed our wall mount solution as well as designing a system that
provides the same solution in modular office furniture.



The
enclosure 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 enclosure was designed to accommodate all manufacturers
equipment including various panels as well as fiber optic cables and wireless systems.



Product Application



The enclosure will reduce the
amount of wire running from the workstation to the telecommunications closet. The wiring will now run from the workstation to our enclosure, which is readily accessible through the ceiling grid system, a raised floor panel, or through a panel in
modular furniture. The enclosures are designed to accommodate either all of the newly developed Open Office Architecture wiring equipment and distribution connections or the configurations for wireless access.These enclosures are



4



---

##### Table of Contents

mounted in a standard 2ft. x 4 ft. or 2ft. x 2 ft ceiling grid system or raised floor system, and are 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. Additionally, we have the capability to
customize the enclosure for specific needs as well as having designed a system compatible with modular office furniture, allowing systems to be reconfigured in an office environment as needed. 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. Cables are easily re-routed and reused. Less cable is used, thereby reducing the
cost of materials and labor. Money is saved with the initial installation and when systems are changed.



The enclosure makes better use of telecommunications closets, reducing the mass of cables to be run throughout the building. Therefore, building owners
have more leasable space.



Product Standards and Regulations



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 zone enclosure 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 (TIA) and Building Industrial Consulting Services International. The TIA sets telecommunications industry standards. We are
represented on four of the TIAs subcommittees to study zone cabling, thus participating in recommendations for future standards and guidelines for its use.



Zone cabling, or Open Office Architecture, was originally endorsed under Telecommunications Systems Bulletin 75, by the
American National Standards Institute, the Telephone Industry Association and the Electrical Industry Association.Bulletin 75 has been incorporated into TIA-568-B.1. Currently, the TIA sub-committees are studying TIA 569a and are making
additional recommendations on zone cabling and related systems. In December 2004, the TIA issued a standard for Commercial Building Telecommunications Cabling Pathways and Spaces, TIA-569-B. The publication of the new standard gives official
recognition to the concept and application of active zone enclosures, called telecommunication enclosures. Although American Access pioneered the development of such products and introduced its first active zone enclosure product in
January 1997, this is the first official standard covering such products. American Access has determined that its zone enclosure products meet the new 569-B standard for performance and functionality. The Company is represented on both the TIA and
four of its sub-committees, and will help shape future direction of zone cabling.



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 enclosure that mounts within the ceiling grid system. The Company
then developed accessory equipment to permit cable penetrations and maintain fire rating.



5



---

##### Table of Contents

The second phase was to develop an enclosure that serves as a termination, distribution or consolidation
point within a raised floor data center.



The third phase
includes a high-voltage termination enclosure 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 houses an enclosure inside select modular office
furniture.



Phase five was accomplished in 2001 when our
wireless enclosure made its debut. Since we introduced it, the wireless enclosure has been the subject of repeat orders by a major network provider.



Currently, we continue to expand our line of proprietary products, offering different-sized units, wall mounts, wireless enclosures and customizing
existing units for private label customers.



There can be no
assurance that any new products will be successfully developed or marketed.



Intellectual Property



Currently, multiple patents
have been issued for the related technology of our Zone Cabling Termination Enclosures and for Communications Cable Interconnection Apparatus and Associated Method For An Open Office Architecture including:



U.S. Patent No. 5,911,611 issued on June 15, 1999;

U.S. Patent No. 5,842,313 issued on December 1, 1998;

U.S. Patent No. 6,112,483 issued on September 5, 2000;

Chinese Patent No. ZL98002220.6 issued on January 5, 2005;

Australian Patent No. 750298 issued on October 31,2002;

Canadian Patent No. 2,277,797 issued on July 23, 2002;

Mexican Patent No. 205.0/021576 issued September 25, 2003;

German Patent No. DE 698,08,462 T2 issued on July 10, 2003;

Austrian Patent No. E 225 575 issued on December 3, 2002; and

Great Britain as European Patent No. 0953221 issued on February 10, 2002.



In addition to the zone cabling enclosure patents, U.S. Patent No. 6,201,687 for Modular Furniture Wall System and Method
for Telecommunications Equipment and Wire Management In An Open Office Architecture was issued on March 13, 2001.



OMEGA METALS



We have developed all of our products utilizing computer assisted design drawings (CADD). Master copies of our 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., in exchange for 226,470 shares of the Companys common stock.



Omega Metals, a wholly-owned subsidiary of the Company since 1998, is a precision sheet metal fabrication and assembly
company and has been a manufacturer of various products used in the telecommunications industry. It is 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. Effective February 3, 2005, Omega Metals was merged into American Access Technology, Inc. and will continue to function as a separate division.



6



---

##### Table of Contents

Omega Metals operates from its 67,500 sq. ft. manufacturing facility situated on 81/2acres of land owned by the Company. The manufacturing process is run by a state-of-the-art computer control
system. Manufacturing services include precision stamping, bending, assembling, painting, powder coating and silk screening. The recent installation of a robotic welder has significantly improved production efficiencies. 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. Diversified facilities and equipment allow Omega Metals 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 also manufactures for the Companys acquired product line, the Eclipse Ultraviolet Light Air Cleansing System.



Omega markets its services through sales representatives who are independent
contractors covering the Eastern United States. Omegas vice president of sales works in the field, calling on and developing accounts.



SALES AND MARKETING



Our analysis indicate that the telecommunications industry is beginning to promote zone cabling as a means to distribute fiber and short runs of enhanced
copper. This cabling architecture provides the LAN broader band width, increased speeds, and reduced costs associated with moves, adds, and changes (MACs).



On May 8, 2003 we entered into an agreement with Chatsworth Products, Inc. (CPI), Westlake Village, CA establishing a five-year strategic
alliance for the manufacture and sales of Zone Cabling and Wireless products developed by American Access. These products, which are currently manufactured by American Access, are co-branded with the names of both American Access and Chatsworth
Products and will be exclusively sold and distributed by CPI. Under the agreement, American Access will continue to manufacture the products but CPI will have manufacturing rights under certain circumstances. American Access currently manufactures
all of such products. In connection with the alliance, CPI purchased 215,517 shares of American Access common stock in a private placement at $1.16 per share.



Our marketing plan envisions a distribution chain that includes forging relationships with and ultimately selling our products to:



| | 1 | Systems Providers (Original Equipment Manufacturers  OEMs) that buy and sell product and specify telecommunications systems to end-users. We have signed
private label agreements with several manufacturers, for which we custom design products to their specifications, serving as an OEM, or label our standard and modified products to suit customers needs. Marketing through systems providers is
similar to the tire manufacturer that broadens its sales success by selling tires to the automobile manufacturer for inclusion in the finished product. For us, being specified as part of a whole telecommunications system at the pre-design phase is
an important part of our sales effort, so we focus on getting the word out to OEMs about the benefits of zone cabling;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | Distributors that stock, sell and finance product and whole systems. We work with our distributors that employ a sales force to support and sell product through contractors.
Working closely with distributors ensures that their sales efforts are successful because their sales personnel understand why zone cabling products are important to a network;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3 | Contractorswho install, test and guarantee the network systems they build for end-users. Contractors also work closely with the architects and Information Technology Systems
Designers who need to know the benefits of zone cabling so it can be specified from the beginning of a project;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4 | End-users that can specify the most cost-efficient system available to them will want to hear the zone cabling story from their architects, contractors, distributors or
systems providers. Forging all of these relationships gives us the edge in educating potential buyers of our products.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



---

##### Table of Contents

As we build relationships on these four levels, the products we manufacture can be sold to systems
providers and distributors, who in turn sell to contractors or directly to the end-user. Because our products are an integral part of a telecommunications network, we market them for inclusion in those networks, not as separate products. Our goal is
to reach beyond the concept that our product is an alternative to traditional home run cabling and to make zone cabling a standard in the industry. We are accomplishing this goal by hiring independent contractors to manage sales and OEM accounts
within designated territories. Currently, three independent sales agents bring to the job years of experience in the telecommunications systems sector. These representatives also cross sell other metal fabricating jobs for Omega Metals.



Concurrently, Omega Metals utilizes manufacturers representatives
who are independent contractors to generate sales. Omegas vice president of sales also calls on accounts and coordinates Omegas sales efforts.



The Company uses several brochures to assist in marketing ranging from a one-page overview to an eight-page full color product and application brochure.
We also maintain an Internet website for the casual visitor, the telecommunications expert and the investor. All of these marketing/media materials provide company information, product information, engineering specifications, drawings, application
for use, and features and benefits tailored to each individual market need. Additionally, the Internet website provides marketing support materials that can be downloaded and printed at individual locations throughout the world. Questions and
answers can be transmitted via e-mail feedback capability, query analysis for tracking of inquiries, lead generation for the distributors, distribution of marketing materials to end-users not normally addressed by the individual distributors.



The Company is participating with its channel partners in
trade shows as a component in their individual booths and hospitality suites. The Company also participates individually in select trade shows and distributors forums each year.



Distribution and Sales



In addition to our relationship with our OEM partners and our strategic alliance with CPI, the Company maintains authorized distributors that are
providers of integrated cabling and network solutions that support business information and network infrastructure requirements. These distributors team with customers to implement network solutions by combining a variety of customized pre- and
post-sale services and products from the worlds leading manufacturers.



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.



RISK FACTORS



Our business is subject to a number of risks, some of which are discussed below. Other risks are presented elsewhere in this
document and in the information incorporated by reference into this document. Before deciding to invest in our company or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other
information contained in this Annual Report on Form 10-KSB, our Quarterly Reports on 10-QSB; and in our other filings with the Commission, including



8



---

##### Table of Contents

any subsequent reports filed on Forms 10-KSB, 10-QSB and 8-K. The risks and uncertainties described below are not the only ones that we face. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business and results of operations. If any of these risks actually occur, our business, financial condition or results of operations could be
seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.



GENERAL BUSINESS OPERATIONS AND FINANCIAL RISKS



Risks Related to our business:



We have had a history of operating losses.



We incurred net losses of approximately $858,000 in 2004, $842,000 in 2003, $967,000 in 2002, $1,441,000 in 2001 and $2,034,000 in 2000. Our expenses are
currently greater than our revenues. Our ability to operate profitably depends on increasing our sales and achieving sufficient gross profit margins. We cannot assure you that we will operate profitably.



We have experienced fluctuations in our revenues and this may continue in the future.



In 2001, we experienced significant declines in sales in both
our zone cabling products and metal fabrication and assembly business. We believe this decline was the result of a significant decline in capital spending in the telecommunications industry, a reduction in technology-related capital spending and a
general overall economic recession that has negatively affected the markets we serve. While we have seen an increase in our revenues since 2001 from an economic recovery, there can be no assurance as to the duration and strength of such recovery and
whether it will continue to positively affect our revenues.



We have a limited
operating history with our zone cabling and wireless products, which makes your evaluation of our business difficult.



We introduced our zone cabling products into the commercial marketplace in January 1997 and since that date have introduced additional products including
our first wireless enclosure in August 2001. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in relatively new and rapidly evolving markets. These risks include:



| |  |  | uncertain commercial acceptance of our products;
| | - |  | ------------------------------------------------



| |  |  | technological obsolescence; and
| | - |  | -------------------------------



| |  |  | competition.
| | - |  | ------------



We cannot assure you that we will succeed in addressing these risks. If we fail to do so, our revenue and operating results could be materially harmed.



Telecommunications networking products are subject to rapid technological change and to compete, we must offer products that achieve market
acceptance.



The telecommunications networking industry is
characterized by rapid technological change, short product life cycles and evolving industry standards. To remain competitive, we must continue to improve our existing products and offer products for new technologies which may emerge.



Our zone cabling enclosures are designed to facilitate zone cabling of
workspace environments. We believe that zone cabling is a superior approach for growing and open office configurations or wherever frequent moves, additions and changes of telecommunications services are a factor. We can offer no assurance, however,
that zone cabling will be widely adopted by the telecommunications industry. Furthermore, the recent growth of wireless networking may adversely affect the demand for our zone cabling products.



9



---

##### Table of Contents

Sales of our zone cabling products depend upon the decision of prospective end users to undertake a
network cabling or wireless networking projects which incorporate our products. Such projects are affected by a variety of factors, including the following:



| |  |  | acceptance of the benefits of zone cabling over traditional home run cabling;
| | - |  | -----------------------------------------------------------------------------



| |  |  | general economic conditions; and
| | - |  | --------------------------------



| |  |  | potential technological changes such as the growth of wireless networking in the office.
| | - |  | ----------------------------------------------------------------------------------------



For these and other reasons, the sales cycle associated with the purchase of our zone cabling and wireless products can be
quite lengthy and is subject to a number of significant risks, including customers budgeting constraints and internal acceptance reviews that are beyond our control. Because of the lengthy sales cycle, our sales of such products are variable
and can fluctuate substantially.



We depend significantly on one distributor of
our zone cabling and wireless products.



Until May 2003, our
zone cabling and wireless product revenues were derived from our sales to a limited number of direct customers, most of which were OEM customers and stocking distributors. In May 2003, we established Chatsworth Products, Inc. (CPI) as our
distributor for all of our zone cabling and wireless products to customers other than OEM customers. Accordingly, we are dependent on the performance of CPI to maintain relationships with our existing customers, other than OEM customers, and
establish new customers for our products. Our distribution agreement with CPI lasts until May 2008. If CPI is not successful in maintaining good relationships with our existing customers, other than OEM customers, and developing new customers for
our products or experiences significant reduction, delay or cancellation of orders from any of these customers, our operating results could be materially and adversely affected.



Our failure to adequately protect our proprietary rights could adversely affect our ability to compete effectively.



We rely on a combination of patents, trademarks, non-disclosure agreements,
invention assignment agreements and other security measures in order to establish and protect our proprietary rights. We have been issued four U.S. patents and seven foreign patents which are important to our current business. We can offer no
assurance that the claims allowed within the patents will be sufficiently broad to protect our technology. In addition, we can offer no assurance that any patents issued to us will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will adequately protect the Company. There can be no assurance that the measures we have taken or may take in the future will prevent misappropriation of our technology or that others will not independently develop similar
products, design around our proprietary or patented technology or duplicate our products.



Risks related to ownership of our common stock:



The exercise of our outstanding stock options could adversely affect our outstanding common stock.



Our stock option plans are an important component of our compensation program for our employees and directors. At December 31, 2004, we have 6,572,402
outstanding options to purchase shares of common stock with exercise prices ranging from $0.56 to $10.00 per share. The average weighted exercise price is $2.56. Of the total outstanding, 5,441,479 are options and warrants outstanding to employees
and officers/directors. The existence of such rights to acquire common stock at fixed prices may prove a hindrance to our efforts to raise future funding through the sale of equity. The exercise of such options will dilute the percentage ownership
interest of our existing stockholders and may dilute the value of their ownership. The possible future sale of shares issuable on the exercise of outstanding options could adversely affect the prevailing market price for our common stock.
Furthermore, the holders of the



10



---

##### Table of Contents

outstanding rights may exercise them at a time when we would otherwise be able to obtain additional equity capital on terms more favorable to us. However,
due to the wide range of exercise prices, the likelihood that all outstanding options and warrants get exercised all at one time is highly unlikely.



If the price of our stock goes below $1.00 for 30 consecutive trading days, our stock could be delisted from the NASDAQ Stock Market.



