SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
__________________________________
For the Fiscal Year Ended: Commission File Number:
September 30, 1996 0-16397
__________________________________
APPLIED SPECTRUM TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1419457
(State of Incorporation) (IRS Employer Identification Number)
P.O. Box 26707
St. Louis Park, Minnesota 55426
(Address of Principal Executive Offices)
Registrant's Telephone Number,
Including Area Code
(612) 947-0714
__________________________________
Securities Registered Pursuant to 12(b) of the Act: None
Securities Registered Pursuant to 12(g) of the Act:
Common Stock - $.01 par value
Common Stock Purchase Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
As of November 30, 1996, 2,953,941 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the Common Stock of the
Registrant as of that date (based on the Company's plan to dissolve),
excluding shares owned beneficially by officers and directors, is estimated
to be zero.
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
During fiscal 1994 Applied Spectrum Technologies, Inc. (AST) began
implementing a Plan of Dissolution that was approved by its shareholders at a
Special Shareholders' Meeting held on November 30, 1993. Under the Company's
Plan of Dissolution most of its assets were sold during 1994 with some
payments deferred into 1995 and beyond. If future results are successful and
all liabilities and expenses are covered a liquidating dividend will be paid
to shareholders. The estimated recovery period runs through January, 1997.
During fiscal 1995 most of the tangible asset sales were collected and only
technology licenses remain to be collected. During fiscal 1996 the Company
continued to collect license fees and payments on one equipment lease.
Prior to implementation of the Dissolution Plan, AST was engaged in the
development, manufacture, marketing and sale of digital business
communication systems. In recent years the Company has allocated most of its
available resources to the marketing and sale of its T-1 Multiplexer product
which is a communication system that allows many individual telephone and
data services to be transmitted and received over one high speed digital
transmission line. The CENTRA Series of T-1 systems includes channel banks
and T-1 Multiplexers which support voice, data and video communications for
point to point interoffice requirements as well as digital access to long
distance carrier networks.
During fiscal 1989, the Company acquired all technology and product
rights to a T-1 Multiplexer product (see Product Section) from a company
named Digi-Voice. Under terms of the Digi-Voice Agreement the Company paid
$200,000 in advance royalties. The Company is liable for royalties on net
revenues from shipments of the products over the agreement term. The T-1
product required further development work by the Company but went into
production and distribution during the second quarter of fiscal 1990.
The Company's T-1 Multiplexer marked CENTRA is a communication system
that allows many individual telephone and data services to be transmitted and
received over one high speed digital transmission line. The CENTRA Series of
T-1 systems include channel banks and T-1 Multiplexers which support voice,
data and video communications for point to point interoffice requirements as
well as digital access to long distance carrier networks.
2
The Company entered into OEM sub-license agreements with four of its T-1
Multiplexer customers between 1991 and 1993. The Company also sold its T-1
Multiplexers through direct and distribution sales channels until the
implementation of the Dissolution Plan.
The Company's initial products were intended for use (i) in the Telco
market, and (ii) in the onpremises network market. In 1990 the Company was
restructured to de-emphasize its initial products to concentrate primarily on
its new T-1 Multiplexer product. The Company continued to make their initial
products available for sale but did not actively market these products nor
did the Company do any additional unfunded development work on these products
after 1990
The Company was organized as a Minnesota Corporation on February 17,
1982. The Company's principal executive offices have relocated from 450
Industrial Boulevard, Minneapolis, Minnesota 55413 to P.O. Box 26707, St.
Louis Park, Minnesota 55426-0700, and its telephone number is (612) 947-0714.
(b) Financial Information About Industry Segments.
Since its inception, the Company has operated in one industry segment -
the development, manufacture, marketing and sales of communications products
and networks some of which transmit digital data over existing local
telephone wires simultaneously with normal voice communications.
(c) Narrative Description of Business.
BACKGROUND
The technology on which the Company's original products are based,
including Spread Spectrum Technology, permit data and telemetry to be
transmitted simultaneously over telephone wire without interfering signals
with normal voice service. The Company's products are known as data/voice
multiplexing ("DVM") equipment and are aimed at operating telephone companies
(Telco market).
The Company's Alarm and DVM-400 products were introduced to a Telco
marketplace which was slow to develop. Consistent with a strategy begun in
1988, the Company has been redirecting its efforts towards the commercial
marketplace, with recent emphasis on the T-1 Multiplexer market.
During 1989 and early 1990 the Company worked on the development of the
T-1 product which was introduced to the market in 1990 and became the
Company's primary product.
The Company's lack of financial resources caused the Company to pursue a
plan of dissolution as approved by the Board of Directors and approved by the
shareholders on November 30, 1993. For more information see Item 7 -
Management Discussion and Analysis of Financial Condition.
3
PRODUCTS
Prior to ceasing operations and implementing the Dissolution Plan, the
Company's Products were:
In 1990 the Company introduced the CENTRA T-1
Multiplexer product for distribution into the T-1 commercial marketplace.
The CENTRA T-1 Multiplexer product is a device that allows twenty-four (24)
(or more) voice and data telecommunication services to be transmitted and
received over a single telephone service. This is more economical than
multiple individual lines. The Company's T-1 systems include channel banks
and T-1 Multiplexers which support voice, data and video communications for
point to point interoffice requirements as well as digital access to long
distance carriers' networks.
The Company's initial products included the DWV-200, which is used for
security alarm applications and the DVM-400 product line, which is used for
digital data communications. The DWV-200 and the DVM-400 were developed for
the Telco market. Variations of the DVM-400, known as SPECTRA-DOV 30 and
SPECTRA-LINK 50 and SPECTRA-LINK 64 were developed for the on-premises
network market.
MARKETS
Under the Dissolution Plan, the Company is no longer pursuing these
markets but prior to adopting the Dissolution Plan the Company's markets
consisted of:
There is a niche market for "intelligent channel banks" which sell at
approximately the same price as channel banks but are designed to handle
voice and data to support some of the key features of higher-end T-1 systems.
The Company's CENTRA T-1 product was positioned to compete in this segment
of the market.
The market for T-1 services is in a state of evolution. In basic
transmissions, voice signals are digitally coded into 8 bit digital words and
may be mixed with data signals to form a composite digital signal, which can
transmit and receive up to 24 voice and data services as a single composite
line more economically than 24 individual leased services.
The equipment needed to combine the individual services is called a T-1
Multiplexer. The CENTRA T-1 product is one of a new generation of low cost
T-1 Multiplexers that effectively makes high bandwidth services such as T-1
services available to small organizations.
SALES AND DISTRIBUTION
Prior to ceasing operations and implementing the Dissolution Plan, the
Company's Sales and Distribution efforts were:
4
Sales and distribution efforts in 1992 and 1993 were focused primarily
on T-1 Multiplexer product. Due to the lack of resources and attrition the
Company discontinued direct sales efforts in September 1993.
Historically, Company has been substantially dependent upon a small
number of customers. During 1993 there was one T-1 customer who accounted
for 17% of total revenues.
Between 1991 and 1993, the Company entered into four agreements with OEM
customers which provide for non-exclusive rights to sales, manufacturing and
technology of the T-1 Multiplexer product.
