SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 2, 1996
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CHATCOM, INC.
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(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-20462 95-3746596
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
9600 TOPANGA CANYON BOULEVARD, CHATSWORTH, CALIFORNIA 91311
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 818/709-1778
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ITEM 5. OTHER EVENTS
Completion of Private Placement of 6% Convertible Preferred Stock
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In March 1996, ChatCom, Inc., a California corporation (the "Company"),
commenced a private placement pursuant to which it sold 75 shares of Series B 6%
Convertible Preferred Stock, $20,000 stated value per share ("Series B Preferred
Stock") in March 1996, and 75 shares of Series C 6% Convertible Preferred Stock,
$20,000 stated value per share ("Series C Preferred Stock") in May 1996. Gross
proceeds from this private placement were $3,000,000 and total offering costs
incurred by the Company were approximately $370,000, of which $300,000 was paid
as placement fees to Maximum Partners, Ltd. For its services in connection with
the offering, the Company also issued to Maximum Partners, Ltd. 30,000 warrants,
each warrant entitling the holder thereof to purchase one share of the Company's
Common Stock at an exercise price of $3.00. The warrants expire in May, 2000.
The proceeds from the placement were utilized to repay all amounts owed
under the Company's line of credit financing agreement with Deutsche Financial
Services Corporation (approximately $970,000) and to provide working capital for
operations.
The Series B Preferred Stock and the Series C Preferred Stock (collectively
the "Preferred Stock"), together with any accrued but unpaid dividends on the
Preferred Stock that the Company may pay in shares of its common stock in lieu
of cash upon conversion or redemption of the Preferred Stock (the "Conversion
Dividends") are convertible by the holders thereof into shares of the Company's
Common Stock (50% commencing 60 days following the issuance of the Preferred
Stock and the balance commencing 90 days following the issuance of the Preferred
Stock). The actual number of shares of common stock (the "Shares") into which
the Preferred Stock and the Conversion Dividends are convertible is variable,
with the conversion value of the Shares being equal to the lesser of (a) the
Market Price (as hereinafter defined) of the Common Stock on the respective
dates of issuance of the Preferred Stock, or (b) 75% of the Market Price of the
Common Stock on the respective dates of conversion or redemption of the
Preferred Stock. The Market Price of the Common Stock is equal to the average
closing bid price of the Common Stock for the five trading day period
immediately preceding the applicable date of issuance, conversion or redemption.
Assuming the Market Price of the Common Stock at the times of issuance of all of
the shares of Preferred Stock is less than 75% of the Market Price of the Common
Stock at the time of conversion or redemption of all the shares of Preferred
Stock, the total number of Shares issuable to the holders, of the Preferred
Stock (excluding any Shares that may be issued to pay Conversion Dividends)
would be 1,485,634 Shares.
The Company is required to register all of the Shares under the Securities
Act of 1933 and has filed a registration statement with the Securities and
Exchange Commission that will cover all of the Shares, which has not yet become
effective.
Repayment of Line of Credit
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On May 2, 1996, the Company completed repayment of all amounts owing under
the line of credit financing agreement with Deutsche Financial Services
Corporation, and the agreement was terminated. The Company has no immediate
plans to replace the financing facility. The repayment of these amounts
eliminates essentially all of the debt of the Company apart from trade payables
and accrued liabilities incurred in the normal course of business and allows the
Company to liquidate a $500,000 certificate of deposit that was securing the
line of credit upon the maturity of the certificate of deposit at the end of
May.
Effect of Decreased Orders and Shipments
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Due to reduced orders and shipments in during the fiscal quarter ended
March 31, 1996, as well as a restructure reserve that was recorded relating to
the reassignment and replacement of certain of the
Company's executive officers, the Company expects to record a loss for that
quarter of approximately $1,250,000 to $1,500,000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto, duly authorized.
ChatCom, Inc.,
a California corporation
Date: May 22, 1996 By: /s/ James B. Mariner
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James B. Mariner, President and
Chief Executive Officer
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