Our stock is currently listed on the Nasdaq Small Cap Market. The Nasdaq
Stock Markets Marketplace Rules impose a minimum stock price of $1.00 per share for the continued listing of our stock. As of the date of this report, we are in compliance with all Nasdaq Stock Market listing requirements. If our stock price
were to close below $1.00 for 30 consecutive trading days in the future we could be out of compliance and our stock would be subject to delisting if we did not achieve compliance within the 180-day cure period provided in the Nasdaq Marketplace
Rules. If we are delisted our stocks liquidity would suffer, and we would likely experience reduced investor interest. Such factors may result in a decrease in our stocks trading price. Delisting also makes it more difficult for us to
issue additional shares in order to secure additional financing.



ITEM 2. DESCRIPTION OF PROPERTY



The Company maintains its corporate offices at 6670 Spring Lake Road, Keystone Heights, FL 32656. The corporate offices are located at our 67,500 sq. ft manufacturing facility which is situated on 81/2acres of land owned by the Company in Northeast Florida, midway between Jacksonville and Gainesville.



ITEM 3. LEGAL PROCEEDINGS



On
April 10, 2001, the Company entered into an Agreement and Plan of Merger to merge with Defense Technology Systems, Inc., formerly known as DataWorld Solutions, Inc., an unrelated entity. Subsequent to signing the agreement, the merger
candidate incurred materially adverse changes in its basic business structure and operations. Pursuant to the terms of the agreement, the Company terminated the agreement and filed suit against the entity on July 11, 2001 in the 18th Judicial
Circuit Court, Seminole County, Florida seeking a declaratory judgment that it properly terminated the merger agreement and damages resulting from the termination. The merger candidate counter sued for a $500,000 termination fee specified in the
agreement, but which was payable only under limited circumstances. The trial process began February 7, 2005. On February 18, 2005, Floridas 18th Judicial Circuit Court ruled in favor of American Access. The judge ruled that American Access was
justified in terminating the merger agreement and has initially awarded American Access damages including fees and costs incurred, the value of which remains to be determined, in connection with the proposed merger and the resulting litigation. A
receivable has not been recorded, pending the determination of damages, fees and costs incurred and the other partys potential appeal.



On December 15, 2004, the Company filed seven suits in Small Claims Court in Clay County, Florida, related to a customers default on a $38,000
account receivable for the ultra-violet light product. The entire past due balance is reflected in the bad debt allowance. The customer subsequently responded by filing a counter-suit in South Carolina and Clay County claiming breach of contract,
negligence, fraud and misrepresentation.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



There were no submissions of matters to security holders in the fourth quarter 2004.



11



---

##### Table of Contents

PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Common Stock



The
Companys common stock trades on the NASDAQ Stock Exchange under the symbol AATK.



The following table sets forth quotations for the high and low closing prices for the Companys common stock, as reported by Nasdaq, for the periods
indicated below:



|           |  |                               |      |                               |   |      |  |     |      |  |   |     
|---------- |  | ----------------------------- | ---- | ----------------------------- | - | ---- |  | --- | ---- |  | - | ----
|           |  | High                          |      | Low                           |   | High |  | Low
|           |  | Year Ending December 31, 2004 |      | Year Ending December 31, 2003
|1stQuarter |  | $                             | 1.98 |                               | $ | 1.25 |  | $   | 0.76 |  | $ | 0.49
|2ndQuarter |  | $                             | 2.00 |                               | $ | 1.15 |  | $   | 1.45 |  | $ | 0.60
|3rdQuarter |  | $                             | 2.05 |                               | $ | 1.52 |  | $   | 1.37 |  | $ | 0.80
|4thQuarter |  | $                             | 2.50 |                               | $ | 1.72 |  | $   | 1.34 |  | $ | 0.83



We have approximately
90 stockholders of record as of March 21, 2005 not including approximately 4,500 beneficial holders whose stock is held in street name. There are no contractual restrictions on our ability to pay dividends. No dividend has been declared or paid by
the Company since inception. The Company does not currently anticipate that any dividends will be declared.



ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



Cautionary note on forward-looking statements: 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.



Certain amounts in prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements. Commencing with the first quarter 2004,
certain amounts have been reclassified to cost of goods sold from selling, general and administrative costs and the comparable amounts have been reclassified to/from the prior year.



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.



12



---

##### Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES



We have adopted various accounting policies that govern the application of accounting principles generally accepted in the
United States of America in the preparation of our financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on managements knowledge of current events and actions it may undertake in the future, they may ultimately differ from
actual results. Our significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2004, that are made a part of this annual report on Form 10-KSB. Certain accounting policies involve
significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. Management believes the following critical accounting policies reflect its most significant estimates and assumptions
used in the presentation of our financial statements. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as special purpose entities (SPEs), nor do
we have any variable interest entities (VIEs), as defined by FN 46 and FN 46(R).



Revenue Recognition



The
Company recognizes revenue from product sales at the time the product is shipped and title passes to the customer.



Allowance for Doubtful Accounts



The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The
estimate is based on managements assessment of the collectibility of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. We also will review historical experience
with the customer, the general economic environment and the aging of our receivables. We record an allowance to reduce the specific receivables to the amount that we reasonably believe to be collectible. Those estimates subject to potential change
in the near term include allowances for doubtful accounts. Based on our historical collection experience, we currently feel our allowance for doubtful accounts is adequate.



Stock-Based Compensation



Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), encourages,
but does not require companies to record stock-based compensation plans using a fair value based method for grants to employees and directors. The Company has chosen to continue to account for stock-based compensation, granted to employees and
directors, using the intrinsic value based method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, compensation cost for stock options granted to employees and
directors is measured as the excess, if any, of the quoted market price of the Companys common stock at the date of the grant over the amount an employee must pay to acquire the stock. Grants of stock-based compensation to non-employees are
accounted for following SFAS No. 123 utilizing the fair value method. SFAS No. 123 requires that fair value of the investment granted be measured, which the Company does using an option pricing model.



In December 2004, the Financial Accounting Standards Board issued SFAS No.
123-R, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance.
SFAS No. 123-R establishes standards for the accounting for transactions in which an entity



13



---

##### Table of Contents

exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or
services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS No. 123 as originally issued and EITF Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. This Statement does not address the accounting for employee share ownership plans, which
are subject to AICPA Statement of Position 93-6, Employers Accounting for Employee Stock Ownership Plans. This Statement becomes effective the beginning of the first interim or annual reporting period that begins after December 15, 2005. The
Company has not assessed the full impact but believes the adoption of this standard may have a significant, non-cash impact on the Companys results of operations or financial position as of January 2006.



Inventory Valuation



Inventories are stated at the lower of cost or market, with cost determined
using an average cost method. Inventory costs for finished goods and work-in-process include material, labor, production overhead, and outside services. Production overhead, including indirect labor, is allocated to finished goods and
work-in-progress based on material purchases which is an estimate that could be subject to change in the near term.



RESULTS OF OPERATIONS



REVENUES



Total revenues
increased 22.2% in 2004, primarily as the result of a 47.6% increase in our zone cabling division which is mainly attributable to the strategic alliance with Chatsworth Products, Inc. Sales to CPI represent approximately $1,595,000 or 23.7% of total
sales for the year ended December 31, 2004 and $372,000 or 6.7% of total sales (9.1% of total sales between May and December, 2003) for the year ended December 31, 2003. Pricing for our OEM relationships is reviewed and updated annually to take into
account such changes as market demand and economic factors affecting costs. Omega Metals, our formed metal division, increased sales 9.2% which is primarily attributable to an increase in orders from existing customers. Omega is not limited to
annual pricing reviews and revises its pricing accordingly.



|             |  |      |           |      |   |           |  |     
|------------ |  | ---- | --------- | ---- | - | --------- |  | ----
|             |  | 2004 |           | 2003 |   | % change 
|Formed metal |  | $    | 3,978,308 |      | $ | 3,644,258 |  | 9.2 
|Zone cabling |  |      | 2,762,029 |      |   | 1,871,052 |  | 47.6
|             |  |      |           |      |   |           |  |     
|Total        |  | $    | 6,740,337 |      | $ | 5,515,310 |  | 22.2
|             |  |      |           |      |   |           |  |     



COSTS AND EXPENSES



Cost of sales represents expenses incurred by the Company to have its
products manufactured and assembled. These costs represent 84.6% of revenues for the year 2004 and 82.8% of revenues for the year 2003. Fuel and transportation costs, in direct correlation to the market value of crude oil, increased significantly in
2004. Strong steel market demand and high prices in most U.S. steel markets prompted an 11% overall increase in domestic steel shipments and a 31% increase in imports of raw steel. Although the increases in importing and shipping alleviated some of
the shortages reported by many in steel-consuming sectors, the shortage continues. Sheet metal prices increased relentlessly (an average of 34%) throughout the year and are projected to continue to escalate throughout 2005. Labor costs increased due
to a shortage of skilled labor and production delays due to four hurricanes that struck Florida between September and October 2004, thus increasing overtime expense. Additionally, commencing with the first quarter 2004, $456,000 in 2004 and $388,000
in 2003 have been reclassified to cost of goods sold from selling, general and administrative costs.



14



---

##### Table of Contents

General and administrative costs represent 13.0% of revenues for the year 2004 and 13.5% for the year
2003. The $133,000 overall increase in selling, general and administrative expenses for the twelve months ended December 31, 2004 is primarily due to an increase of $134,000 in professional, legal and settlement costs. Commission expense increased
$58,000 due to the increased sales but is offset by a decrease of $23,000 in advertising expense, $20,000 in tax and licenses and $16,000 in bad debt expense.



Compensation and related benefits represent 12.7 % of revenues for the year 2004 and a total of 19.5% for the year 2003. Compensation expense for 2003
includes $201,460 (3.7%) related to a decision by the Board to treat outstanding loans and interest receivable of the two officers as compensation. The amounts due were approximately $110,260 and $91,200, respectively, of which $155,000 was
principal and $46,460 was interest, collectively. Stock-based compensation of approximately $144,000 represents 2.1% of sales for the year 2004 as compared to $54,000, or 1.0% of sales for the year 2003. The increase of $90,000 is attributable to
claim settlements of approximately $55,000 and legal fees of approximately $35,000.



|                                                                                                   |  |      |           |          |       |      |   |           |  |         |  |        |  
|-------------------------------------------------------------------------------------------------- |  | ---- | --------- | -------- | ----- | ---- | - | --------- |  | ------- |  | ------ | -
|                                                                                                   |  | 2004 |           | %Revenue |       | 2003 |   | %Revenue  |  | %Change | 
|Costs and Expenses:                                                                                |  |      |           |          |       |      |   |           |  |         |  |        |  
|Cost of sales                                                                                      |  | $    | 5,701,403 |          | 84.6  |      | $ | 4,568,186 |  | 82.8    |  | 24.8   |  
|Selling, general and administrative                                                                |  |      | 878,948   |          | 13.0  |      |   | 745,465   |  | 13.5    |  | 17.9   |  
|Compensation and related benefits                                                                  |  |      | 857,732   |          | 12.7  |      |   | 869,047   |  | 15.8    |  | (1.3   | )
|Compensation to officer/director/stockholders in connection with marketing/manufacturing agreement |  |      |          |          |      |      |   | 201,460   |  | 3.7     |  | (100.0 | )
|Stock-based compensation                                                                           |  |      | 143,775   |          | 2.1   |      |   | 53,687    |  | 1.0     |  | 167.8  |  
|                                                                                                   |  |      |           |          |       |      |   |           |  |         |  |        |  
|                                                                                                   |  |      | 7,581,858 |          | 112.5 |      |   | 6,437,845 |  | 116.8   |  | 17.8   |  
|                                                                                                   |  |      |           |          |       |      |   |           |  |         |  |        |  



As a result of the
above information, we had a net loss in 2004 of $858,000 compared to a net loss of $842,000 in 2003. The $81,000 improvement in Loss Before Other Income is the result of increased gross margin due to reduction in direct costs, an approximate
increase of 22% in sales and the elimination of the 2003 additional compensation expense incurred in 2003. However, due to an increase of approximately $224,000 in selling, general, administrative expense and stock-based compensation, we ultimately
recognized an increase in net loss of approximately $15,000.



|                         |  |      |          |   |      |   |          |          |  |      |  
|------------------------ |  | ---- | -------- | - | ---- | - | -------- | -------- |  | ---- | -
|                         |  | 2004 |          |   | 2003 |   |          | % change | 
|Loss before Other Income |  | $    | (841,521 | ) |      | $ | (922,535 | )        |  | (8.8 | )
|                         |  |      |          |   |      |   |          |          |  |      |  
|Net Loss                 |  | $    | (857,516 | ) |      | $ | (842,116 | )        |  | 1.8  |  
|                         |  |      |          |   |      |   |          |          |  |      |  



LIQUIDITY AND CAPITAL RESOURCES



Our operating activities utilized cash of $363,469 during the
year ended December 31, 2004 compared to utilization of $321,789 in 2003. Net cash used consisted primarily of net losses, increases in accounts payable, accrued and prepaid expenses, and inventories. However, the cash decrease is offset by
depreciation, amortization, stock issued for services, a loss on the sale of equipment and decreases accounts receivable and unearned revenues.



Net cash used by investing activities for the year ended December 31, 2004 was $266,283 compared to a utilization of $225,138 in 2003 for equipment and
product rights. In 2004, the Company earned $12,418 in interest on investments which was reinvested; sold equipment which provided $45,000; and increased patent costs $4,803. Additionally, the Company purchased $294,062 of new equipment.



15



---

##### Table of Contents

Net cash provided by financing activities was $1,305,825 for the year ended December 31, 2004 compared to
$327,530 in 2003, primarily from investor stock purchases. In 2004, the Company received cash of $993,200 from investors buying stock in private agreements but incurred $49,750 in consulting and legal fees related to the investor purchases. The
Company also received $100,000 from a stock subscription receivable related to the CPI marketing agreement and $262,375 from the exercise of warrants and options by employees and consultants. The Company also recorded a receivable of $92,660 related
to the exercise of warrants and options which is included as a non-cash financing activity.



In October 2004, the Company ordered a laser-cutting machine from Trumpf, Inc. in the amount of $705,000. A deposit of $66,500 was paid to Trumpf, Inc. on October 20, 2004. Subsequently, the Company ordered an
automatic loading system from Trumpf for approximately $127,000. The equipment was shipped and installed in early March 2005, with the remaining balance due within standard payment terms. Additional expenses to prepare the premises for the
installation are estimated at $20,000 to $40,000, exclusive of any applicable asset retirement obligations.



Our operating and capital requirements in connection with operations have been and will continue to be significant. Based on our current plans, we
anticipate that revenues earned from product sales will be the primary source of funds for operating activities. In addition to existing cash and cash equivalents, we may rely on bank borrowing or sales of securities to meet the basic capital and
liquidity needs for the next 12 months. Additional capital may be sought to fund the expansion of our product line and marketing efforts, which may also include bank borrowing, a private placement of securities or the potential exercise of existing
options and warrants. However, we have no agreements for funding at this time and there can be no assurance that funding will be available if we require it.



In December 2003, we announced an agreement with an institutional investor to purchase 365,286 shares of our common stock pursuant to a Private Investment
Public Equity (PIPE) for $370,000, an average price of $1.01 per share. The purchase price of the shares approximated the average closing price of the stock for the 30 trading days prior to the initial close. The closing of the initial
installment of 143,000 shares for $130,000 was completed December 4, 2003. On February 6, 2004, the final installment for 222,286 shares was completed and $240,000 was collected. The closing on the balance of the agreement took place after a
registration statement covering the resale of the shares by the investor was declared effective by the Securities and Exchange Commission. The sale was arranged directly between the Company and the investor and no sales commission was paid or
warrants issued in connection with the private placement. We believe this investment reflects the growing confidence of investors in AATK, our management and overall business strategy. The proceeds from this private placement will enable our Company
to continue to fund our manufacturing expansion, increase working capital and fund general corporate purposes.