During fiscal 1994, two of these OEM agreements were terminated by the
customer. The Company continues to support the other two OEMs from a
technology and marketing standpoint through the use of former employees on a
consulting basis.
PRODUCT DEVELOPMENT
During fiscal 1995 and 1996, there were no product development
activities because of the implementation of the Plan of Dissolution. Prior
to the implementation of the Dissolution Plan, the Company's product
development activities were:
During fiscal 1990, the Company completed development and introduced a
new T-1 Multiplexer product. All rights to the technology and early stage
product design were obtained through purchase from Digi-Voice. The Company's
technical team redesigned the T-1 Multiplexer product for introduction into
the current marketplace. The majority of the development program in 1993
related to cost reduction of the T-1 product and support of the OEM Licenses.
During fiscal 1996, the Company continued to support its OEM Licenses by
use of former employees as consultants.
MANUFACTURING, SERVICE AND SUPPORT
Prior to ceasing operations and implementing the Dissolution Plan, the
Company's manufacturing operations consisted primarily of assembly, test and
quality control of components and subassemblies and final testing of
completed products. Subcontractors assemble printed circuit boards for the
Company's products.
Due to a lack of resources and attrition the Company ceased
manufacturing and service operations at the end of fiscal 1993. The Company
entered into agreements with third parties which protected its customer base
from a manufacturing and service standpoint.
5
A one-year warranty was given on all historic products, and longer
warranties were sometimes granted on products sold to distributors and OEMs.
During 1992 the Company extended the warranty on its CENTRA T-1 Multiplexer
products from one year to five years. Warranty coverage on the CENTRA T-1
Product has been assigned to a third party. Under the terms of the sale of
its T-1 inventory as part of the Dissolution Plan, the Company granted
extended warranty coverage to the Buyer. The Company has accrued $75,000
towards their potential liability.
The Company had a customer service department which provided training,
installation and product support. The customer service department
administers customer warranties and repairs and provides telephone and
on-site assistance. The Company sold its customer service department to a
third party in September, 1993.
COMPETITION
The Company believes that the principal competitive factors in the T-1
marketplace are performance, reliability and price.
In its focus on the low-end T-1 marketplace the Company faced numerous
competitors, some of which are CoastCom, Telco Systems, Case/Data Tel, Strata
Com and Newbridge. These companies offer T-1 products with features and
prices similar to the Company's CENTRA T-1 Multiplexer.
BACKLOG
At September 30, 1996 and 1995, the Company's backlog of orders was
zero.
GOVERNMENT REGULATION
Communications equipment is subject to federal regulations which require
that they be tested and then approved or certified by the Federal
Communications Commission (the "FCC") prior to their use, sale, lease or
distribution. Where required or appropriate, the Company's products have
been tested and approved by the FCC and have received its authorization for
distribution.
The Telcos are regulated by the states in which they operate and are
generally required to establish a tariff for each new service they offer,
including those which would use the Company's products.
EMPLOYEES
At September 30, 1996, the Company employed 1 part-time employee and has
consulting agreements with some of its former employees.
6
PATENTS, TRADEMARKS AND LICENSES
Prior to adopting the Dissolution Plan, the Company had obtained a
number of United States and foreign patents. The 17-year terms of the
Company's United States patents expire from the years 2001 to 2004. The
Company believed, however, that its principal technological advantage, if
any, over current and prospective competitors was in the ability of its
personnel to apply a broad range of techniques, some of which may be trade
secrets of the Company, to the resolution of the customer needs. The Company
attempted to protect its trade secrets by requiring each of its employees to
execute a confidentiality agreement and by other measures common to technical
industries. There was no assurance that any of the Company's patents or
other proprietary rights of the Company would be sufficient to prevent
effective competition with its products.
While the Company is not aware of any patent or other proprietary rights
of parties which is infringed by any of its products, there can be no
assurance that such an infringement may not exist at present or in the
future. The Company generally indemnifies its customers and licensees
against costs and damages they may incur as a consequence of any infringement
of third party rights by the Company's products and, should such an
infringement be alleged, the Company could be required to expend significant
amounts to defend any such claim and to pay any judgments which might be
rendered, as well as to compensate its customers and licensees for losses
incurred.
The Company's product name "DWV-200" is registered as a trademark in the
United States. The Company also claims common law trademark rights with
respect to the name "DVM-400". The Company has registered the name SPECTRA
as a trademark in the United States.
During 1994, the Company stopped paying for any further patent or
trademark applications or renewals.
(d) Financial Information About Foreign and Domestic Operation and
Export Sales.
Substantially all of the Company's revenue, operating profit and
identifiable assets are attributable to the Unites States.
ITEM 2. PROPERTY
On September 16, 1993, the Company vacated its former headquarters and
manufacturing facilities located at 450 Industrial Boulevard, Minneapolis,
Minnesota. The Company is now conducting business through voice mail, P.O.
box and facsimile machines. The Company has obtained approximately 300
square feet space for storage of its assets at reasonable monthly rental
amounts. The Company has no present intention of leasing any additional
facility.
7
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or to which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Year First
Elected or
Name Age Appointed Position Currently Held
- ---- --- ---------- -----------------------
Edward F. Mackay 54 1983 Chief Executive Officer
& Chief Financial Officer
Mr. Mackay has been Chief Executive Officer of the Company since July
1993. Mr. Mackay was Executive Vice President and Chief Financial Officer of
the Company from July 1991 until July 1993. Mr. Mackay was Vice President -
Finance and Chief Financial Officer of the Company from October 1985 to July
1991. From June 1983 until September 1985, Mr. Mackay served as the
Company's Treasurer and Controller.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock has been traded on the national, over-the-
counter market under the symbol ASTI since the time of its initial public
offering in January 1988. However, the Company was notified by NASDAQ that, due
to low trading volume, it would not report transaction in the Company's stock
after October 13, 1989.
The only significant support for valuation of the Company's common stock
since October 1989 was the sale of additional common stock to private investors
in March 1990, at a price of $.50 per share.
As of August 6, 1993, there were approximately 953 holders of record of the
Company's common stock.
8
The Company has never declared or paid cash dividends on its common stock.
The Company intends to pay a liquidating dividend if sufficient funds are
available upon completion of the Dissolution Plan.
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9
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE FIVE YEARS ENDED SEPTEMBER 30,
--------------------------------------
STATEMENTS OF OPERATIONS DATA: 1996 1995 1994 1993 1992
- ------------------------------ ---- ---- ---- ---- ----
Net sales $ 3 $ 4 $ 11 $1,393 $1,691
Development contract revenues - - - 21 37
Sublicensing revenues 58 71 30 91 272
---- ---- ---- ----- ------
Total revenues 61 75 41 1,505 2,000
Operating profit (loss) 16 1 (46) (140) (176)
Other income (expense) 6 (6) 221 (33) (35)
---- ---- ---- ----- ------
Net profit (loss) 22 (5) 175 (173) (211)
Net profit (loss) per share $0.01 $0.00 $0.09 ($0.09) ($0.11)
Weighted average number of
shares outstanding 2,954 2,686 1,996 1,996 1,996
BALANCE SHEET DATA:
Cash & short-term investments $308 $293 $149 $145 $34
Working capital 155 133 129 (97) 72
Total assets 308 293 333 515 682
Long-term liabilities
Shareholders' equity 156 134 130 (45) 128
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All amounts in the following discussion have been rounded to the nearest
$1,000.