On both February 3, 2004 and May 4, 2004, the Company received $50,000 from CPI to finalize the purchase of stock related to the strategic alliance formed
in May 2003.



During 2004, 371,500 options were exercised to
purchase the Companys common stock. Options were exercised by employees and commissioned salesmen at strike prices ranging from $0.78 to $1.53 and the Company collected $262,375. During 2003, 10,000 options were exercised.



On October 12, 2004, the Company sold 407,136 shares of common stock to four
institutional investors in a private placement transaction for gross proceeds of $753,200, at a price of $1.85 per share. The purchase price of the shares approximated the average closing price of the common stock over the 15-day period prior to the
execution of the contract. Under the terms of the transaction, the investors received warrants to purchase an additional 150,000 common shares, exercisable at $2.30 per share for a period of five years and the registered broker dealer firm which
acted as the placement agent in connection with the purchase of such shares and warrants by two of the investors received warrants to purchase 6,700 common shares, exercisable at $2.30 per share for a period of five years. We earmarked the proceeds
of this funding to purchase laser-cutting equipment. That equipment has been delivered and installed as of March 2005. The Company recognized a decrease in equity of $49,750 for consulting and legal fees related to this transaction.



16



---

##### Table of Contents

CONTRACTUAL OBLIGATIONS



In October 2004, the Company ordered a laser-cutting machine from Trumpf, Inc. in the amount of $705,000. A deposit of
$66,500 was paid to Trumpf, Inc. on October 20, 2004. Subsequently, the Company ordered an automatic loading system from Trumpf for approximately $127,000. The equipment was shipped and installed in early March 2005, with the remaining balance due
within standard payment terms. Additional expenses to prepare the premises for the installation are estimated at $20,000 to $40,000, exclusive of any applicable asset retirement obligations. On October 6, 2004 the Company sold 407,136 shares of
common stock to three institutional investors in a Private Placement transaction for gross proceeds of $753,200 to accomplish the funding of the base cost of the laser cutter.



ITEM 7. FINANCIAL STATEMENTS



See
the Companys financial statements beginning on page F-1.



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.



ITEM 8A. CONTROLS AND PROCEDURES



An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure
controls and procedures as of December 31, 2004. Disclosure controls and procedures are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of
1934, such as this Form 10-KSB, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Based on that evaluation, our CEO and CFO have concluded that our
disclosure controls and procedures are effective to satisfy the objectives for which they are intended. Subsequent to the date of our managements evaluation, there were no significant changes in our internal controls or in other factors that
could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.



Part III



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



The directors, executive officers, and key employees of the Company are as follows:



|                  |  |     |  |                                                 
|----------------- |  | --- |  | ------------------------------------------------
|Name              |  | Age |  | Position                                        
|John E. Presley   |  | 65  |  | Director, President/CEO                         
|Joseph F. McGuire |  | 46  |  | Director, CFO/Sec/Treasurer                     
|Erik Wiisanen     |  | 61  |  | Director, VP  Sales and Marketing, Omega Metals
|Ken Cornell       |  | 36  |  | Independent Director                            
|Lamar Nash        |  | 58  |  | Independent Director                            
|Tim Adams         |  | 54  |  | VP - Sales and Marketing                        



17



---

##### Table of Contents

JOHN E. PRESLEY has been a Director of the Company since November 1998, and President and CEO
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 the Company in November 1998 and was merged into the Company in February 2005.



JOSEPH F. MCGUIRE was appointed Chief Financial Officer and a Director on June 29, 2000. He has 16 years CFO
experience, and is a CPA. From 1998 until June 2000, he was Chief Financial Officer for Hirst Investment Management, Inc.; from 1997 to 1998, CFO for MHR Fund Management; from 1995 to 1997, CFO for the Common Fund; from 1994 to 1995, CFO for Link
Strategic Investors; and from 1989 to 1995, CFO for John Henry & Co., Inc. Prior to 1989, he held management positions with Dean Witter Reynolds, Paine Webber, Inc., and Price Waterhouse. He is a 1980 graduate of the University of Notre Dame.



ERIK WIISANEN, Vice-President-Marketing of Omega, was
elected a Director in December 1999. He graduated from Cornell University in 1965. He worked in Banking as a Vice President of Barnett Bank until 1970 and was a representative for shipping interests until he helped 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 and marketing for Omega since 1981.



KEN CORNELL became a member of the Board of Directors and Chairman of the Boards Audit Committee in April 2004. He attended the University
of Florida s Fisher School of Accounting Masters Program and graduated in 1991. His previous employment experience includes working in the audit division of Ernst & Young in Atlanta, Georgia, where he serviced primarily small public
and private entrepreneurial companies as well as some larger Fortune 500 companies. He served as the Chief Financial Officer of Log On America, a publicly held internet/telecommunications company from 1999 to 2002. While there, he was responsible
for all internal and external financial reporting, due diligence reviews for various acquisitions, and establishment of internal controls and financial processes used to evaluate the various products and services offered by the company. He founded
CornellCFO in 1997. CornellCFO has assisted companies in the high technology arena with financing, strategic alliances, merger and acquisition, and various turnaround services since 1997. He holds his CPA license in Florida and is a member of the
American Institute of Certified Public Accountants (AICPA).



LAMAR NASH joined the Board of Directors and Audit Committee in January 2003. He had been an Advisory Committee member from November 2001 through December 2002. He currently serves as Vice President, business development for Barton
Malow Companys Southern Region. The construction company, ranked in the top 20 of construction companies worldwide, has annual revenues exceeding $1.2 billion. He is a former vice president and corporate marketing officer of The Haskell
Company, a top 100 design-build firm. He also served as interim executive director of the Foundation for Integrated Services, an affiliate of Design-Build Institute of America. He is former chairman and director of Florida First Capital Finance
Corporation; past president of Florida Economic Development Council; and former staff director of the Jacksonville, Florida Chamber of Commerce Committee of 100. In addition, he has co-owned a small business with annual sales of $5 million. He is a
member of Design-Build Institute of America, Georgia Economic Developers Association and is also a licensed real estate broker. He is a 1969 graduate of the University of Florida.



TIM ADAMSwas named Vice President of Sales and Marketing, where he will be responsible for directing sales and
marketing for both the patented zone cabling/wireless division and the contract



18



---

##### Table of Contents

manufacturing division of the Company. He brings over thirty years of experience in sales, marketing, engineering and manufacturing to American Access, with
the last fourteen years spent at Metcam, Inc., where he was director of sales, increasing sales fivefold and diversifying their products into additional markets. Prior to Metcam, he spent over three years at Belcan Corporation and over three years
at Canron Industries, Inc., where he led successful sales and marketing campaigns. Prior to that he was involved in product development and in manufacturing. He earned an M.B.A. from Xavier University and received his Bachelor of Science degree in
industrial engineering from Purdue University.



Our directors
are elected for a one-year term at our annual shareholders meeting. Vacancies may be filled by the Board of Directors until the next annual meeting.



John Presley, President and Director, is the brother-in-law of Erik Wiisanen, Vice President of Marketing for Omega Metals and a Director of the Company.



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE



Section 16(a) of the Securities Exchange Act of
1934 requires the Companys directors and executive officers, and persons who own more than 10% of a registered class of the Companys equity securities, to file with the Securities and Exchange Commission (the Commission)
initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater-than 10% shareholders are required by the Commissions regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its review of Forms 3, 4 and 5 received by the Company, or written representations from certain reporting persons, the Company believes, during the fiscal year ended December
31, 2004, all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 applicable to officers, directors and 10% shareholders were satisfied other than reports by certain officers and directors of the grant of stock purchase
options.



Director Independence



The Board has determined that Directors Ken Cornell and Lamar Nash are
independent within the Nasdaq Stock Markets director independence standards.



Audit Committee Financial Expert



The Board has
determined that Director Ken Cornell is an audit committee financial expert as defined by Item 401(e)(2) of Regulation S-B of the Securities exchange Act of 1934.



Code of Ethics



The Company has adopted a code of business conduct and ethics for its directors, officers and employees. Such code is filed as Exhibit 14 to this Form
10-KSB and is available to shareholders at no charge from: Joseph F. McGuire, Chief Financial Officer, 6670 Spring Lake Road, Keystone Heights, FL 32656.



Audit Committee Approval of Auditor



After careful review, the audit committee accepted the Rachlin Cohen & Holtz LLP proposal for the 2004 audit and elected to continue to retain their
services.



19



---

##### Table of Contents

ITEM 10. EXECUTIVE COMPENSATION



SUMMARY COMPENSATION TABLE (1)



The following table summarizes compensation paid to the Companys president/chief executive officer in 2004 and the other officers who earned $100,000 or more in 2004 (the named executive officers) as well as their
compensation in 2003 and 2002.



|                                          |  |              |  |             |                       |       |   |                           |  |                                                                    |           |  |                      
|----------------------------------------- |  | ------------ |  | ----------- | --------------------- | ----- | - | ------------------------- |  | ------------------------------------------------------------------ | --------- |  | ---------------------
|Name and Position                         |  | Year         |  | TotalIncome |                       | Bonus |   | All otherCompensation (2) |  | Long term compensation- Number of securitiesunderlying options (3)
|John E. Presley, President/CEO            |  | 200420032002 |  | $$$         | 175,000175,000175,000 |       |   |                        |  | $                                                                  | 111,980 |  | 190,000130,000460,000
|                                          |  |              |  |             |                      
|Erik Wiisanen Vice President Omega Metals |  | 200420032002 |  | $$$         | 125,000125,000125,000 |       |   |                        |  | $                                                                  | 94,187  |  | 180,000130,000455,000
|                                          |  |              |  |             |                      
|Joseph F. McGuire Chief Finl Officer     |  | 200420032002 |  | $$$         | 120,000120,000120,000 |       | $ | 10,000                  |  |                                                                    |        |  | 190,000130,000210,000

---

|(1) | The columns for Other Annual Compensation, Restricted Stock Awards and LTP Payouts have been omitted because there is no such compensation to be
reported.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents compensation from cancellation of debt and interest due from these officers.
|--- | ---------------------------------------------------------------------------------------

|(3) | Represents options to acquire shares of common stock granted to such named executive officers.
|--- | ----------------------------------------------------------------------------------------------



EXECUTIVE EMPLOYMENT CONTRACTS



The named executive officers set forth in the Summary Compensation Table are at will employees and do not have written
employment agreements. The compensation committee has established the current base annual salaries of the named executive officers as follows:



|                  |  |   |        
|----------------- |  | - | -------
|John E. Presley   |  | $ | 175,000
|Erik Wiisanen     |  | $ | 125,000
|Joseph F. McGuire |  | $ | 120,000



Such employees may receive bonus
payments if granted by the Compensation Committee. Such employees are also eligible to receive grants of stock or options under the 2004 Employee Stock Incentive Plan and as directors may receive options under the 2004 Director Stock Option Plan.
Any grants under the 2004 Employee Stock Incentive Plan are set by the Compensation Committee. Grants under the 2004 Director Stock Option Plan are pursuant to a formula set forth in the plan. As employees, they are eligible to receive employee
benefits generally available to all employees of the Company.



OPTIONS GRANTS IN LAST FISCAL YEAR

(Individual Grants)



The following information sets forth the individual grants of stock options
to the Companys named executive officers in the above table in the fiscal year ended December 31, 2004. No stock appreciation rights were granted during 2004.



20



---

##### Table of Contents

|                  |  |                                                |        |  |                                                       |   |  |                |          |                 |                           
|----------------- |  | ---------------------------------------------- | ------ |  | ----------------------------------------------------- | - |  | -------------- | -------- | --------------- | --------------------------
|Name              |  | Number of SecuritiesUnderlying Options Granted |        |  | % of Total OptionsGranted Employeesin Fiscal Year (5) |   |  | Exercise Price |          | Expiration Date
|John E. Presley   |  | 90,000100,000                                  | (1)(2) |  | 23                                                    | % |  | $$             | 1.531.53 |                 | July 26, 2009July 26, 2009
|                  |  |                                                |        | 
|Erik Wiisanen     |  | 80,000100,000                                  | (1)(2) |  | 22                                                    | % |  | $$             | 1.531.53 |                 | July 26, 2009July 26, 2009
|                  |  |                                                |        | 
|Joseph F. McGuire |  | 90,000100,000                                  | (1)(2) |  | 23                                                    | % |  | $$             | 1.531.53 |                 | July 26, 2009July 26, 2009

---

|(1) | Options issued under the 2004 Director Stock Option Plan.
|--- | ---------------------------------------------------------

|(2) | Options issued under the 2004 Employee Stock Incentive Plan.
|--- | ------------------------------------------------------------

|(3) | Percentages are based on a total of 846,000 options granted to employees in 2004.
|--- | ---------------------------------------------------------------------------------



CHANGE OF CONTROL PROVISIONS



The options and warrants granted by the Company have various vesting requirements, definitions, termination clauses and any
options granted 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. Options may terminate before their expiration dates if the optionees status as an employee, director or a consultant
is terminated or upon the optionees death or disability.



AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR and FY-END OPTIONS VALUES



The following table sets forth the number of stock options exercised by the named executive officers in the Summary Compensation table during the last
completed fiscal year. No options were exercised in such year. The stock price of the Company was $2.20 at December 31, 2004. There were no stock appreciation rights held or exercised by the named executive officers.



|                  |  |                           |  |               |  |                                                                 |  |                                                         |          
|----------------- |  | ------------------------- |  | ------------- |  | --------------------------------------------------------------- |  | ------------------------------------------------------- | ---------
|Name              |  | SharesAcquired OnExercise |  | ValueRealized |  | Number of SecuritiesUnderlying UnexercisedOptions at FY-End (1) |  | Value of Unexercised In-The-Money Options At FY-End (1)
|John E. Presley   |  | 0                       |  | 0           |  | 2,012,019                                                       |  | $                                                       | 1,085,601
|Erik Wiisanen     |  | 0                       |  | 0           |  | 1,616,888                                                       |  | $                                                       | 1,065,800
|Joseph F. McGuire |  | 0                       |  | 0           |  | 923,333                                                         |  | $                                                       | 785,600  

---

|(1) | All of such options are exercisable in full as of December 31, 2004.
|--- | --------------------------------------------------------------------



DIRECTOR COMPENSATION



Independent directors are paid $500 for board and committee meetings attended at our corporate headquarters and $250 for telephonic meetings. Reasonable
travel and lodging expenses incurred by the independent directors and associated with meetings are reimbursed by the Company.



On July 23, 2004, the shareholders approved the 2004 Director Stock Option Plan (Plan). The Plan provides for the automatic grant of options
to each of our directors (including directors who are employees) to acquire shares on the first Monday following each annual meeting of stockholders each year



21



---

##### Table of Contents

beginning with the 2004 Annual Meeting. Each director will be granted options to purchase 50,000 shares of Common Stock plus additional options for service
on committees of the Board. Each chairman of a committee of the Board of Directors shall be granted 10,000 stock options and each member of a committee shall be granted 5,000 stock options. All options granted under the Director Plan are required to
be issued at 100% of the fair market value on the Companys common stock on the date of grant unless the Committee requires a higher price at the time of grant or such higher price is required under another provision of the Director Plan.



The award of annual stock options to directors is designed as
compensation for service as a director for the period from their election at an annual meeting of stockholders until the next annual meeting of stockholders. Due to the lack of sufficient shares authorized for issuance under the Companys 2000
Director Stock Option Plan, the directors elected at the 2003 annual meeting of stockholders received only one-half of the options to which they were entitled under the 2000 Director Stock Option Plan. The 2004 Director Stock Option Plan provides
that the incumbent directors elected at the 2003 annual meeting will receive the balance of the options they would have received for service as a director from the 2003 annual meeting to the 2004 annual meeting at the same time and the same option
price they will receive the options grant after the 2004 annual meeting of stockholders.



The Directors Plan also provides for the grant of stock options to any directors who join the Board other than by election at an annual meeting of stockholders. As of the date of their joining the Board, such
directors would receive an award of options in an amount equal to those which they would have received had they been elected as a director at the annual meeting immediately prior to their joining the Board reduced pro-rata by the number of days in a
year between their joining the Board and the immediately prior annual meeting of stockholders. The director who joined the Board after the 2003 annual meeting of stockholders would receive such grant at the same time and the same option price he
will receive the options to be granted after the 2004 Annual Meeting, if he is elected and the Directors Plan is approved at the Annual Meeting.



The grants of options to Directors in 2004 are as follows. The amounts to Messrs. Presley, Wiisanen and McGuire are also included in the summary
compensation tables below.



|                                          |  |                                                    |  |               |      |                 |              
|----------------------------------------- |  | -------------------------------------------------- |  | ------------- | ---- | --------------- | -------------
|Name                                      |  | Number of SecuritiesUnderlying Options/SARsGranted |  | ExercisePrice |      | Expiration Date
|John E. Presley, President/CEO            |  | 90,000                                             |  | $             | 1.53 |                 | July 26, 2009
|                                          |  |                                                    | 
|Erik Wiisanen Vice President Omega Metals |  | 80,000                                             |  | $             | 1.53 |                 | July 26, 2009
|                                          |  |                                                    | 
|Joseph F. McGuire Chief Finl Officer     |  | 90,000                                             |  | $             | 1.53 |                 | July 26, 2009
|                                          |  |                                                    | 
|Ken Cornell Director                      |  | 80,000                                             |  | $             | 1.53 |                 | July 26, 2009
|                                          |  |                                                    | 
|Lamar Nash Director                       |  | 90,000                                             |  | $             | 1.53 |                 | July 26, 2009



The options and warrants granted by
the Company have various vesting requirements, definitions, termination clauses and any options granted 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. Options may terminate before their
expiration dates if the optionees status as an employee, director or a consultant is terminated or upon the optionees death or disability.



22



---

##### Table of Contents

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The following table sets forth, as of March 21, 2005, 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 of the Company; (iii) each executive officer of the Company named in the Summary Compensation Table; and (iv) all directors and officers as a group.



|                                                                        |  |                  |        |  |                  |  
|----------------------------------------------------------------------- |  | ---------------- | ------ |  | ---------------- | -
|Name and Address of Shareholder                                         |  | Number of Shares |        |  | Percent of Class |  
|John E. Presley 6689 Shands Road Keystone Heights, Florida 32656        |  | 1,815,254        | (1)(2) |  | 19.98            | %
|                                                                        |  |                 
|Erik Wiisanen 6689 Shands Road Keystone Heights, Florida 32656          |  | 1,575,123        | (1)(2) |  | 17.81            | %
|                                                                        |  |                 
|Joseph F. McGuire 6670 Spring Lake Road Keystone Heights, Florida 32656 |  | 890,333          | (1)    |  | 10.78            | %
|                                                                        |  |                 
|Ken Cornell 3064 SW 92ndStreet Gainesville, FL 36208                    |  | 80,000           | (1)    |  | 1.07             | %
|                                                                        |  |                 
|Lamar Nash 319 Oak Meadow Drive Woodstock, GA 30188                     |  | 175,000          | (1)    |  | 2.32             | %
|                                                                        |  |                 
|All directors and officers as a group (6 persons)                       |  | 4,610,710        |        |  | 39.24            | %



Based upon 7,382,260 shares
outstanding on March 21, 2005.



---

|(1) | Includes options or warrants to purchase common stock which are exercisable as of December 31, 2004 as set forth in the following table:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 64,000 shares owned by the Companys Profit Sharing Plan. Messrs. Presley and Wiisanen exercise shared voting and investment power with respect to such shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



23



---

##### Table of Contents

|                  |  |              |  |              |  |               |  |               |  |               |  |              |  |              |  |          
|----------------- |  | ------------ |  | ------------ |  | ------------- |  | ------------- |  | ------------- |  | ------------ |  | ------------ |  | ---------
|NAME              |  | $0.78Options |  | $1.00Options |  | $1.13 Options |  | $1.25 Options |  | $1.53 Options |  | $1.75Options |  | $2.25Options |  | Total    
|John E. Presley   |  | 160,000      |  | 493,334      |  | 130,000       |  | *             |  | 190,000       |  | *            |  | 664,685      |  | 1,638,019
|Erik Wiisanen     |  | 155,000      |  | 488,333      |  | 130,000       |  | *             |  | 180,000       |  | *            |  | 444,555      |  | 1,397,888
|Joseph F. McGuire |  | 160,000      |  | 243,333      |  | 130,000       |  | *             |  | 190,000       |  | *            |  | 150,000      |  | 873,333  
|Ken Cornell       |  | *            |  | *            |  | *             |  | *             |  | 80,000        |  | *            |  | *            |  | 80,000   
|Lamar Nash        |  | 30,000       |  | *            |  | 30,000        |  | *             |  | 90,000        |  | 25,000       |  | *            |  | 175,000  



EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004



The Company makes grants of options to purchase common stock of the Company individually and pursuant to its stock option plans. The Company has also used common stock and warrants to purchase common stock to pay consultants and advisors
for services and to pay broker/dealers in connection with securities offerings. The following table summarizes information about outstanding equity compensation plans as of December 31, 2004.



|                                                           |  |                                                                                 |  |                                                                  |      |                                                                                                                                            |          
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------ | ---------
|Plan Category                                              |  | Number of securities to beissued uponexercise ofoutstandingoptions/warrants (a) |  | Weighted- average exerciseprice ofoutstandingoptions/warrants(b) |      | Number of securitiesremaining available forfuture issuance under equitycompensation plans(excluding securitiesreflected in column (a)) (c)
|Equity compensation plans approved by security holders (1) |  | 5,068,740                                                                       |  | $                                                                | 1.95 |                                                                                                                                            | 1,524,000
|Equity compensation plans not approved by security holders |  | 1,503,662                                                                       |  | $                                                                | 4.63 |                                                                                                                                            |         
|Total                                                      |  | 6,572,402                                                                       |  | $                                                                | 2.56 |                                                                                                                                            | 1,524,000

---

|(1) | Consists of options to purchase common stock pursuant to the Companys Employee and Director Incentive Stock Option Plans and other shareholder-approved arrangements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Individual Equity Compensation
Arrangements not Approved by Shareholders



The Company issued
45,000 shares of stock to an employee pursuant to an early retirement agreement in September 2003. The Company paid 2,500 shares of Company common stock on acceptance of the agreement and 42,500 shares of Company common stock in consideration of
consulting services for the period October 14, 2003 through April 14, 2004. Stock-based compensation related to the 42,500 shares was initially recorded as deferred compensation and was fully amortized over the life of the service agreement from
October 14, 2003 through April 14, 2004.



24



---

##### Table of Contents

In May 2004, the Company issued 18,000 shares of common stock in lieu of cash to its outside legal
counsel for services rendered.



In prior years the Company
issued options and warrants to individuals and companies for services to the Company. Such options and warrants enable the holder to purchase common stock at a specified price and for a specified term, after which the option or warrant expires and
may no longer be exercised. Reference is hereby made to Note 13 to the consolidated financial statements filed herewith for further information.



In July and August 2004, the Company issued 17,709 and 21,500 shares, respectively, of common stock as part of the resolution and settlement of three
legal claims.



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



In May and June 2000, the Company authorized loans to two directors, John E. Presley and Erik Wiisanen, who also are officers of the Company or its subsidiaries, and who collateralized the loans with personal assets
unrelated to these transactions. The collateralized loans were to enable these directors to cover margin calls precipitated by a drop in the price of the Companys common stock. On May 31, 2000, the two directors (one of whom is the
Companys president) each executed a promissory note and security agreement for $75,000 and $60,000 respectively, payable on or before December 31, 2000, with interest at 10%. In October 2000, the two directors executed additional promissory
notes with identical terms for $10,000 each, payable on or before April 30, 2001. Each of these notes was extended to June 30, 2003. No interest has been paid on the notes receivable since inception and through December 31, 2002. The total amount
due at December 31, 2002 is $193,711 which includes accrued interest. Pursuant to the Sarbanes-Oxley Act of 2002, enacted in July 2002, these notes receivable cannot be amended or extended in any way and must be satisfied when due, June 30, 2003. As
a result of a one-time decision by the Board prior to the due date, both outstanding loans and accrued interest have been cancelled and treated as compensation. The total amounts were approximately $110,260 and $91,200, respectively, of which
$155,000 was principal and $46,460 was interest, collectively.



All related party transactions are required to be reviewed and approved by an independent body of the Board of Directors composed solely of independent directors as defined in Nasdaq Rule 4350(d)(2)(A).



ITEM 13. EXHIBITS



(a) Exhibits



See exhibits index immediately
following the signature page. The Company shall furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) upon request to Joseph McGuire, American Access Technologies, Inc., 6670 Springlake Road, Keystone Heights,
FL 32656.



(b) Reports on Form 8-K:



The following reports on Form 8-K were filed during the
quarterly period ended December 31, 2004.



October 6,
2004Reporting sale of shares and issuance of a press release under Item 5.



25



---

##### Table of Contents

October 7, 2004Revising the number of warrants issued as part of sale of shares under Item 5.



October 7, 2004Press release announcing Preliminary Sales for the nine and three
months ended September 30, 2004 under Items 7 and 12.



November 3,
2004Press release announcing Financial Results for the nine and three months ended September 30, 2004 under Items 7 and 12.



Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Rachlin Cohen & Holtz LLP (Rachlin) has audited the Companys financial statements annually since the Companys inception in 1996.



Fees related to services performed by Rachlin in 2004 and 2003 were as follows:



|                   |  |      |        |      |   |       
|------------------ |  | ---- | ------ | ---- | - | ------
|                   |  | 2004 |        | 2003
|Audit Fees (1)     |  | $    | 69,609 |      | $ | 62,466
|Audit-Related Fees |  |      | -0-    |      |   | -0-   
|Tax Fees (2)       |  |      | 4,915  |      |   | 5,000 
|All Other Fees     |  |      | -0-    |      |   | -0-   
|                   |  |     
|Total              |  | $    | 74,524 |      | $ | 67,466

---

|(1) | Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Tax fees principally included tax advice, tax planning and tax return preparation.
|--- | ----------------------------------------------------------------------------------



The Audit Committee, comprised of Ken Cornell (Chairman), Lamar Nash and Joseph F. McGuire, has reviewed and discussed with
the Companys management and Rachlin Cohen & Holtz LLP the audited consolidated financial statements of the Company contained in the Companys Annual Report on Form 10-KSB for the Companys 2004 fiscal year. The Audit Committee
has also discussed with Rachlin Cohen Holtz LLP the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the
audit of the Companys consolidated financial statements.



The Audit Committee has received and reviewed the written disclosures and the letter from Rachlin Cohen & Holtz LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with Rachlin Cohen & Holtz LLP its independence from the Company.



The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.



26



---

##### Table of Contents

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-KSB for its 2004 fiscal year for filing with the SEC.



Audit Committees Pre-Approval Policies



The Audit Committees policy is now to pre-approve all audit services and all permitted non-audit services (including
the fees and terms thereof) to be provided by the Companys independent auditor; provided, however, pre-approval requirements for non-audit services are not required if all such services (1) do not aggregate to more than five percent of total
revenues paid by the Company to its accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Audit Committee and
approved prior to the completion of the audit by the Audit Committee.



The Audit Committee pre-approved all of Rachlins fees described above.



27



---

##### Table of Contents

SIGNATURES



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



AMERICAN ACCESS TECHNOLOGIES, INC.By

/s/ John E. PresleyJohn E. PresleyPresident/Chief Executive OfficerDate: March 21, 2005




In accordance
with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                      |  |                                                                                          |  |               
|--------------------- |  | ---------------------------------------------------------------------------------------- |  | --------------
|Signature             |  | Title                                                                                    |  | Date          
|/s/ John E. Presley   |  | President, Chief Executive Officer and Director (Principal Executive Officer)            |  | March 21, 2005
|John E. Presley       |  |                                                                                          | 
|                      |  |                                                                                         
|/s/ Joseph F. McGuire |  | Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial Officer) |  | March 21, 2005
|Joseph F. McGuire     |  |                                                                                          | 
|                      |  |                                                                                         
|/s/ Erik Wiisanen     |  | Vice President Omega Metals and Director                                                 |  | March 21, 2005
|Erik Wiisanen         |  |                                                                                          | 
|                      |  |                                                                                         
|/s/ Ken Cornell       |  | Independent Director                                                                     |  | March 21, 2005
|Ken Cornell           |  |                                                                                          | 
|                      |  |                                                                                         
|/s/ Lamar Nash        |  | Independent Director                                                                     |  | March 21, 2005
|Lamar Nash            |  |                                                                                          | 



28



---

##### Table of Contents

EXHIBIT INDEX



| |  |  | 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.)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.)
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 3(c) 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.)
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 3(d) 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.1 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.)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.2 Employee 2000 Stock Option Plan. (Incorporated by Reference to Exhibit 8.16 to Registrants Form 10K-SB as filed April 20, 2000.)*
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.3 Directors 2000 Stock Option Plan. (Incorporated by Reference to Exhibit 8.17 to Form 10K-SB as filed April 20, 2000.)*
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.4 Promissory note executed by director and officer-employee Erik Wiisanen. (Incorporated by reference to Exhibit 8.11 to Registrants Form 10Q-SB filed August 15, 2000.)*
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.5 Promissory note executed by director and officer-employee John Presley. (Incorporated by reference to Exhibit 8.12 to Registrants Form 10Q-SB filed August 15, 2000.)*
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.6 Promissory note executed by director and officer-employee Bobby Story. (Incorporated by reference to Exhibit 8.13 to Registrants Form 10Q-SB filed August 15, 2000.)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.7 Agreement for the Acquisition of Product Rights from Bill Sherer Corp. and Bill Sherer, executed January 11, 2002. (Incorporated by reference to Exhibit 8.23 to the
Registrants Form 10K-SB, filed March 29, 2002.)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.8 Amendment of the Agreement for the Acquisition of Product Rights from Bill Sherer Corp. and Bill Sherer, executed October 1, 2002. (Incorporated by reference to Exhibit 22 to
the Registrants Form 10K-SB, filed March 28, 2003.)
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.9 Employment Agreement executed by John Presley on May 2, 2002. (Incorporated by reference to Exhibit 23 to the Registrants Form 10K-SB, filed March 28, 2003.)*
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.10 Employment Agreement executed by Erik Wiisanen on May 2, 2002. (Incorporated by reference to Exhibit 24 to the Registrants Form 10K-SB, filed March 28, 2003.)*
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.11 Employment Agreement executed by Joseph McGuire on May 2, 2002. (Incorporated by reference to Exhibit 25 to the Registrants Form 10K-SB, filed March 28, 2003.)*
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.12 Amended 2000 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.1 to the Registrants Form 10Q-SB, filed August 11, 2003.)*
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.13 Amended 2000 Director Stock Option Plan. (Incorporated by reference to Exhibit 10.2 to the Registrants Form 10Q-SB, filed August 11, 2003.)*
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.14 Manufacturing and Marketing Agreement dated May 8, 2003 between registrant and Chatsworth Products, Inc. (portions omitted pursuant to a request for confidentiality.)
(Incorporated by reference to Exhibit 10.3 to the Registrants Form 10Q-SB, filed August 11, 2003.)
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.15 Stock Purchase and Sale Agreement dated May 8, 2003 between registrant and Chatsworth Products Inc. (Incorporated by reference to Exhibit 10.4 to the Registrants Form
10Q-SB, filed August 11, 2003.)
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.16 Standstill Agreement dated May 8, 2003 between registrant and Chatsworth Products, Inc. (Incorporated by reference to Exhibit 10.5 to the Registrants Form 10Q-SB, filed
August 11, 2003.)
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.17 2004 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrants Form 10Q-SB, filed August 4, 2004.)*
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.18 2004 Director Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Registrants Form 10Q-SB, filed August 4, 2004.)*
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.25 Form of Employees Stock Option Agreement under 2004 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to Registrants Registration Statement on
Form S-8; file number 333-118178.)*
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.26 Form of Directors Stock Option Agreement under 2004 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to Registrants Registration Statement on
Form S-8; file number 333-118178.)*
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 10.27 Summary of unwritten employment contracts for named executive officers  March 2005*
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | 10.28 Summary of director compensation for attending meetings of the Board of Directors and committees  March 2005*
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | 10.29 Purchase Order for laser cutting machine
| | - |  | ----------------------------------------------



29



---

##### Table of Contents

| |  |  | 14 Code of Ethics (Incorporated by reference to Exhibit 14 to the Registrants Form 10K-SB, filed March 21, 2004.)
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | 21 Subsidiary of the Small Business Issuer.
| | - |  | -------------------------------------------



| |  |  | 23 Consent of Auditors
| | - |  | ----------------------



| |  |  | 31 Section 302 Certifications of the Chief Executive Officer and Chief Financial Officer.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | 32.1 Section 1350 Certification of the Chief Executive Officer.
| | - |  | ---------------------------------------------------------------



| |  |  | 32.2 Section 1350 Certification of the Chief Financial Officer.
| | - |  | ---------------------------------------------------------------

---

|* | Indicates a management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------------------



30



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.