GENERAL
In its latest audited financial statement, September 30, 1992, the
Company's auditors issued a qualified opinion regarding the Company's ability
to continue as a going concern. Revenues have been insufficient to generate
cash flows sufficient to support operations and pay liabilities. Revenue
changes are customer and competitor related. Price changes within product
lines were minimal. Therefore, most changes were related to the volume of
product purchased. The Company was declared to be in default on its secured
credit line in May 1993 and has since deferred payment on its liabilities to
many unsecured creditors. A reduction in staffing and departure of key
employees such as the President and CEO, Director of Operations and Service
Department Manager also negatively impacted the Company's chances of
continuing its operations.
We previously disclosed in our 10-K for the year ended September 30,
1992, the Company's liquidity is dependent on its ability to generate
additional revenues and make use of the Norwood Credit Line. The Company was
unsuccessful in its attempts to raise additional equity financing or find a
strategic partner. During the second fiscal quarter of 1993, the Company's
secured lender Norwood Venture Corp. acquired all of the Company's stock
owned by Oxford Partners and Norwood is the majority (77.3%) owner of the
Company.
During March 1993 the Company reduced its work force from 20 employees
to 13 employees and placed its engineering development plans on hold as a
means of matching fixed costs to revenues. In an unrelated event the
Company's President and CEO, James J. Szeliga, resigned as an officer of the
Company on May 7, 1993.
For the first nine months of fiscal year 1993 revenues decreased
$276,000. Cash decreased $31,000 to $3,000, net working capital excluding
cash and credit line borrowing decreased $48,000 to $99,000 and the Company
borrowed an additional $88,000 under its Norwood Credit Line. At June 30,
1993 the balance owing on the Norwood Credit Line was $195,000.
In light of the above, the Company embarked upon an extensive search for
additional equity or debt investment and for a strategic partner with which
to merge, or a purchaser of the Company as a going concern. (See: SEARCH FOR
STRATEGIC PARTNER below). When neither additional funding nor a strategic
partner were located, liquidation pursuant to Chapter 7 or Reorganization
under Chapter 11 of the United States Bankruptcy Code were considered.
However, the Company believed a greater monetary return would be realized if
the Company conducted a controlled dissolution and the assets
11
are sold pursuant to independently negotiated agreements. The Company also
concluded that attempted reorganization under Chapter 11, given the Company's
inability to generate sufficient revenue to sustain its operations and
attrition of its staff and key employees would only serve to further erode
the value of the Company's existing assets.
As a result, the Board of Directors, as a means of attempting to
maximize any recovery to its creditors and shareholders, adopted a plan of
dissolution such that a payment plan to creditors could be implemented and
foreclosure by its secured lender could be avoided. As part of the
dissolution plan, the Company will attempt to sell its assets contingent on
future payments. If future results are successful and all liabilities and
expenses are covered, a liquidating dividend will be paid to shareholders.
The estimated recovery period is two to three years. The Board of Directors
of the Company did not seek or obtain an independent report, appraisal or
fairness opinion in connection with the proposed dissolution due to the lack
of funds required to obtain such an opinion.
SEARCH FOR STRATEGIC PARTNER
Between late 1992 and mid-1993, the Company contacted approximately 60
entities, including HT Communications, Inc. ("HT" or "HT Communications"),
seeking equity or debt investment or a strategic partner with respect to a
possible merger. Such searches were unsuccessful. Contacts were made with OEM
customers, competitors and numerous other companies in the data communications
industry regarding the sale of the Company as an operating concern. The
majority of these contacts expressed no interest and none resulted in a feasible
offer that would have paid all of AST's outstanding liabilities, nor did any of
these contacts culminate in a letter of intent or a definitive agreement.
SHAREHOLDER APPROVAL
Shareholder approval of the Dissolution Plan was received at a special
shareholders' meeting held on November 30, 1993.
TRANSACTION WITH HT COMMUNICATIONS, INC.
Having received no positive results from its search for a strategic
partner, the Company again contacted a number of these same entities to discuss
a possible licensing arrangement and/or asset sale. HT Communications was the
only company which expressed an interest in pursuing further discussions with
AST. All negotiations have been conducted exclusively between Mr. Mackay, on
behalf of the Company, and HT's President.
In August, 1993, AST entered into a License Agreement with HT
Communications granting HT a non-exclusive, perpetual, world-wide license to
manufacture those T-1 digital Multiplexer products marketed under the name
CENTRA Series 4000 and CENTRA Series 3000. In consideration, HT pays to AST
royalties on its sale of certain AST products for a period of three (3)
12
years. With respect to its general terms, the License Agreement with HT was
negotiated along the lines of AST's previously existing License Agreements.
In addition to the License Agreement already in place with HT, AST
entered into an agreement in December of 1993 with HT Communications for the
acquisition of the majority of the T-1 assets of AST. The Agreement called
for HT to purchase the fixed assets and inventory at their fair market value
and standard cost respectively in installments over approximately nine (9)
months commencing in December 1993. In addition, HT agreed to assume
obligations associated with certain AST contracts and to offer some AST
employees jobs. Due to HT's cash flow problems, the payment terms of the
Agreement were amended such that AST has secured interest in HT's assets and
the payments were extended to December, 1995 including interest on the unpaid
balance at the rate of 12% per annum, with HT having the right to prepay any
balance owing.
FEDERAL INCOME TAX CONSEQUENCES OF DISSOLUTION
The Company is unable to determine at this time with specificity what the
income tax consequences of the proposed dissolution of the Company will be given
the uncertainty as to the actual dollars which will be realized upon liquidation
of the Company's assets as well as questions regarding how the net operating
loss carried forward will be dealt with in light of the changes in control of
the Company. However, the Company has made the following estimate in this
regard:
(i) The extent of net operating loss available to offset income is
unknown due to the changes in ownership and the difficulty in
determining fair market value of the Company;
(ii) The 1993 fiscal year's operating loss will probably offset any gain
on the recapture of depreciation or value from the sale of fixed assets;
(iii) Inventory will be sold at approximately the same value as cost, so
there will be no income tax consequences; and
(iv) Future royalties will be taxable at normal tax rates unless they can be
offset by net operating losses.
REVENUES
Revenues in 1996 decreased $14,000 as a result of the decreased license
fees. 1996 revenues consisted of $3,000 in net sales, primarily equipment
leases, and $57,000 of sub-licensing fees from OEM licensees.
Revenues in 1995 increased $34,000 as a result of the increased license
fees. 1995 revenues consisted of $4,000 in net sales, primarily equipment
leases, and $71,000 of sub-licensing fees from OEM licensees.
13
Revenues in 1994 decreased $1,464,000 as a result of the implementation of
the Dissolution Plan. 1994 revenues consisted of $11,000 in net sales,
primarily service contracts, and $29,000 of sub-licensing fees from OEM
licensees.
COST OF PRODUCT SOLD
There were no cost of products sold in 1996, 1995 and 1994 because of the
Dissolution Plan.
PRODUCT DEVELOPMENT ACTIVITIES
Included in product development expense are research and development and
product engineering costs, including expenses incurred to modify products for
particular applications and to resolve performance problems arising in
specific applications. When funding for product development is received from
third parties through development contracts, the proceeds are recorded as
development contract revenues, and the related expenses are separately
recorded under development contract costs. Expenses in excess of related
development contract revenues are charged to product development expenses
because the Company believes that such contracts may result in future product
sales. The Company is not obligated under any of its development contracts
to pay any continuing royalties, refund any amounts or apply them against
future deliveries.
In March 1989, the Company acquired all rights to a T-1 Multiplexer
product which was under development by another company. The Company applied
significant resources toward the completion of the development work on this
new product and introduced production models to the marketplace during the
second quarter of fiscal 1990. The Company paid advance royalties of
$200,000 for the rights to this product. These advance royalties were
amortized against the Company's obligation to pay royalties on future
shipments.
During 1993 the majority of the development activities centered around
T-1 product development work associated with cost reductions to the T-1
Multiplexer product and support of OEM licenses.
EXPENSES
General and administrative expenses in 1996, 1995 and 1994 relate to the
implementation of the Dissolution Plan. Sales and marketing and product
development expenses were eliminated in 1996, 1995 and 1994 as part of the
Dissolution Plan.
The Company records the development expenses related to development
contracts in development contract costs.
14
OTHER INCOME/EXPENSES
Other expense of $20,000 in 1995 is the result of further settlement of
liabilities.
Other income of $204,000 in 1994 consists of $124,000 from the sale of
assets and $80,000 from the settlement of liabilities.
CAPITAL RESOURCES AND LIQUIDITY
Substantially all of the Company's working capital needs to date have
been funded through proceeds from the sales of Common Stock and preferred
stock, loans from or guaranteed by certain shareholders, issued shares of
Common Stock and three series of preferred stock for aggregate consideration
of $11,796,000. During 1987, all three series of preferred stocks were
converted to Common Stock. In January 1988, the Company's initial public
offering (IPO) was completed. Net proceeds from the IPO were $3,841,000,
The funds from the IPO were used to repay $691,000 of convertible debentures
and to fund activities in product development and sales and market
development during 1988, 1989 and the first half of 1990. The Company also
pursued some unsuccessful acquisition strategies during 1989 and 1990.
In the second quarter of fiscal 1990 the Company did a restructuring and
recapitalization to concentrate primarily on its new CENTRA T-1 Multiplexer
product line. The restructuring resulted in substantially all resources
being directed towards penetration of the commercial T-1 marketplace. The
recapitalization resulted in a 1 for 100 reverse split of the Company's
voting common stock. Following the reverse split the Company issued
1,268,000 new shares of voting Common Stock on March 26, 1990 to private
investors at $0.50 per share which resulted in $634,000 of equity funding.
In addition to the sale of stock in March 1990, the Company obtained a
revolving credit line of up to $500,000 from Norwood Venture Corp. The credit
line which is secured by all assets were useable based on a borrowing formula
equal to 90% of eligible receivables. The agreement with Norwood has been
modified three times. The most recent modification in March 1992 increased
the total line from $500,000 to $600,000 and increased the borrowing base to
include up to $100,000 of T-1 Multiplexer inventory. As part of these
modifications, Norwood was granted an increase to 1,000,000 shares in its
warrants to purchase the Company's common stock at $0.50 per share. Another
condition of the modification was a provision that reduced Norwood's Warrant
price from $0.50 per share to $0.01 per share upon the notice if default by
the Company. The Company defaulted on its agreement with Norwood in 1993 and
then the warrant price was reduced to $0.01 per share. As of June 30, 1993,
the Company had $195,000 outstanding against the credit line. During the
fourth quarter of 1993, the Company was able to repay the balance owed
Norwood on its credit line as part of the early stages of the dissolution
process.
Through September 1996, the Company has incurred net cumulative losses
of $16,148,000.
15
The implementation of the Dissolution Plan has resulted in a reduction of
liabilities of $399,000 during fiscal 1994 and 1995. As of September 30, 1996,
the Company had cash of $308,000 and booked liabilities of $153,000. The net
book value of the Company at September 30, 1996 is $156,000 or $.05 per
outstanding share.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL DATA
FINANCIAL STATEMENTS: PAGE
Statements of Operations - Years ended 18
September 30, 1996, 1995, 1994
Balance Sheets - September 30, 1996 and 1995 19
Statements of Cash Flows - Years ended 20
September 30, 1996, 1995, 1994
Statements of Shareholders' Equity - Years ended 21
September 30, 1996, 1995, 1994
Notes to Financial Statements 22-25
The following data are included herein and should be read in conjunction
with the financial statements referred to above:
FINANCIAL STATEMENT SCHEDULES:
VIII - Valuation and Qualifying Accounts 26
X - Supplementary Income Statement Information 27
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
1992 UNPAID AUDIT FEES
The Company's auditor during the past fiscal years, Ernst & Young, has not
been paid for last year's audit and income tax work, leaving a total liability
in the amount of $26,675.00. The auditors are therefore refusing to accept
additional work. Preparing audited financial statements for fiscal year
16
ending September 30, 1993, was impossible based upon the Company's current
financial position. The 10-K documents were filed on a timely basis with
unaudited financial statements for the fiscal year ending September 30, 1993.