AND SUBSIDIARIES



CONSOLIDATED FINANCIAL STATEMENTS



DECEMBER 31, 2004 AND 2003



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES



INDEX TO FINANCIAL STATEMENTS



|                                                        |  |           
|------------------------------------------------------- |  | ----------
|                                                        |  | PAGE      
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | 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-26



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders

American Access Technologies, Inc. and Subsidiaries



We have audited the accompanying consolidated balance sheet of American Access Technologies,
Inc. and Subsidiaries as of December 31, 2004, and the related consolidated statements of operations, stockholders equity and cash flows for each of the years ended December 31, 2004 and 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of American Access Technologies, Inc. and Subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for each of the
years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States.



As more fully discussed in Note 2 to the consolidated financial statements, the Company is subject to certain risks and other matters.



RACHLIN COHEN & HOLTZ LLP



Fort Lauderdale, Florida

January 30, 2005, except for the fifth paragraph of Note 1 as to which the date is February 3, 2005, and the fifth paragraph of Note 14 as to which the date is February 18, 2005.



F-1



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEET



DECEMBER 31, 2004



|                                                                                                       |  |   |            |  
|------------------------------------------------------------------------------------------------------ |  | - | ---------- | -
|ASSETS                                                                                                 |  |   |            |  
|Current Assets:                                                                                        |  |   |            |  
|Cash and cash equivalents                                                                              |  | $ | 960,012    |  
|Investment securities                                                                                  |  |   | 424,554    |  
|Accounts receivable, net of allowance of $72,000                                                       |  |   | 935,860    |  
|Due from stockholders for exercise of options                                                          |  |   | 92,660     |  
|Inventories                                                                                            |  |   | 1,165,363  |  
|Prepaid expenses and other current assets                                                              |  |   | 68,724     |  
|Note receivable, other, net of allowance of $361,562                                                   |  |   |           |  
|                                                                                                       |  |   |            |  
|Total current assets                                                                                   |  |   | 3,647,173  |  
|                                                                                                       | 
|Property, Plant and Equipment                                                                          |  |   | 2,703,407  |  
|Intangible Assets                                                                                      |  |   | 79,511     |  
|Other                                                                                                  |  |   | 107,772    |  
|                                                                                                       |  |   |            |  
|Total assets                                                                                           |  | $ | 6,537,863  |  
|                                                                                                       |  |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                   |  |   |            |  
|Current Liabilities:                                                                                   |  |   |            |  
|Accounts payable                                                                                       |  | $ | 336,954    |  
|Accrued expenses                                                                                       |  |   | 93,912     |  
|                                                                                                       |  |   |            |  
|Total current liabilities                                                                              |  |   | 430,866    |  
|                                                                                                       |  |   |            |  
|Commitments, Contingencies, Other Matters and Subsequent Event                                         |  |   |           |  
|                                                                                                       | 
|Stockholders Equity:                                                                                  |  |   |            |  
|Preferred stock, $.001 par value; authorized 1,000,000 shares; issued and outstanding -0- shares       |  |   |           |  
|Preferred stock-Series A, $.001 par value; authorized 60,000 shares; issued and outstanding -0- shares |  |   |           |  
|Common stock, $.001 par value; authorized 30,000,000 shares; issued and outstanding 7,382,260 shares   |  |   | 7,382      |  
|Additional paid-in capital                                                                             |  |   | 15,586,259 |  
|Deficit                                                                                                |  |   | (9,486,644 | )
|                                                                                                       |  |   |            |  
|Total stockholders equity                                                                             |  |   | 6,106,997  |  
|                                                                                                       |  |   |            |  
|Total liabilities and stockholders equity                                                             |  | $ | 6,537,863  |  
|                                                                                                       |  |   |            |  



See notes to
consolidated financial statements.



F-2



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2004 AND 2003



|                                                                                                     |  |      |           |   |      |   |           |  
|---------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                                     |  | 2004 |           |   | 2003 |  
|Net Sales:                                                                                           |  |      |           |   |      |   |           |  
|Formed metal                                                                                         |  | $    | 3,978,308 |   |      | $ | 3,644,258 |  
|Zone cabling                                                                                         |  |      | 2,762,029 |   |      |   | 1,871,052 |  
|                                                                                                     |  |      |           |   |      |   |           |  
|                                                                                                     |  |      | 6,740,337 |   |      |   | 5,515,310 |  
|                                                                                                     |  |      |           |   |      |   |           |  
|Costs and Expenses:                                                                                  |  |      |           |   |      |   |           |  
|Cost of sales                                                                                        |  |      | 5,701,403 |   |      |   | 4,568,186 |  
|Selling, general and administrative                                                                  |  |      | 878,948   |   |      |   | 745,465   |  
|Compensation and related benefits                                                                    |  |      | 857,732   |   |      |   | 869,047   |  
|Compensation to officers/directors/stockholders in connection with marketing/manufacturing agreement |  |      |          |   |      |   | 201,460   |  
|Stock-based compensation                                                                             |  |      | 143,775   |   |      |   | 53,687    |  
|                                                                                                     |  |      |           |   |      |   |           |  
|                                                                                                     |  |      | 7,581,858 |   |      |   | 6,437,845 |  
|                                                                                                     |  |      |           |   |      |   |           |  
|Loss Before Other Income (Expense)                                                                   |  |      | (841,521  | ) |      |   | (922,535  | )
|                                                                                                     |  |      |           |   |      |   |           |  
|Other Income (Expense):                                                                              |  |      |           |   |      |   |           |  
|Interest income                                                                                      |  |      | 2,173     |   |      |   | 8,077     |  
|Other income (expense)                                                                               |  |      | (2,407    | ) |      |   | 60,335    |  
|Loss on sale of equipment                                                                            |  |      | (28,179   | ) |      |   |          |  
|Realized and unrealized gain on investments                                                          |  |      | 12,418    |   |      |   | 12,007    |  
|                                                                                                     |  |      |           |   |      |   |           |  
|                                                                                                     |  |      | (15,995   | ) |      |   | 80,419    |  
|                                                                                                     |  |      |           |   |      |   |           |  
|Net Loss                                                                                             |  | $    | (857,516  | ) |      | $ | (842,116  | )
|                                                                                                     |  |      |           |   |      |   |           |  
|Net Loss Per Common Share - Basic and Diluted                                                        |  | $    | (.13      | ) |      | $ | (.14      | )
|                                                                                                     |  |      |           |   |      |   |           |  
|Weighted Average Common Shares Outstanding                                                           |  |      | 6,789,029 |   |      |   | 6,001,747 |  
|                                                                                                     |  |      |           |   |      |   |           |  



See notes to
consolidated financial statements.



F-3



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                           |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  
|------------------------------------------ |  | ------------ |  | -------------------------- | ----- |  | ------- | ---------- | - | --------------------------------- | - | ---------- | ----------------------------- |  | - | ------- | - |  | - | ---- | - |  | - | --------- | -
|                                           |  | Common Stock |  | Additional Paid-in Capital |       |  | Deficit |            |   | Deferred Stock-Based Compensation |   |            | Stock Subscription Receivable |  |   | Total   |  
|                                           |  | Shares       |  | Amount                     |       |  |         |            |  
|Balance, December 31, 2002                 |  | 5,843,612    |  | $                          | 5,844 |  | $       | 13,702,322 |   |                                   | $ | (7,787,012 | )                             |  | $ |        |   |  | $ | (270 | ) |  | $ | 5,920,884 |  
|Year Ended December 31, 2003:              |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  
|Write-off of stock subscription receivable |  |             |  |                            |      |  |         | (270       | ) |                                   |   |           |                               |  |   |        |   |  |   | 270  |   |  |   |          |  
|Sale of common stock in private placements |  | 358,517      |  |                            | 358   |  |         | 379,642    |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 380,000   |  
|Exercise of warrants                       |  | 10,000       |  |                            | 10    |  |         | 7,790      |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 7,800     |  
|Warrants granted for services              |  |             |  |                            |      |  |         | 11,931     |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 11,931    |  
|Common stock issued for services           |  | 44,000       |  |                            | 44    |  |         | 23,285     |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 23,329    |  
|Common stock issued as compensation        |  | 45,000       |  |                            | 45    |  |         | 38,655     |   |                                   |   |           |                               |  |   | (38,700 | ) |  |   |     |   |  |   |          |  
|Amortization of deferred compensation      |  |             |  |                            |      |  |         |           |   |                                   |   |           |                               |  |   | 20,425  |   |  |   |     |   |  |   | 20,425    |  
|Net loss                                   |  |             |  |                            |      |  |         |           |   |                                   |   | (842,116   | )                             |  |   |        |   |  |   |     |   |  |   | (842,116  | )
|                                           |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  
|Balance, December 31, 2003                 |  | 6,301,129    |  | $                          | 6,301 |  | $       | 14,163,355 |   |                                   | $ | (8,629,128 | )                             |  | $ | (18,275 | ) |  | $ |     |   |  | $ | 5,522,253 |  
|                                           |  |              |  |                            |       |  |        
|Year Ended December 31, 2004:              |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  
|Sale of common stock in private placements |  | 629,422      |  |                            | 629   |  |         | 942,821    |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 943,450   |  
|Exercise of options and warrants           |  | 371,500      |  |                            | 371   |  |         | 354,664    |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 355,035   |  
|Common stock issued for services           |  | 41,000       |  |                            | 41    |  |         | 69,959     |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 70,000    |  
|Common stock issued as compensation        |  | 39,209       |  |                            | 40    |  |         | 55,460     |   |                                   |   |           |                               |  |   |        |   |  |   |     |   |  |   | 55,500    |  
|Amortization of deferred compensation      |  |             |  |                            |      |  |         |           |   |                                   |   |           |                               |  |   | 18,275  |   |  |   |     |   |  |   | 18,275    |  
|Net loss                                   |  |             |  |                            |      |  |         |           |   |                                   |   | (857,516   | )                             |  |   |        |   |  |   |     |   |  |   | (857,516  | )
|                                           |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  
|Balance, December 31, 2004                 |  | 7,382,260    |  | $                          | 7,382 |  | $       | 15,586,259 |   |                                   | $ | (9,486,644 | )                             |  | $ |        |   |  | $ |     |   |  | $ | 6,106,997 |  
|                                           |  |              |  |                            |       |  |         |            |   |                                   |   |            |                               |  |   |         |   |  |   |      |   |  |   |           |  



See notes to
consolidated financial statements.



F-4



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS



YEARS ENDED DECEMBER 31, 2004 AND 2003



|                                                                                                     |  |      |           |   |      |   |          |  
|---------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | -
|                                                                                                     |  | 2004 |           |   | 2003 |  
|Cash Flows from Operating Activities:                                                                |  |      |           |   |      |   |          |  
|Net loss                                                                                             |  | $    | (857,516  | ) |      | $ | (842,116 | )
|Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:     |  |      |           |   |      |   |          |  
|Depreciation and amortization                                                                        |  |      | 393,252   |   |      |   | 419,569  |  
|Warrants and stock issued for services                                                               |  |      | 143,775   |   |      |   | 53,687   |  
|Compensation to directors/officers/stockholders in connection with marketing/manufacturing agreement |  |      |          |   |      |   | 201,460  |  
|Credit for recovery of doubtful accounts receivable                                                  |  |      |          |   |      |   | (166,000 | )
|Loss on sale of equipment                                                                            |  |      | 28,179    |   |      |   |         |  
|Changes in operating assets and liabilities:                                                         |  |      |           |   |      |   |          |  
|(Increase) decrease in:                                                                              |  |      |           |   |      |   |          |  
|Accounts receivable                                                                                  |  |      | 31,338    |   |      |   | (54,776  | )
|Accrued interest receivable                                                                          |  |      |          |   |      |   | (9,897   | )
|Inventories                                                                                          |  |      | (46,476   | ) |      |   | (143,218 | )
|Prepaid expenses and other current assets                                                            |  |      | 60,531    |   |      |   | 31,160   |  
|Increase (decrease) in:                                                                              |  |      |           |   |      |   |          |  
|Accounts payable and accrued expenses                                                                |  |      | (116,552  | ) |      |   | 281,073  |  
|Deferred revenue                                                                                     |  |      |          |   |      |   | (92,731  | )
|                                                                                                     |  |      |           |   |      |   |          |  
|Net cash and cash equivalents used in operating activities                                           |  |      | (363,469  | ) |      |   | (321,789 | )
|                                                                                                     |  |      |           |   |      |   |          |  
|Cash Flows from Investing Activities:                                                                |  |      |           |   |      |   |          |  
|Acquisition of property and equipment                                                                |  |      | (294,062  | ) |      |   | (101,660 | )
|Acquisition of product rights                                                                        |  |      |          |   |      |   | (100,000 | )
|Purchase of investments                                                                              |  |      | (12,418   | ) |      |   | (12,007  | )
|Proceeds from sale of equipment                                                                      |  |      | 45,000    |   |      |   |         |  
|Increase in patent costs                                                                             |  |      | (4,803    | ) |      |   | (11,471  | )
|                                                                                                     |  |      |           |   |      |   |          |  
|Net cash and cash equivalents used in investing activities                                           |  |      | (266,283  | ) |      |   | (225,138 | )
|                                                                                                     |  |      |           |   |      |   |          |  
|Cash Flows from Financing Activities:                                                                |  |      |           |   |      |   |          |  
|Net proceeds from issuance of common stock, net of related costs                                     |  |      | 943,450   |   |      |   | 319,730  |  
|Proceeds from stock subscription receivable                                                          |  |      | 100,000   |   |      |   |         |  
|Proceeds from exercise of options                                                                    |  |      | 262,375   |   |      |   | 7,800    |  
|                                                                                                     |  |      |           |   |      |   |          |  
|Net cash and cash equivalents provided by financing activities                                       |  |      | 1,305,825 |   |      |   | 327,530  |  
|                                                                                                     |  |      |           |   |      |   |          |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                                 |  |      | 676,073   |   |      |   | (219,397 | )
|                                                                                                     |  |     
|Cash and Cash Equivalents, Beginning                                                                 |  |      | 283,939   |   |      |   | 503,336  |  
|                                                                                                     |  |      |           |   |      |   |          |  
|Cash and Cash Equivalents, Ending                                                                    |  | $    | 960,012   |   |      | $ | 283,939  |  
|                                                                                                     |  |      |           |   |      |   |          |  
|Non-Cash Investing and Financing Activities:                                                         |  |      |           |   |      |   |          |  
|Stock purchase receivable                                                                            |  | $    | 92,660    |   |      | $ |         |  
|                                                                                                     |  |      |           |   |      |   |          |  



See notes to
consolidated financial statements.