The auditors have also refused to review the 1996,1995 and 1994 Financial
Statements because of the payment situation and the lack of audited financial
statements for 1993 and so we are unable to include their opinion from prior
years on the financial statements. The 10-K documents for 1996,1995 and 1994
are being filed on a timely basis with unaudited financial statements for the
fiscal years ending September 30, 1994, 1995 and 1996
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17
APPLIED SPECTRUM TECHNOLOGIES,INC
STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
------------------------------
1996 1995 1994
---- ---- ----
REVENUES:
Net sales $ 3,186 $ 3,641 $ 11,277
Development contract revenues
Sublicensing revenues 57,489 71,143 29,311
-------- -------- ---------
Total revenues 60,675 74,784 40,588
Cost of product sold - - -
Development contract costs - - -
-------- -------- ---------
Total costs - - -
Gross profit 60,675 74,784 40,588
Sales and marketing expense - - -
General and administrative expense 45,081 74,018 86,604
Product development cost - - -
-------- -------- ---------
Operating profit (loss) 15,594 766 (46,016)
Other income (expense) - net - (19,530) 203,630
Interest income 6,284 14,963 24,267
Interest expense - (1,544) (7,036)
-------- -------- ---------
Net profit (loss) $ 21,878 $ (5,345) $ 174,845
-------- -------- ---------
-------- -------- ---------
Net profit (loss) per share $ 0.01 $ (0.00) $ 0.09
-------- -------- ---------
-------- -------- ---------
Weighted average number of
shares outstanding 2,953,941 2,685,698 1,996,064
See notes to financial statements
18
APPLIED SPECTRUM TECHNOLOGIES,INC
BALANCE SHEETS
(UNAUDITED)
1996 1995
------ ------
ASSETS
CURRENT ASSETS
Cash $ 307,740 $ 292,696
Other - -
---------- ----------
Total current assets 307,740 292,696
PROPERTY AND EQUIPMENT
Equipment at fair market value 750 750
---------- ----------
$ 308,490 $ 293,446
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,276 $ 14,276
Employee compensation and taxes withheld - 5,212
Reserve for warranty costs 75,000 75,000
Accrued severance costs 62,250 62,250
Other accrued expenses 1,200 2,822
---------- ----------
Total current liabilities 152,726 159,560
SHAREHOLDERS' EQUITY
Common Stock,par value $.01 per share
authorized 10,000,000 shares, issued
and outstanding 2,953,941 29,540 29,540
Additional paid-in-capital 16,274,155 16,274,155
Accumulated deficit (16,147,931) (16,169,809)
----------- -----------
155,764 133,886
---------- ----------
$ 308,490 $ 293,446
---------- ----------
---------- ----------
See notes to financial statements
19
APPLIED SPECTRUM TECHNOLOGIES,INC
STATEMENT OF CASH FLOWS
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
---- ---- ----
OPERATING ACTIVITIES
Net profit (loss) $ 21,878 $ (5,345) $ 174,845
Adjustments to reconcile net profit (loss) to
net cash provided by operating activities:
Provisions for losses on
accounts receivable 24,700
(Gain) on sale of equipment (13,799)
Net cash flow from (used for) changes in:
Accounts receivable - 182,770 (131,311)
Inventories and accounts payable - (4,210) 41,453
Reserve for warranty costs
Other current assets and liabilities (6,834) (39,167) (156,350)
---------- ---------- ----------
Net cash from (used for) operating activities 15,044 134,048 (60,462)
INVESTING ACTIVITIES
Proceeds from sale of equipment - - 64,795
---------- ---------- ----------
Net cash from investing activities - - 64,795
FINANCING ACTIVITIES
Proceeds from exercise of warrants 9,579
Proceeds from debt borrowings
Payments on debt borrowings - - -
---------- ---------- ----------
Net cash from financing activities - 9,579 -
---------- ---------- ----------
INCREASE IN CASH 15,044 143,627 4,333
Cash beginning of year 292,696 149,069 144,736
---------- ---------- ----------
CASH END OF YEAR $ 307,740 $ 292,696 $ 149,069
---------- ---------- ----------
---------- ---------- ----------
See notes to financial statements
20
APPLIED SPECTRUM TECHNOLOGIES,INC
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
BALANCE AT
September 30, 1993 1,996,064 $19,961 $16,274,155 ($16,339,309) ($45,193)
Net profit for the year $174,845 $174,845
---------------------------------------------------------------------------------------------
BALANCE AT
September 30, 1994 1,996,064 $19,961 $16,274,155 ($16,164,464) $129,652
Exercise of warrants 957,877 $9,579 $9,579
Net profit for the year ($5,345) ($5,345)
---------------------------------------------------------------------------------------------
BALANCE AT
September 30, 1995 2,953,941 $29,540 $16,274,155 ($16,169,809) $133,886
Net profit for the year $21,878 $21,878
---------------------------------------------------------------------------------------------
BALANCE AT
September 30, 1996 2,953,941 $29,540 $16,274,155 ($16,147,931) $155,764
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
See notes to financial statements
21
APPLIED SPECTRUM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A--BASIS OF FINANCIAL STATEMENT PRESENTATION
Based on the Company's adopted "Plan of Dissolution" the September 30,
1996, 1995 and 1994, financial statements which are "unaudited" have been
prepared on a dissolution basis. Tangible Assets at September 30, 1996 and
1995, have been adjusted to estimated fair market value. Intangible Assets
have been written off. Liabilities have been recorded in the normal course of
business.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prior to implementing the Plan of Dissolution, the Company was engaged in
the development, manufacture, marketing and sale of products for the digital
transmission of data.
REVENUE RECOGNITION: Revenues from sales are recognized on shipment of the
product. Revenues pertaining to development contracts and sub-license fees
are recognized when billed. The billings are done on a progress basis to
cover expenses incurred or achievement of certain contract milestones and
specifications. Expenses in excess of related development contract revenues
are charged to product development costs because the Company believes that
such contracts may result in future product sales. The Company enters into
development contracts to perform feasibility studies and to develop certain
products.
WARRANTIES: The Company's products are generally under warranty against
defects in material and workmanship for a period of one year. During 1992,
the Company increased the warranty period on its CENTRA T-1 Multiplexer
products to five years. Under the terms of the sale of the Company's T-1
inventory in 1994, an extended warranty was granted to the Buyer. The
Company maintains an accrual for these anticipated future warranty costs
based on management's estimates of such costs.
PROPERTY AND EQUIPMENT: Property and equipment in 1996 and 1995 is stated at
fair market value. Depreciation has been provided using the straight line
method at rates expected to amortize the cost of the property and equipment
over its estimated useful life.
22
INVESTMENT TAX CREDIT: Investment tax credits are accounted for using the
"flow-through" method whereby the credit will be treated as a reduction of
income tax expense in the year in which the credit is realized.
PROFIT (LOSS) PER SHARE: Profit (Loss) per share is computed by dividing the
net profit (loss) for the period by the weighted average number of shares of
Common Stock. Outstanding stock options, warrants and convertible debentures
are not included in the loss per share calculations as they are anti-dilutive.
NOTE C--REVOLVING CREDIT LINE
The Company had a revolving credit line with Norwood Venture Corp. The
revolving credit line secured by all assets was called by Norwood during the
third fiscal quarter of 1993, because the Company was in default on its
borrowing conditions. As part of the dissolution process, the Company was
able to repay the secured lender, Norwood, as of September 30, 1993.
NOTE D-COMMON STOCK
On January 29, 1988, the Company completed its initial public offering and
as a result issued 328,073 shares of Common Stock and 164,036 warrants. The
Company received net proceeds of $3,841,222.
On March 23, 1990, the shareholders approved a one-for-one hundred reverse
stock split of the Company's Common Stock and an amendment to the Articles of
Incorporation reducing the authorized Common Stock available for issuance
from 175,000,000 common shares to 10,000,000 common shares.
On March 26, 1990, the Company issued 1,268,000 shares of Common Stock to
private investors and received net proceeds of $634,000. The Company also
granted warrants to purchase up to 600,000 shares of the Company's Common
Stock at $0.50 per share to Norwood as a condition to Norwood's revolving
credit line.
As a condition to amendments to Norwood's revolving credit line on March
29, 1991, and March 19, 1992, the Company granted additional warrants to
purchase an additional 400,000 shares of the Company's Common Stock at $0.50
per share to Norwood. When the Company defaulted on the Norwood loan in
1993, the Warrant price was automatically reduced to $0.01 per share.
Norwood exercised its rights to the warrants in January 1995 and purchased
957,877 shares of common stock.
23
NOTE E--STOCK OPTIONS AND WARRANTS
The Company has reserved 912,900 shares and 915,000 shares at September
30, 1996 and 1995 respectively for issuance under stock option plans and
warrants. Options granted under stock option plans to officers, key
employees and consultants are at a price equal to the fair market value of
stock at the date of grant and are generally exercisable at the rate of 20%
per year on a cumulative basis. Options to purchase 676,000 shares were
available for grant at September 30, 1996 and 1995. Other option activity
was as follows:
Year Ended September 30
---------------------------
1996 1995
------ ------
Outstanding at beginning of year 229,000 229,000
Granted
Canceled (2,100)
----------
Outstanding at end of year 226,900 229,000
Comprised of at end of year
Incentive stock options 200,000 200,000
Non-Qualified stock options 26,900 26,900
--------- -------
226,900 226,900
Price range of options outstanding $.10-$15.00 $.10-$15.00
Exercisable at end of year 226,900 226,900
In addition to the above stock option plans the following warrants to
purchase common stock were outstanding:
Year Ended September 30,
Price ------------------------
Per Expiration
Share Date 1996 1995
------ ----- ---- ----
Miscellaneous $ .50 May 1997 10,000 10,000
Outstanding at year end 10,000 10,000
Exercisable at year end 10,000 10,000
NOTE F-MAJOR CUSTOMERS
During 1996 and 1995, HT Communications, Inc. accounted for 94% and 69% of
total revenue.
24
NOTE G--INCOME TAXES
Due to the change in ownership and plan of dissolution it is estimated
that most of the Company's net operating loss carryforwards will not be
utilized. It is assumed that the Company's operating earnings in 1996 and
1994 will be offset by net operating loss carryforwards since the last change
in ownership occurred.
NOTE H--LEASES
The Company's previously leased facility was vacated on September 16,
1993. The facility leases expired on March 31, 1993 and the Company extended
the use of the space on a month-to-month basis through August 31, 1993.
During fiscal 1996, 1995 and 1994, the Company obtained practically
rent-free space for storage of its assets and operation of its business
through voice mail, post office box, and facsimile machines.
NOTE I--CHANGE IN CONTROL OF THE COMPANY
During the second fiscal quarter of 1993, Norwood Venture Corp., acquired
all of the Company stock owned by Oxford Venture Fund Limited Partnership and
Oxford Venture Fund II Limited Partnership placing Norwood in voting control
of the majority of the outstanding common stock of the Company.
NOTE J--SIGNIFICANT EVENTS
During 1991 and 1992 the Company entered into OEM sub-licensing agreements
with three T-1 customers and during 1993 the Company entered into an OEM
sub-licensing agreement with one T-1 customer. These agreements required the
Company to transfer certain non-exclusive manufacturing, sales and technology
rights to the OEMs. In exchange for the rights, the Company receives
sub-licensing fees, future royalties and development contract revenues.
During 1996, 1995, and 1994 the Company recognized $58,000, $71,000, and
$29,000 respectively in sub-licensing revenues from these agreements.
In December 1993, the Company completed an Agreement to sell the majority
of its assets to HT Communications.
25
APPLIED SPECTRUM TECHNOLOGIES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Additions
CHARGED
BALANCE CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS END OF
CLASSIFICATION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- -------------- ------ -------- -------- -------- ------
Year ended September 30, 1996:
- -------------------------------
Deducted from asset accounts:
Allowance for doubtful accounts $0 $0 $0 $0
Reserve for warranty costs
and product returns $75,000 $75,000
Year ended September 30, 1995:
- ------------------------------
Deducted from asset accounts:
Allowance for doubtful accounts $0 $0 $0 $0
Reserve for warranty costs
and product returns $75,000 $75,000
Year ended September 30, 1994:
- ------------------------------
Deducted from asset accounts:
Allowance for doubtful accounts $24,700 ($3,043) $21,657 (1) $0
Reserve for warranty costs
and product returns $75,000 $75,000
________________________
(1) Actual write-offs net of recoveries.
26
APPLIED SPECTRUM TECHNOLOGIES,INC
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Column A Column B
Charged to Costs and Expenses
Year Ended September 30,
Item 1996 1995 1994
- ---- ---- ---- ----
Maintenance and repairs None None None
Depreciation and amortization of intangible assets,
pre-operating costs, and similar deferrals None None None
Taxes, other than payroll and income taxes:
Real estate None None None
Personal Property None None None
Other None None None
Royalties 1,874 6,206 2,866
Advertising costs None None None
27
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCUSSIONS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a) DIRECTORS OF THE COMPANY
Principal
Occupation
and
Business Director
NAME OF DIRECTOR AGE Experience Since
---------------- --- ---------- --------
Mark Littell 45 President, Norwood Venture Corp., 1993
a firm which manages venture
capital funds. Mr. Littell is
also a Director of Video Services
Acquisition Corp.
(b) EXECUTIVE OFFICERS OF THE COMPANY
The information required by this Item 10 regarding executive
officers is included in this Report under Item 4A, "Executive Officers
of the Registrant."
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28
ITEM 11. EXECUTIVE COMPENSATION
(a) CASH COMPENSATION
The following table provides information as to the compensation
of the executive officers for services rendered in all capacities
during the fiscal year ended September 30, 1996 and to all executive
officers as a group.
Name of Individual Capacities in Cash
or Number in Group Which Served Compensation(1)
------------------ ------------- ---------------
Edward F. Mackay Chief Executive Officer $36,500
All Executive Officers
as a Group (1 Person) $36,500
(1) Includes $0 incentive bonus associated with implementation of
dissolution plan and performance against budget for fiscal 1996.
(b) COMPENSATION PURSUANT TO PLANS
AGREEMENTS. Mr. Mackay has an agreement with the Company which
was modified at the time he became Chief Executive Officer responsible
for following a Plan of Dissolution with continuing responsibility for
public reporting requirements. Mr. Mackay's contract calls for a
payment of accrued bonus and a reduced base compensation after the
secured lender is paid-off. Mr. Mackay's contract also calls for
incentives to maximize the recovery process for unsecured creditors
and shareholders. Upon the termination of his contract, Mr. Mackay
will receive $62,250 of accrued severance pay.
In addition to the direct compensation, the 200,000 of incentive
stock options that Mr. Mackay had at $0.50 per share were rescinded
during 1993 and were reissued at $0.10 per share.
THE 1992 STOCK OPTION PLAN. The 1992 Stock Option Plan was
discontinued because it was not ratified by the shareholders.
29
THE 1990 STOCK OPTION PLAN. AST has adopted a 1990 Stock Option
Plan which became effective on February 14, 1990. The Plan permits
the granting of options to purchase 900,000 shares of voting Common
Stock of AST officers, consultants and other key employees of AST, as
selected by the Compensation Committee of the Board of Directors.
Options granted under the 1990 Plan may be either "incentive stock
options" as amended, or options which do not so qualify. The 1990
Plan provides that (a) the option price for incentive stock options
may not be less than the fair market value of the Common Stock at the
date of the grant, (b) options may not be granted after February 14,
2000, and (c) options may not be exercised after ten years from the
date of the grant.