F-5



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



DECEMBER 31, 2004 AND 2003



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Organization and Capitalization



American Access Technologies, Inc. (Company) was incorporated on October 21, 1996, under the laws of the State
of Florida. The Companys Articles of Incorporation, as amended on November 25, 1996, authorize the Company to issue and have outstanding at any one time 10,000,000 shares of common stock, par value $.001 per share and 1,000,000 shares of
preferred stock, par value $.001 per share.



On October 2,
1998, the previously amended Articles of Incorporation were further amended to provide for the issuance of 60,000 shares of Series A 10% Senior Convertible Preferred stock, par value $.001 per share. During November 1998, the Company completed a
$5,000,000 private placement of 50,000 shares of its Series A 10% Senior Convertible Preferred Stock, at $100.00 per share. During 1999 and 2000, holders of the Series A Preferred stock converted 50,000 of the Series A Preferred shares into 505,515
common shares. At December 31, 2004, there was no Preferred stock issued and outstanding.



On February 14, 2001, the Articles of Incorporation were further amended increasing the shares of common stock authorized from 10,000,000 to 30,000,000 shares.



Business



The Company manufactures patented zone cabling enclosures for the
telecommunications industry, enabling businesses and government to move, add, and change copper and fiber optic cabling to keep pace with advances in high-speed communications networks.



Omega Metals, Inc. (Omega), a wholly-owned subsidiary of the Company since 1998, was merged into the Company
effective February 3, 2005 and will continue to operate as a separate division. Omega Metals is a precision sheet metal fabrication and assembly operation which manufactures our zone cabling and wireless products. It also serves a diverse client
base of over 300, including engineering, technology and electronics companies, mostly in the Southeast. Omega Metals operates from a 67,500 sq. ft. manufacturing facility situated on 8 1/2 acres of land which is owned by the Company. Manufacturing
services include precision stamping, bending, assembling, painting, powder coating and silk screening.



Zonecabling.com, Inc., a wholly-owned subsidiary of the Company, was incorporated on May 4, 2000, to develop a Business-to-Business e-commence portal, and
is currently inactive.



Principles of Consolidation



The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.



F-6



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Use of Estimates



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on managements
knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Those estimates subject to potential change in the near term include allowances for doubtful accounts and notes receivable and
allocations of production overhead to inventories.



Revenue Recognition



The Company
recognizes revenue from product sales at the time the product is shipped and title passes to the customer.



Cash and Cash Equivalents



The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.



Concentrations of Credit Risk



Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents, investments in securities 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, 2004, the
Company had deposits in excess of federally insured limits of approximately $258,000. The Company maintains its cash with high quality financial institutions which the Company believes limits these risks.



Additionally, the Company maintains an investment account with a financial
institution that is not insured by the FDIC. These funds, which were invested primarily in seven-day auction instruments at December 31, 2004, may be subject to insurance by SIPC, Securities Investor Protection Corporation, subject to various
limitations. At December 31, 2004, approximately $502,000 was held in this account and is included in cash and cash equivalents.



F-7



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Concentrations of Credit Risk (Continued)



Investment Securities



The Company classifies its investment securities in one of three categories:
trading, available for sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity are those securities as to which the Company has the ability and intent to hold
the security until maturity. All other securities not included in trading or held-to-maturity are classified as available for sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at
amortized costs, adjusted for the amortization or accretion of premiums and discounts.



Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders equity until realized.
Realized gains and losses from the sale of available for sale securities are determined on a specific identification basis. A decline in the market value of any available for sale or held-to-maturity security below cost that is deemed other than
temporary results in a reduction in carrying amount to fair value.



The impairment is charged to earnings and a new cost basis for the security is established. Dividend and interest income are recognized when earned.



Notes and Trade Receivables



Notes and trade receivables are recorded at net realizable value. The Company records interest income on interest-bearing loans receivable using an
appropriate rate of interest over the life of the loan. Related fees and/or costs are deferred and amortized over the life of the loan using the interest method.



The Company does business and extends credit based on an evaluation of the customers financial condition generally
without requiring collateral. Exposure to losses on trade 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.



Non-Accrual and Past Due Notes and Trade Receivables



Interest income accruals are suspended for interest-bearing loans receivable that are in default during the period of time that collectibility is uncertain. Payments received on non-accrual loans are first applied against any accrued
interest balance outstanding. Once collectibility is considered to be certain, interest income accruals are resumed.



F-8



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Concentrations of Credit Risk (Continued)



Non-Accrual and Past Due Notes and Trade Receivables (Continued)



Delinquent notes and trade receivables are charged against
the allowance for doubtful accounts once uncollectibility has been determined. Notes and trade receivables are considered to be past due and placed on delinquent status based on contractual terms, as well as how frequently payments are received, on
an individual account basis.



Inventories



Inventories are stated at the lower of cost or
market, with cost determined using an average cost method. Inventory costs for finished goods and work-in-process include material, labor, production overhead, and outside services. Production overhead, including indirect labor, is allocated to
finished goods and work-in-progress based on material purchases.



Property, Plant and Equipment



Property, plant and equipment are recorded at cost and depreciated, using the straight-line method, over the estimated useful lives of the assets. Gain or loss on disposition of assets is recognized currently. Repairs and maintenance are
charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the assets.



Patents



The Company has capitalized certain incremental costs incurred related to acquiring several patents on the Companys products. The Company holds four
patents that were issued by the United States Patent Department. The Company also holds patents in Canada, Mexico, Great Britain, Germany, Austria, China and Australia. The Company amortizes the cost of patents over the patents estimated
useful lives, 18 years.



Product Development
Costs



Costs in connection with the development of the
Companys product are comprised of design, production, consulting and other related professional fees. These costs are charged to expense as incurred.



Advertising



Advertising costs are charged to expense as incurred. Advertising costs were approximately $3,000 and $26,000, respectively, for the years ended December
31, 2004 and 2003.



F-9



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



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.



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.



Stock-Based Compensation



Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), encourages, but does not
require companies to record stock-based compensation plans using a fair value based method. The Company has chosen to continue to account for stock-based compensation using the intrinsic value based method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Companys common stock at the date of the grant
over the amount an employee must pay to acquire the stock.



The Company used the Black-Scholes option-pricing model to determine the fair value of grants made in 2004 and 2003. The following assumptions were applied in determining the pro forma compensation cost:



|                                |  |                 |  |               
|------------------------------- |  | --------------- |  | --------------
|                                |  | 2004            |  | 2003          
|Risk Free Interest Rate         |  | 5.0%            |  | 5.0%          
|Expected Dividend Yield         |  |                |  |              
|Expected Option Life            |  | 0.75-1.25 years |  | 1.0-1.25 years
|Expected Stock Price Volatility |  | 74% to 131%     |  | 83% to 105%   



Had compensation cost
for the options and warrants issued to employees, officers and directors been determined based on the fair value at the grant date consistent with SFAS No. 123, the Companys net loss and loss per share would have been as follows:



|                                                                                                       |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                       |  | 2004 |            |   | 2003 |  
|Net Loss:                                                                                              |  |      |            |   |      |   |            |  
|As reported                                                                                            |  | $    | (857,516   | ) |      | $ | (842,116   | )
|Add: stock-based employee compensation expense included in net loss                                    |  |      |           |   |      |   | 11,929     |  
|Deduct: total stock-based compensation expense determined under fair value based method for all awards |  |      | (733,355   | ) |      |   | (181,203   | )
|                                                                                                       |  |      |            |   |      |   |            |  
|Pro forma                                                                                              |  | $    | (1,590,871 | ) |      | $ | (1,011,390 | )
|                                                                                                       |  |      |            |   |      |   |            |  



F-10



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Stock-Based Compensation (Continued)



|                   |  |      |       |   |      |   |       |  
|------------------ |  | ---- | ----- | - | ---- | - | ----- | -
|                   |  | 2004 |       |   | 2003 |  
|Loss Per Share:    |  |      |       |   |      |   |       |  
|Basic and diluted: |  |      |       |   |      |   |       |  
|As reported        |  | $    | (0.13 | ) |      | $ | (0.14 | )
|                   |  |      |       |   |      |   |       |  
|Pro forma          |  | $    | (0.23 | ) |      | $ | (0.17 | )
|                   |  |      |       |   |      |   |       |  



Long-Lived
Assets



The Company continually evaluates whether
events and circumstances have occurred that may warrant revision of the estimated life of its intangible and other long-lived assets or whether the remaining balance of its intangible and other long-lived assets should be evaluated for possible
impairment. If and when such factors, events or circumstances indicate that intangible or other long-lived assets should be evaluated for possible impairment, the Company will determine the fair value of the asset by making an estimate of expected
future cash flows over the remaining lives of the respective assets and compare that fair value with the carrying value of the assets in measuring their recoverability. In determining the expected future cash flows, the assets will be grouped at the
lowest level for which there is cash flow, at the operating subsidiary level.



Fair Value of Financial Instruments



The respective carrying value of certain on-balance-sheet financial instruments approximates their fair value. These instruments include cash and cash equivalents, accounts receivable, investment securities, notes
receivable 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.



Recent Accounting Pronouncements



In December 2004, the Financial Accounting Standards
Board issued SFAS No. 123-R, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance. SFAS No. 123-R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in
exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based



F-11



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Recent Accounting Pronouncements (Continued)



payment transactions with parties other than employees provided in SFAS No.
123 as originally issued and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. This Statement does not address the accounting
for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers Accounting for Employee Stock Ownership Plans. This Statement becomes effective the beginning of the first interim or annual reporting period
that begins after December 15, 2005. The Company has not assessed the full impact but believes the adoption of this standard may have a significant non-cash impact on the Companys results of operations or financial position as of January 2006.



In November 2004, the FASB issued SFAS No. 151,
Inventory Costs  An Amendment of ARB NO. 43, Chapter 4 (SFAS No. 151). SFAS No. 151 requires all companies to recognize a current-period charge for abnormal amount of idle facility expense, freight, handling costs and wasted
materials. This statement also requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for fiscal year beginning after June 15,
2005. The Company does not expect the adoption of this statement to have a material effect on its consolidated financial statements.



In December 2003, the Financial Accounting Standards Board issued FASB Interpretation Number 46-R Consolidation of Variable Interest
Entities.FIN 46-R, which modifies certain provisions and effective dates of FIN 46, sets for the criteria to be used in determining whether an investment is a variable interest entity should be consolidated. These provisions are based on
the general premise that if a company controls another entity through interests other than voting interests, that company should consolidate the controlled entity. The Company believes that currently, it does not have any material arrangements that
meet the definition of a variable interest entity which would require consolidation.



Reclassifications



Certain amounts in prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements. Commencing with the first quarter 2004, certain amounts have been
reclassified to cost of goods sold from selling, general and administrative costs and the comparable amounts have been reclassified to/from the prior year.



F-12



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 2. SUMMARY OF CERTAIN RISKS AND OTHER MATTERS



Profitability and Liquidity



As of December 31, 2004, the Company reflected stockholders equity of
approximately $6,100,000. However, the Company has incurred net losses of approximately $858,000 in 2004 and $842,000 in 2003, and has an accumulated deficit balance of approximately $9,487,000 at December 31, 2004. The Companys ability to
achieve sustained profitable operations is dependent on continuing to achieve sales growth through expansion of sales and marketing efforts. Management believes that cash flows from operations and additional financing available from other sources
will be sufficient to fund operations. There is no assurance that such events will occur.



NASDAQ Listing



The Companys stock is currently listed on the Nasdaq Small Cap Market. The Nasdaq Stock Markets Marketplace Rules impose a minimum stock price of $1.00 per share for the continued listing of the Companys stock. As of the
date of this report, the Company is in compliance with all Nasdaq Stock Market listing requirements. If the Companys stock price were to close below $1.00 for 30 consecutive trading days in the future, the Company could be out of compliance
and the Companys stock would be subject to delisting if compliance was not achieved within the 180-day cure period provided in the Nasdaq Marketplace Rules. Delisting makes it more difficult to issue additional shares in order to secure
additional financing.



Pending Litigation



The Company is involved in certain pending litigation
as to which it cannot predict the outcome with any certainty (see Note 14).



NOTE 3. INVESTMENT SECURITIES



All marketable
securities are deemed by management to be trading and are reported at fair value with net unrealized gains or losses reported on the consolidated statement of operations. Realized gains and losses are recorded based on the specific identification
method. Net realized gain was approximately $12,000 for each of the years ended December 31, 2004 and 2003. The carrying amount of the Companys investments at December 31, 2004 is shown below:



|                          |  |      |         |            |   |        
|------------------------- |  | ---- | ------- | ---------- | - | -------
|                          |  | Cost |         | Fair Value
|Variable annuity contract |  | $    | 400,000 |            | $ | 424,554
|                          |  |      |         |            |   |        



F-13



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 4. ACQUISITION OF PRODUCT RIGHTS



In 2002, the Company entered into an Agreement for the Acquisition of Product Rights (Agreement) from Bill
Sherer Corporation (BSC) and its principal, Bill Sherer. All rights, entitlements, logos, trademarks, goodwill and designs pursuant to the Northern Lights/Eclipse Ultraviolet Light Air Cleansing Systems (the Products) were
acquired by the Company in exchange for a one-time cash payment of $50,000, $500,000 in restricted common stock, and forgiveness of approximately $133,000 in outstanding accounts receivables carried by the Company on BSCs account.



Also in 2002, the Company amended the agreement for the purchase of the
products rights. The Company paid $25,000 in cash over five quarters ($125,000 in total) commencing November 1, 2002 and ending November 1, 2003, in addition to the previous one-time cash payment of $50,000 and forgiveness of approximately $133,000
in outstanding accounts receivable. In exchange for the cash payments, the Company did not issue $500,000 of restricted common stock plus 5% interest earned which was also payable in stock that, pursuant to the original agreement, could have been
requested at any time after January 11, 2003 through January 11, 2007. The amendment reduced the purchase price of the product rights by $375,000 to a total of $308,000 which has been fully amortized as of December 31, 2004. The Company is currently
looking for a company to acquire the product rights and distribute the product while the Company continues to manufacture the product.