There were no options exercised or granted during the fiscal year
ended September 30, 1996.
Also, AST has outstanding three options to purchase 2,900 shares
of Common Stock at an exercise price of $15.00 per share expiring 1997
and 1998. These options were issued under AST's prior 1987 Stock
Option Plan.
(d) DIRECTOR'S COMPENSATION
Directors who are not employees of AST and who forego their
regular pay in order to attend Board meetings receive $500 for each
meeting of the Board attended and $200 for each committee meeting
attended other than committee meetings which occur on the same date as
for each Board of Directors meeting at which they attend
telephonically. Mr. Littell has waived his directors fees.
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30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information pertaining to
directors, executive officers and persons who, to the best of AST's
knowledge owned beneficially more than five percent (5%) of the voting
common stock of AST as of November 30, 1996:
Shares of Common Stock
Beneficially Owned(1)(2)
Name of
Beneficial Owner Amount Percent of Class
---------------- ------ ----------------
Norwood Venture Corp.(6) 2,282,564(3) 77.27
Mark Littell(7) 2,282,564(4) 77.27
Edward F. Mackay 216,539(5) 6.87
All Directors and 2,499,103 79.24
Officers as a Group
(1) Shares not outstanding but deemed beneficially owned by virtue of
the right of an individual or entity to acquire them within sixty
(60) days are treated as outstanding only when determining the
amount and percent owned by such individual or entity.
Fractional shares have been rounded to the nearest whole share.
(2) Unless otherwise noted, each person or group identified possesses
sole voting and investment power with respect to the shares
opposite the name of such person or group.
(3) Consists of 1,282,564 shares owned by Norwood Venture Corp. (Norwood).
31
(4) Includes 1,282,564 shares owned by Norwood. Mr. Littell may be
a beneficial owner of Norwood shares.
(5) Includes 200,000 shares Mr. Mackay has the right to acquire
within sixty (60) days upon the exercise of options.
(6) Norwood Venture Corp. is located at 1430 Broadway Street, Suite
1607, New York, New York 10018
(7) Mr. Littell's business address is 1430 Broadway Street, Suite
1607, New York, New York, 10018.
(b) CHANGES IN CONTROL
On March 19, 1992, Norwood Venture Corp. ("Norwood") and Oxford
Venture Fund Limited Partnership ("Oxford") and Oxford Venture Fund II
Limited Partnership ("Oxford II") entered into a Stock Purchase
Agreement whereby Norwood would acquire the AST stock owned by Oxford
and Oxford II in the event of default by AST under the terms of its
Revolving Credit Agreement with Norwood. Oxford and Oxford II entered
into this Agreement in order to induce Norwood to amend its Revolving
Credit Agreement with AST to, among other things, increase the amount
the Company could borrow thereunder.
On February 23, 1993, AST was notified that as of February 18,
1993, Norwood had acquired all the AST common stock previously owned
by Oxford and Oxford II. Though AST was technically in default under
the Revolving Credit Agreement and a Certificate of Default had been
delivered to Oxford and Oxford II, Norwood had not yet given AST
formal notice of default or acceleration of its loan. However, in the
interest of renegotiating AST's borrowing base under the Revolving
Credit Agreement, Norwood, Oxford and Oxford II arrived at a formula
that would transfer Oxford and Oxford II's AST stock to Norwood at a
price to be determined by future borrowing requirements of AST funds
received and by Norwood as a direct result of its stock ownership in
AST (the "AST Proceeds"), in the event of a merger, corporate
acquisition or public offering of AST securities. As an inducement to
Norwood to be more flexible in its lending and to loan further amounts
to AST, the percentage of The Proceeds to be paid by Norwood to Oxford
and Oxford II varies from 46.6% to 11.6% according to amounts loaned
by Norwood to AST in excess of the borrowing base as defined in the
Revolving Credit Agreement. Specifically, Norwood will pay to Oxford
and Oxford II (a) 46.4% of the AST Proceeds received by it between
February 18, 1993 and the date (the "First Date") Norwood first
advances to AST funds in excess of the borrowing base; (b) 34.8% of
AST Proceeds
32
received by Norwood between the First Date and the date (the"Second Date")
Norwood first advances to AST $100,000.00 in excess of the borrowing base;
(c) 23.2% of the AST proceeds received by Norwood between the Second Date
and the date (the "Third Date") in which Norwood first advances to AST
$200,000. in excess of the borrowing base, and (d) 11.6% of any AST
proceeds received by Norwood after the Third Date. Payment is to be made
to Oxford and Oxford II upon Norwood's receipt of any such proceeds which
is expected to occur upon completion of the dissolution of the Company if
money remains after payment of all of AST's creditors.
Mr. Littell participated in facilitating the February 1993 Agreement
and resulting transfer of stock to Norwood, on behalf of Norwood as its
President.
Prior to this transfer, Oxford and Oxford II together beneficially
owned approximately 65.65% and Norwood beneficially owned approximately
32.52% of the common stock of the Company. This transfer placed Norwood
in voting control of the majority of the outstanding common stock of AST.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
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33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
Page No.
--------
(a) 1. Financial Statements:
Reference is made to the Index to
Financial Data contained in this Report 16
2. Financial Statement Schedules:
Reference is made to the Index to
Financial Data contained in this Report 16
3. Reference is made to the Exhibit Index
contained in this Report 34-39
A copy of any of the Exhibits listed or referred to in the Exhibit Index
will be furnished at a reasonable cost to any person who was a such person of
written request for any such exhibit. Such requests should be sent to Applied
Spectrum Technologies, Inc., P.O. Box 26707, St. Louis Park, Minnesota 55426.
(b) Reports on Form 8-K: None were filed during the fourth quarter of the
fiscal year covered by this Report.
(The remainder of this page has been intentionally left blank.)
34
ITEM 14. (a)3. EXHIBITS
The following is a complete list of Exhibits filed or incorporated by
reference as a part of this Report:
APPLIED SPECTRUM TECHNOLOGIES, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1996
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
1.1 Forms of Underwriting Incorporated by reference to Exhibit 1.1 to
Agreement and Dealer the Company's Registration Statement on
Agreement. Form S-1 (File No. 33-17959)
3.1 Amended and Restated Incorporated by reference to Exhibit 3.1 to
Articles of Incorporation the Company's Registration Statement on
of the Company. Form S-1 (File No. 33-17959)
3.2 By Laws of the Company. Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on
Form S-1 (File No. 33-17959)
4.1 Specimen Form of the Incorporated by reference to Exhibit 4.1 to
Company's Common Stock the Company's Registration Statement on
Certificate. Form S-1 (File No. 33-17959)
4.2 Amended and Restated Incorporated by reference to Exhibit 4.4 to
Articles of Incorporation of the Company's Registration Statement on
the Company (See Exhibit 3.1). Form S-1 (File No. 33-17959)
4.3 By-laws of the Company Incorporated by reference to Exhibit 4.5 to
(see Exhibit 3.2). the Company's Registration Statement on
Form S-1 (File No. 33-17959)
4.4 Agreement for 1987 Bridge Incorporated by reference to Exhibit 4.6 to
Financing, Conversion and the Company's Registration Statement on
Sale of Shares, dated September Form S-1 (File No. 33-17959)
18, 1987 between the Company
and certain shareholders.