NOTE 5. NOTES RECEIVABLE



Directors and Stockholders Notes Receivable in Exchange for Cash



In 2000, the Company authorized loans to two directors, who also are officers of American Access or its subsidiaries, and
who collateralized the loans with personal assets unrelated to these transactions. The collateralized loans were to enable these directors to cover margin calls precipitated by a drop in the price of the Companys common stock. The two
directors (one of whom is the Companys president) each executed a promissory note and security agreement for $75,000 and $60,000 respectively, payable on or before December 31, 2000, with interest at 10%. In October 2000, the two directors
executed additional promissory notes with identical terms for $10,000 each, payable on or before April 30, 2001. Each of these notes was extended to June 30, 2003. No interest had been paid on the notes receivable since inception and through
December 31, 2002.



On May 5, 2003 the Compensation Committee
of American Access Technologies, Inc. met and unanimously passed a motion to reward the two directors for their considerable time and effort in negotiating and executing the five year marketing and manufacturing agreement with Chatsworth Products,
Inc. (see Note 12). After considerable discussion it was decided to treat the outstanding loans and interest to the two directors as compensation. The total amounts were approximately $110,000 and $91,000, respectively.





F-14



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 5. NOTES RECEIVABLE (Continued)



Note Receivable, Other



The Company instituted litigation against the debtor and personal guarantor
for default in payment of a promissory note of $325,000, with accrued interest in excess of approximately $36,000. The original promissor assigned its obligations with written consent of the Company, after the Company filed a lawsuit for default of
the original note of $500,000 plus 15% interest, of which approximately $63,000 was unpaid. Although the debtor paid an initial cash payment of $250,000, its obligations of $325,000 plus $36,562 in interest were in default at the end of 2000. No
additional interest was recorded after that date because of uncertainty of collectibility. The Company has been attempting to negotiate a settlement agreement with the debtor and the notes guarantor. An allowance for doubtful collectibility of
the total outstanding principal balance, as well as all accrued interest, has been recorded.



NOTE 6. INTANGIBLE ASSETS



|                             |  |                                |  |      |         |                          |   |         |  |   |       
|---------------------------- |  | ------------------------------ |  | ---- | ------- | ------------------------ | - | ------- |  | - | ------
|Amortized Intangible Assets: |  | Estimated Useful Lives (Years) |  | Cost |         | Accumulated Amortization |   | Net    
|Patents                      |  | 18                             |  | $    | 108,422 |                          | $ | 28,911  |  | $ | 79,511
|Product Rights (see Note 4)  |  | 3                              |  |      | 308,000 |                          |   | 308,000 |  |   |      
|                             |  |                                |  |      |         |                          |   |         |  |   |       
|                             |  |                                |  | $    | 416,422 |                          | $ | 336,911 |  | $ | 79,511
|                             |  |                                |  |      |         |                          |   |         |  |   |       



Amortization expense
for the years ended December 31, 2004 and 2003 was approximately $76,000 and $70,000, respectively.



Estimated Amortization Expense:



|                                 |  |   |       
|-------------------------------- |  | - | ------
|For the year ending December 31: |  |   |       
|2005                             |  | $ | 6,000 
|2006                             |  |   | 6,000 
|2007                             |  |   | 6,000 
|2008                             |  |   | 6,000 
|2009                             |  |   | 6,000 
|                                 |  |   |       
|                                 |  | $ | 30,000
|                                 |  |   |       



NOTE 7. STOCK SUBSCRIPTION
RECEIVABLE



On December 30, 2004, employees and
consultants exercised 89,000 options with strike prices ranging between $1.00 and $1.53. The Company recognized a receivable for the proceeds of $92,660 as of December 31, 2004 from these exercises and subsequently received payment in full in
January 2005.



F-15



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 8. INVENTORIES



|                |  |   |          
|--------------- |  | - | ---------
|Raw materials   |  | $ | 298,800  
|Work-in-process |  |   | 685,352  
|Finished goods  |  |   | 181,211  
|                |  |   |          
|                |  | $ | 1,165,363
|                |  |   |          



NOTE 9. PROPERTY, PLANT AND
EQUIPMENT



|                                 |  |                                |  |   |          
|-------------------------------- |  | ------------------------------ |  | - | ---------
|                                 |  | Estimated Useful Lives (Years) |  |  
|Land                             |  |                               |  | $ | 103,859  
|Building and improvements        |  | 6-40                           |  |   | 1,373,748
|Machinery and equipment          |  | 6-10                           |  |   | 3,939,960
|Computers and office equipment   |  | 5-10                           |  |   | 219,363  
|Deposit on purchase of equipment |  |                               |  |   | 66,500   
|Vehicles                         |  | 7                              |  |   | 66,046   
|Tools                            |  | 2-10                           |  |   | 83,573   
|                                 |  |                                |  |   |          
|                                 |  |                                |  |   | 5,853,049
|Less accumulated depreciation    |  |                                |  |   | 3,149,642
|                                 |  |                                |  |   |          
|                                 |  |                                |  | $ | 2,703,407
|                                 |  |                                |  |   |          



Depreciation expense
for the years ended December 31, 2004 and 2003 was approximately $318,000 and $350,000, respectively.



NOTE 10. PROFIT SHARING PLAN



The Company has terminated its 401(k) Profit Sharing Plan effective March 31, 2004. There were no contributions made during the years ended December 31, 2004 and December 31, 2003.



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 is computed on a consolidated return basis.



F-16



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 11. INCOME TAXES (Continued)



A reconciliation of income taxes computed at the statutory federal rate to income tax expense (benefit) for the year ended
December 31, 2004 is as follows:



|                                              |  |   |          |  
|--------------------------------------------- |  | - | -------- | -
|Tax provision at the statutory rate of 34%    |  | $ | (292,000 | )
|State income taxes, net of federal income tax |  |   | (38,000  | )
|Exercise of stock options and warrants        |  |   | (77,000  | )
|Change in valuation allowance                 |  |   | 332,000  |  
|Stock options not exercised                   |  |   | 60,000   |  
|Other                                         |  |   | 15,000   |  
|                                              |  |   |          |  
|                                              |  | $ |         |  
|                                              |  |   |          |  



As of December 31,
2004, the Company had consolidated net operating loss carryforwards for federal income tax reporting purposes amounting to approximately $10,289,000 which expire in varying amounts to the year 2024. Of the total tax benefit relating to net operating
losses of $872,000, subsequently recognized tax benefits, if any, in the amount of $673,000 will be applied directly to additional paid-in capital.

|
|



The Company
has not recognized any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements in accordance with the provisions of SFAS No. 109 as the realization of this deferred tax benefit is not considered more
likely than not. A 100% valuation allowance has been recognized to offset the entire effect of the Companys net deferred tax asset. The Companys net deferred tax asset position is composed primarily of the Companys net operating
loss carryforwards.



The components of the deferred tax asset
at December 31, 2004 were as follows:



|                                |  |   |            |  
|------------------------------- |  | - | ---------- | -
|Net operating loss carryforward |  | $ | 3,872,000  |  
|Allowance for collectibility    |  |   | 163,000    |  
|Stock compensation              |  |   | 78,000     |  
|Depreciation and amortization   |  |   | (247,000   | )
|Less valuation allowance        |  |   | (3,866,000 | )
|                                |  |   |            |  
|Net deferred tax asset          |  | $ |           |  
|                                |  |   |            |  



In accordance with
certain provisions of the Tax Reform Act of 1986, a change in ownership of greater than 50% of a corporation within a three-year period will place an annual limitation on the corporations ability to utilize its existing tax benefit
carryforwards. The Companys utilization of its tax benefit carryforwards may be restricted in the event of possible future changes in the ownership of the Company from the exercise of warrants or other future issuances of common stock.



The Companys federal and state income tax returns have
not been examined by the respective taxing authorities for the past several years. The final determination of the amount and timing of currently payable income taxes is therefore subject to possible examination of these unexamined years by such
respective taxing authorities.



F-17



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 12. COMMON STOCK



Equity Financing



On May 9, 2003, the Company announced a five-year marketing and manufacturing agreement with Chatsworth Products Inc. (CPI). In addition, the
Company entered into a Stock Purchase Agreement and agreed to issue and sell 215,517 shares of American Access common stock to CPI. In consideration for the shares, CPI agreed to pay to the Company, in cash, a purchase price of $1.16 per share for
the shares, for an aggregate purchase price of $250,000, payable as follows: $50,000 upon the Initial Closing and four (4) additional installments of $50,000 each at subsequent 90 day intervals following the Initial Closing. On May 4, 2004, the
final $50,000 installment was collected.



On December 8, 2003,
the Company announced an agreement to sell 365,286 shares of common stock to an institutional investor in a Private Investment Public Equity transaction for $370,000, an average price of $1.01 per share. The purchase price of the shares approximated
the average closing price for the 30 trading days prior to the initial close. The closing of the initial installment of 143,000 shares for $130,000 was completed December 4, 2003. On February 6, 2004, the final installment for 222,286 shares was
completed and $240,000 was collected. The closing on the balance of the agreement took place after a registration statement covering the resale of the shares by the investor was declared effective by the Securities and Exchange Commission. The sale
was arranged directly between the Company and the investor and no sales commission were paid or warrants issued in connection with the private placement.



On October 12, 2004, the Company sold 407,136 shares of common stock to four institutional investors in a private placement transaction for gross proceeds
of $753,200, at a price of $1.85 per share. The purchase price of the shares approximated the average closing price of the common stock over the 15-day period prior to the execution of the contract. Under the terms of the transaction, the investors
received warrants to purchase an additional 150,000 common shares, exercisable at $2.30 per share for a period of five years and the registered broker dealer firm which acted as the placement agent in connection with the purchase of such shares and
warrants by two of the investors received warrants to purchase 6,700 common shares, exercisable at $2.30 per share for a period of five years. The proceeds of this funding were earmarked to purchase laser-cutting equipment that was installed during
the first quarter, 2005 (See Note 14).



Issuance of
Common Stock for Services/Compensation



In June 2003
and December 2003, respectively, the Company issued 29,000 and 13,000 shares of common stock in lieu of cash to its outside legal counsel for services rendered.



The Company issued 45,000 shares of stock to an employee pursuant to an early retirement agreement in September 2003. The
Company paid 2,500 shares of Company common stock on acceptance of the agreement and 42,500 shares of Company common stock in consideration of consulting services for the period October 14, 2003 through April 14, 2004. Stock-based compensation
related to the 42,500 shares has been recorded as deferred compensation and was amortized over the life of the service agreement.



F-18



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 12. COMMON STOCK (Continued)



Issuance of Common Stock for Services/Compensation (Continued)



In October 2003, the Company issued 2,000 shares of common stock to an
employee as an inducement to join the Company.



In 2004, the
Company issued 41,000 shares of common stock in lieu of cash to its outside legal counsel for services rendered.



In June 2004, the Company issued 39,209 shares of common stock to three separate individuals in settlement of claims against the Company.



NOTE 13. 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-BasedCompensation, established accounting and
disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. The Company has elected to retain its current method of accounting as described above, and has adopted the disclosure requirements of
SFAS No. 123.



Stock Option Plan Since Inception



On January 10, 2000, the Board of Directors of the
Company (Board) authorized the 2000 Employee Stock Option Plan (Stock Option Plan) for those employees, consultants, and advisors (the Participants) of the Company who, in the judgment of the Company are or will
become responsible for the direction and financial success of the Company. The adoption of the Stock Option Plan was ratified by the stockholders on June 29, 2000. The purpose of the Stock Option Plan is to provide the Participants with an increased
incentive to make significant contributions to the long-term performance and growth of the Company. The Board authorized that 500,000 employee options and 300,000 Board of Director options be subject to this plan.



On January 10, 2000, the Company granted 515,000 employee options and
340,000 Board of Director options with an exercise price of $5.67 and a life of five years. Subsequent to the grant, 10,000 options were returned to the Company when an employee separated employment. Also in 2000, a former director exercised 60,000
warrants in a cashless transaction for the difference in the exercise price of $5.67 and the closing price of $8.00 on date of exercise and received 17,475 shares of common stock.



F-19



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



|NOTE | 13. STOCK-BASED COMPENSATION(Continued)
|---- | ---------------------------------------



Stock Option Plan Since Inception (Continued)



On August 15, 2001, the Board authorized an amendment of the 2000 Stock Option Plan. The Board authorized an additional 500,000 employee options and
300,000 Board of Director options be subject to this plan at an exercise price of $1.00. The amendment of the Stock Option Plan was ratified by the stockholders on December 21, 2001. On August 15, 2001, the Company granted 440,000 employee options
and 400,000 Board of Director options with an exercise price of $1 and a life of five years. Also, on November 15, 2001 and December 1, 2001, the Company granted an additional 10,000 and 75,000 employee options with an exercise price of $1 and a
life of five years. During 2001, 110,000 employee options and 120,000 Board of Director options were returned to the Company upon separations of employment and Board resignations.



On July 1, 2002, the Board authorized an additional amendment of the 2000 Stock Option Plan. The Board authorized and
granted an additional 520,000 five-year employee options and 300,000 five-year Board of Director options at an exercise price of $0.78. The amendment to the Stock Option Plan was ratified by stockholders at the August 1, 2003 annual
stockholders meeting. During 2002, 110,000 employee options and 65,000 Board of Director options were returned to the Company upon separations of employment and Board resignations.



On December 2, 2003, the Board authorized a grant of 112,500 and 417,500 five-year employee options at an exercise price of
$ 1.25 and $1.13, respectively, and 150,000 five-year Board of Director options at an exercise price of $1.13. The options authorized were existing options previously ratified by stockholders that were returned to the Company. During 2003, 10,000
employee options were exercised and 360,000 employee options and 120,000 Board of Director options were returned to the Company upon separations of employment and Board resignations.



At the 2003 annual meeting of stockholders, the elected Directors received only one-half of the options to which they were
entitled under the 2000 Director Stock Option Plan. This was due to the lack of sufficient shares authorized for issuance under the Companys 2000 Director Stock Option Plan. However, because the 2004 Director Stock Option Plan provides that
incumbent directors elected at the 2003 annual meeting will receive the balance of the 2003 options, these options were issued after the 2004 annual meeting of stockholders at the same time and the same option price of the options granted after the
2004 annual meeting of stockholders.



On January 3, 2003, the
Company issued 20,000 warrants to purchase common stock in connection with services provided to the Company by two Advisory Board members with an exercise price of $1.00 per share.



The granting of the warrants in 2003 to consultants resulted in a charge to
consulting fees in the amount of approximately $12,000 in 2003 representing the fair value of the 20,000 warrants issued in 2003 and warrants issued in prior years being amortized and expensed in 2003.



F-20



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



|NOTE | 13. STOCK-BASED COMPENSATION (Continued)
|---- | ----------------------------------------



Stock Option Plan since inception (Continued)



As of December 31, 2003, the Company had 7,040,202 options and warrants outstanding to purchase common stock at exercise prices ranging from $0.56 to
$25.00, 5,591,979 of which are options and warrants outstanding to employees and officers/directors.



In January 2004, 30,000 warrants were exercised by three commissioned salesmen. In August 2004, 10,000 warrants were exercised by a former Advisory Board
member.



In March 2004, 65,000 Board of Directors options with
a strike price of $0.78 were exercised, providing the Company $50,700 in net proceeds. Throughout 2004, 236,500 employee options and 30,000 options issued to a consultant with strike prices ranging between $0.78 and $1.53 were exercised, providing
the Company $244,360 in net proceeds. Due to 89,000 of these options being exercised on December 30, 2004, the Company recognized a receivable of approximately $92,000 for proceeds related to these transactions. The funds were subsequently received
in January 2005. (See Note 7)



In June 2004, the Company
issued 20,000 options to an employee as an inducement to join the Company.