35
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
4.5 Form of Convertible Debentures Incorporated by reference to Exhibit 4.1 to
issued pursuant to Agreement the Company's Registration Statement on
for 1987 Bridge Financing, Form S-1 (File No. 33-17959)
Conversion and Sales of Shares.
4.6 Amended and Restated Incorporated by reference to Exhibit 4.8 to
Registration Agreement, dated the Company's Registration Statement on
April 11, 1985, between the Form S-1 (File No. 33-17959)
Company and certain
shareholders.
4.7 Amendment dated October 28, Incorporated by reference to Exhibit 4.10
1987 to Agreement for 1987 to the Company's Registration Statement
Bridge Financing, Conversion on Form S-1 (File No. 33-17959)
and Sales of Shares.
10.1 Employment Agreement dated Incorporated by reference to Exhibit 10.3
December 12, 1985 between to the Company's Registration Statement
the Company and on Form S-1 (File No. 33-17959)
Richard V. Palermo.
10.2 Exclusive License Agreement, Incorporated by reference to Exhibit 10.20
dated July 16, 1986, between to the Company's Registration Statement
the Company and Morse on Form S-1 (File No. 33-17959)
Security Group, Inc.
10.3 License Agreement dated Incorporated by reference to Exhibit 10.21
January 30, 1986, between the to the Company's Registration Statement
Company and Databit, Inc. on Form S-1 (File No. 33-17959)
10.4 Agreement dated April 11, 1986, Incorporated by reference to Exhibit 10.22
between the Company and to the Company's Registration Statement
Databit, Inc., as amended on Form S-1 (File No. 33-17959)
10.5 Amendment to Agreement with Incorporated by reference to Exhibit 10.30
Siemens Data Switching to the Company's Form 10-K for the
Systems, Inc. period ending September 30, 1988
(File No 0-16397)
36
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
10.6 Form of Amendment to Incorporated by reference to Exhibit 10.32
Warrant Agreement dated to the Company's Form 10-K for the
December 18, 1987. period ending September 30, 1988
(File No 0-16397)
10.7 Agreement dated March 30, Incorporated by reference to Exhibit 10.30
1989, between the Company and to the Company's Form 10-K for the
Digi-Voice Corporation. period ending September 30, 1989
(File No 0-16397)
10.8 Agreement dated March 19, Incorporated by reference to Exhibit 10.18
1990, between the Company and to the Company's Form 10-K for the
Norwood Venture Corp. period ending September 30, 1990
(File No 0-16397)
10.9 Applied Spectrum Technologies, Incorporated by reference to Exhibit 10.19
Inc. 1990 Stock Option Plan to the Company's 1990 Stock Option Plan.
Form 10-K for the period ending
September 30, 1990 (File No 0-16397)
10.10 Agreement dated August 31, Incorporated by reference to Exhibit 10.22
1990, between the Company and to the Company's Form 10-K for the
Digi-Voice Corporation, as period ending September 30, 1990
amended. (File No 0-16397)
10.11 Agreement dated December 14, Incorporated by reference to Exhibit 10.23
1990, between the Company and to the Company's Form 10-K for the
Norwood Venture Corp as period ending September 30, 1990
amended (File No 0-16397)
10.12 Agreement dated November 30, Incorporated by reference to Exhibit 10.17
1990, between the Company and to the Company's Form 10-K for the
Penril Corp. period ending September 30, 1991
(File No 0-16397
37
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
10.13 Agreement dated January 1, Incorporated by reference to Exhibit 10.18
1991, between the Company and to the Company's Form 10-K for the
Memotec Datacom, Inc. period ending September 30, 1991
(File No 0-16397)
10.14 Agreement dated January 1, Incorporated by reference to Exhibit 10.19
1991, between the Company and to the Company's Form 10-K for the
Memotec Datacom, Inc. period ending September 30, 1991
(File No 0-16397)
10.15 Amendment dated March 13, Incorporated by reference to Exhibit 10.21
1991, to Agreement dated to the Company's Form 10-K for the
August 30, 1989, between the period ending September 30, 1991
Company and Digi-Voice (File No 0-16397)
Corporation.
10.16 Amendment dated March 29, Incorporated by reference to Exhibit 10.22
1991, to the Agreement dated to the Company's Form 10-K for the
March 19, 1990 between the period ending September 30, 1991
Company and Norwood Venture (File No 0-16397)
Corp.
10.17 Employment Agreement dated Incorporated by reference to Exhibit 10.24
April 25, 1991 between the to the Company's Form 10-K for the
Company and Edward Mackay. period ending September 30, 1991
(File No 0-16397)
10.18 Amendment dated March 19, Incorporated by reference to Exhibit 10.27
1992, to the Agreement dated to the Company's Form 10-K for the
March 19, 1990 between the period ending September 30, 1992
Company and Norwood Venture (File No 0-16397)
Corp.
10.19 Agreement dated June 30, 1992, Incorporated by reference to Exhibit 10.30
between the Company and Data- to the Company's Form 10-K for the
Products of New England, Inc. period ending September 30, 1992
(File No 0-16397)
38
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
10.20 Employment Agreement dated Incorporated by reference to Exhibit 10.20
July 14, 1993, between the to the Company's Form 10-K for the
Company and Edward Mackay. period ending September 30, 1993
(File No 0-16397)
10.21 Agreement dated August 19, Incorporated by reference to Exhibit 10.21
1993, between the Company and to the Company's Form 10-K for the
HT Communications, Inc. period ending September 30, 1993
(File No 0-16397)
10.22 Agreement dated December 1, Incorporated by reference to Exhibit 0.22
1993, between the Company and to the Company's Form 10-K for the
HT Communications, Inc. period ending September 30, 1993
(File No 0-16397)
10.23 Amendment to Employment Incorporated by reference to Exhibit 0.22
Agreement dated July 14, 1993, to the Company's Form 10-K for the
between the Company and period ending September 30, 1994
Edward Mackay. (File No 0-16397)
10.24 Agreement dated April 11, Incorporated by reference to Exhibit 0.24
1995, between the Company and to the Company's Form 10-K for the
HT Communications, Inc. period ending September 30, 1995
(File No 0-16397)
10.25 Amendment dated April 28, Incorporated by reference to Exhibit 0.25
1995, to Agreement date to the Company's Form 10-K for the
August 30, 1989, between the period ending September 30, 1995
Company and Digi-Voice (File No 0-16397)
Corporation.
11.1 Computation of per share Filed Herewith
earnings.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: 12/27/96 APPLIED SPECTRUM TECHNOLOGIES, INC.
By /s/ Edward F. Mackay
--------------------
Edward F. Mackay
Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the Capacities and on the dates indicated:
Dated: 12/27/96 By /s/ Edward F. Mackay
--------------------
Edward F. Mackay
Chief Executive Officer and
Chief Financial Officer
Dated: 12/27/96 By /s/ Mark Littell
-----------------
Mark Littell, Director
40