On July 23, 2004, stockholders approved the 2004 Employee Stock Incentive Plan and the 2004 Director Stock Option Plan. Collectively, these Plans authorize the issuance of up to 2,500,000 shares of the Companys
common stock.



On July 26, 2004, the Board of Directors
authorized a grant of 564,000 five-year employee stock options at an exercise price of $1.53 from the 2004 Employee Stock Incentive Plan and 430,000 five-year Board of Director stock options at an exercise price of $1.53 from the 2004 Director Stock
Option Plan.



On July 26, 2004, the Company issued 20,000
warrants to purchase common stock to its two commissioned salesmen with an exercise price of $1.53 per share.



On October 6, 2004, as part of the private placement transaction during which $753,000 was raised to fund an upcoming capital equipment purchase, the
Company issued 150,000 warrants to three institutional investors and 6,700 warrants to an outside consultant to purchase common stock with an exercise price of $2.30 per share.



As of December 31, 2004, the Company had 6,572,402 options and warrants outstanding to purchase common stock at exercise
prices ranging from $0.56 to $10.00, 5,441,479 of which are options and warrants outstanding to employees and officers/directors.



F-21



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



|NOTE | 13. STOCK-BASED COMPENSATION (Continued)
|---- | ----------------------------------------



Stock Option Plan since inception (Continued)



Changes in outstanding options and warrants for common stock are as follows:



|                                 |  |            |   |  |                                      |       |      |           |   |                                      |   |     
|-------------------------------- |  | ---------- | - |  | ------------------------------------ | ----- | ---- | --------- | - | ------------------------------------ | - | ----
|                                 |  | 2004       |   |  | 2004 Weighted Average Exercise Price |       | 2003 |           |   | 2003 Weighted Average Exercise Price
|Outstanding at beginning of year |  | 7,040,202  |   |  | $                                    | 5.72  |      | 6,906,976 |   |                                      | $ | 5.89
|Options and warrants granted     |  | 1,172,700  |   |  | $                                    | 1.63  |      | 730,000   |   |                                      | $ | 1.13
|Options and warrants exercised   |  | (371,500   | ) |  | $                                    | 0.99  |      | (10,000   | ) |                                      | $ | 0.78
|Options and warrants expired     |  | (1,269,000 | ) |  | $                                    | 19.65 |      | (586,774  | ) |                                      | $ | 2.17
|                                 |  |            |   |  |                                      |       |      |           |   |                                      |   |     
|Outstanding at end of year       |  | 6,572,402  |   |  | $                                    | 2.56  |      | 7,040,202 |   |                                      | $ | 5.72
|                                 |  |            |   |  |                                      |       |      |           |   |                                      |   |     
|Exercisable at end of year       |  | 6,572,402  |   |  |                                      |       |      | 7,040,202 |   |                                      |   |     
|                                 |  |            |   |  |                                      |       |      |           |   |                                      |   |     



The following table
summarizes information about outstanding options/warrants at December 31, 2004:



|                        |  |                                     |  |                                         |  |                         |                |                                     |           |                                         |    
|----------------------- |  | ----------------------------------- |  | --------------------------------------- |  | ----------------------- | -------------- | ----------------------------------- | --------- | --------------------------------------- | ---
|Options Outstanding     |  | Options Exercisable                
|Range of ExercisePrices |  | NumberOutstandingatDecember 31,2004 |  | WeightedAverageRemainingContractualLife |  | Range of ExercisePrices |                | NumberExercisableatDecember 31,2004 |           | WeightedAverageRemainingContractualLife
|$0.56 to $10.00         |  | 6,572,402                           |  | 2.5                                     |  | $                       | 0.56 to $10.00 |                                     | 6,572,402 |                                         | 2.5
|                        |  |                                     |  |                                         |  |                         |                |                                     |           |                                         |    



NOTE 14. COMMITMENTS,
CONTINGENCIES, OTHER MATTERS AND SUBSEQUENT EVENT



Major Vendors



The Company purchased
sheet metal and related products from two primary vendors that, combined, represented approximately 16.3% and 12.7% of cost of sales for the years ended December 31, 2004 and 2003, respectively.





F-22



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



|NOTE | 14. COMMITMENTS, CONTINGENCIES, OTHER MATTERS AND SUBSEQUENT EVENT (Continued)
|---- | ------------------------------------------------------------------------------



Major Customer - Chatsworth Products, Inc. (Related Party)



On May 9, 2003, the Company entered into a marketing and manufacturing
agreement with Chatsworth Products Inc. (CPI). The agreement established a five-year strategic alliance for the sale and manufacture of innovative zone cabling and wireless products developed by American Access Technologies. Under the
terms of the agreement, the Company and CPI will co-market and co-manufacture the products and incorporate the brand names and patents of both companies. In connection with the alliance, CPI purchased 215,517 shares of American Access Common Stock
in a private placement at $1.16 per share (see Note 12).



CPI
purchased products representing approximately $1,595,000 or 23.7% and $372,000 or 6.7% of sales for the years ended December 31, 2004 and 2003, respectively. At December 31, 2004, CPI owed the Company approximately $23,000, which is included in
accounts receivable in the accompanying consolidated balance sheet.



Private Label Contracts



In addition to
the Companys marketing and manufacturing agreement with CPI, the Company has also entered into Original Equipment Manufacturing (OEM) Agreements with several companies. The agreements set forth terms whereby the companies may purchase products
from the Company for resale to their customers. Revenue is recorded at such time as the units are shipped and title passes to the distributors. The agreements are for various terms and are automatically renewed periodically unless terminated by
either party, and contain, among other things, a warranty effective for one year after the date of sale.



Pending Litigation



On April 10, 2001, the Company entered into an Agreement and Plan of Merger with Defense Technology Systems, Inc., formerly known as Data World Solutions,
Inc., an unrelated entity. Subsequent to signing the agreement, the merger candidate made changes in its basic business and operations. The Company terminated the agreement and filed suit against the entity on July 11, 2001 in the 18th Judicial
Circuit Court, Seminole County, Florida seeking a declaratory judgment that it properly terminated the merger agreement. The merger candidate counter sued for the $500,000 termination payment specified in the agreement, which was payable under
limited circumstances. The Company did not believe that the entity is entitled to a termination payment. The trial process began February 7, 2005.



F-23



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



|NOTE | 14. COMMITMENTS, CONTINGENCIES, OTHER MATTERS AND SUBSEQUENT EVENT (Continued)
|---- | ------------------------------------------------------------------------------



Pending Litigation (Continued)



On February 18, 2005, Floridas 18th Judicial Circuit Court ruled in favor of the Company. The judge ruled that the
Company was justified in terminating the merger agreement and has initially awarded the Company damages including fees and costs, the value of which remains to be determined, incurred in connection with the proposed merger and the resulting
litigation. At December 31, 2004, a receivable has not been recorded, pending the determination of damages, fees and costs incurred and the other partys potential appeal.



On December 15, 2004, the Company filed seven suits in Small Claims Court in Clay County, Florida, related to a
customers default on a $38,000 account receivable for the ultra-violet light product. The entire past due balance is reflected in the bad debt allowance. The customer subsequently responded by filing a counter-suit in South Carolina and Clay
County claiming breach of contract, negligence, fraud and misrepresentation.



Equipment Purchase Commitment



In October 2004, the Company ordered a laser-cutting machine from Trumpf, Inc. in the amount of $705,000. A deposit of $66,500 was paid to Trumpf, Inc. on October 20, 2004. Subsequently, the Company ordered an
automatic loading system from Trumpf for approximately $127,000. The equipment was shipped and installed in early March 2005, with the remaining balance due within standard payment terms. Additional expenses to prepare the premises for the
installation are estimated at $20,000 to $40,000, exclusive of any applicable asset retirement obligations. On October 6, 2004 the Company sold 407,136 shares of common stock to three institutional investors in a Private Placement transaction for
gross proceeds of $753,200 to accomplish the funding of the base cost of the laser cutter (see Note 12).



NOTE 15. NET LOSS PER COMMON SHARE



The Company computes earnings (loss) per common share in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, which requires the
presentation of both basic and diluted earnings (loss) per share.



Basic net loss per common share has been computed based upon the weighted average number of shares of common stock outstanding during the periods. The number of shares used in the computation is 6,789,029 and 6,001,747 for the years ended
December 31, 2004 and 2003, respectively. Since the exercise of the warrants and stock options would have an anti dilutive effect, diluted earnings per share did not include common stock equivalents.



|                                          |  |      |          |   |      |   |          |  
|----------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                          |  | 2004 |          |   | 2003 |  
|Net Loss Allocated to Common Stockholders |  | $    | (857,516 | ) |      | $ | (842,116 | )
|                                          |  |      |          |   |      |   |          |  



F-24



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 16. BILL AND HOLD TRANSACTIONS



During 2002 and 2003, the Company entered into an agreement with certain customers, whereby the Company manufactured certain
products based on purchase orders. The Company determined that these transactions did not meet the criteria for revenue recognition as outlined in Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements, until
the products were shipped from the Companys warehouse at the direction of the customer. Upon completion of the manufacturing process, title to the product passed to the customer and the customer assumed responsibility for their risk of loss.
The customer paid a deposit when the product was manufactured, with the remaining balance paid at the earlier of shipment or a date fixed by the agreement. These products were then stored in a segregated area of the Companys warehouse until
shipping orders were received from the customer.



During 2003,
one of the customers placed orders for $132,205 of product, but only $70,506 was shipped. As a result, the $61,699 of product not shipped was reported as deferred revenue in the 2003 financial statements. During 2004, the remaining $61,699 of
product was shipped and recognized as revenue in 2004.



NOTE 17. SEGMENT
INFORMATION



The Company follows SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which dictates the way the Company reports information about its operating segments.



The Company has two reportable segments, zone cabling products and formed metal products. As discussed in Note 1, the
Company markets zone cabling products which are manufactured by Omega, a wholly-owned subsidiary. Omega manufactures formed metal products of varying designs for customers, including the Company.



|                                |  |                      |            |   |                     |   |           |  |   |                     |   |  |                     |           |   |       |   |           |   |  |   |           |  
|------------------------------- |  | -------------------- | ---------- | - | ------------------- | - | --------- |  | - | ------------------- | - |  | ------------------- | --------- | - | ----- | - | --------- | - |  | - | --------- | -
|                                |  | 2004                 |            |   | 2003                |  
|                                |  | Zone CablingProducts |            |   | FormedMetalProducts |   | Total     |  |   | ZoneCablingProducts |   |  | FormedMetalProducts |           |   | Total |  
|Revenue from external customers |  | $                    | 2,762,029  |   |                     | $ | 3,978,308 |  | $ | 6,740,337           |   |  | $                   | 1,871,052 |   |       | $ | 3,644,258 |   |  | $ | 5,515,310 |  
|Intersegment revenue            |  |                      | 132,773    |   |                     |   | 734,239   |  |   | 867,012             |   |  |                     | 227,748   |   |       |   | 533,616   |   |  |   | 761,364   |  
|Investment income               |  |                      | 14,591     |   |                     |   |          |  |   | 14,591              |   |  |                     | 20,084    |   |       |   |          |   |  |   | 20,084    |  
|Depreciation and amortization   |  |                      | 184,903    |   |                     |   | 208,349   |  |   | 393,252             |   |  |                     | 177,372   |   |       |   | 242,197   |   |  |   | 419,569   |  
|Segment (loss) gain             |  |                      | (1,230,553 | ) |                     |   | 373,037   |  |   | (857,516            | ) |  |                     | (783,213  | ) |       |   | (58,903   | ) |  |   | (842,116  | )
|Segment assets                  |  | $                    | 3,727,040  |   |                     | $ | 2,810,823 |  | $ | 6,537,863           |   |  | $                   | 3,449,887 |   |       | $ | 2,619,784 |   |  | $ | 6,069,671 |  



F-25



---

##### Table of Contents

AMERICAN ACCESS TECHNOLOGIES, INC.
AND SUBSIDIARIES



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Continued)



NOTE 18. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS



|                                             |  |         |   |  |   |          |  
|-------------------------------------------- |  | ------- | - |  | - | -------- | -
|Net loss prior to fourth quarter adjustments |  |         |   |  | $ | (878,228 | )
|Adjustments:                                 |  |         |   |  |   |          |  
|Workers compensation insurance               |  | (33,000 | ) |  |   |          |  
|Prepaid tooling                              |  | 107,770 |   |  |   |          |  
|Inventory                                    |  | (54,058 | ) |  |   |          |  
|                                             |  |         |   |  |   |          |  
|Total fourth quarter adjustments             |  |         |   |  |   | 20,712   |  
|                                             |  |         |   |  |   |          |  
|Adjusted net loss                            |  |         |   |  | $ | (857,516 | )
|                                             |  |         |   |  |   |          |  



NOTE 19. QUARTERLY INFORMATION
(UNAUDITED)



The following is a summary of the
Companys unaudited results of operations for the quarters during the years ended December 31, 2004 and 2003, respectively.



|                                          |  |               |           |   |              |   |           |                   |  |   |                  |   |  |   |           |  
|----------------------------------------- |  | ------------- | --------- | - | ------------ | - | --------- | ----------------- |  | - | ---------------- | - |  | - | --------- | -
|                                          |  | Quarter Ended |          
|                                          |  | March 31,2004 |           |   | June 30,2004 |   |           | September 30,2004 |  |   | December 31,2004 |  
|Net Sales                                 |  | $             | 1,276,970 |   |              | $ | 1,754,514 |                   |  | $ | 1,922,056        |   |  | $ | 1,786,797 |  
|Loss Before Other Income/(Expense)        |  | $             | (299,263  | ) |              | $ | (224,058  | )                 |  | $ | (136,158         | ) |  | $ | (182,042  | )
|Net Loss                                  |  | $             | (293,515  | ) |              | $ | (200,290  | )                 |  | $ | (191,421         | ) |  | $ | (172,290  | )
|Basic Net Loss Per Common Share           |  |               | (.05      | ) |              |   | (.03      | )                 |  |   | (.03             | ) |  |   | (.02      | )
|Weighted Average Common Share Outstanding |  |               | 6,342,986 |   |              |   | 6,739,367 |                   |  |   | 6,793,582        |   |  |   | 6,918,063 |  
|                                          | 
|                                          |  | Quarter Ended |          
|                                          |  | March 31,2003 |           |   | June 30,2003 |   |           | September 30,2003 |  |   | December 31,2003 |  
|Net Sales                                 |  | $             | 1,501,397 |   |              | $ | 1,188,347 |                   |  | $ | 1,379,743        |   |  | $ | 1,445,823 |  
|Loss Before Other Income/(Expense)        |  | $             | (135,452  | ) |              | $ | (584,304  | )                 |  | $ | (239,866         | ) |  | $ | 37,087    |  
|Net Income/(Loss)                         |  | $             | (107,229  | ) |              | $ | (561,894  | )                 |  | $ | (220,496         | ) |  | $ | 47,503    |  
|Basic Net Income/(Loss) Per Common Share  |  |               | (.02      | ) |              |   | (.09      | )                 |  |   | (.04             | ) |  |   | .01       |  
|Weighted Average Common Share Outstanding |  |               | 5,843,612 |   |              |   | 5,915,451 |                   |  |   | 6,088,129        |   |  |   | 6,159,796 |  



Basic net loss per
common share has been computed based upon the weighted average number of shares of common stock outstanding during the period. Diluted loss per share has not been presented, as it would be anti-dilutive.



F-26