UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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: 000-2409
Com21, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3201698
_______________________________ _______________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
750 Tasman Drive
Milpitas, California 95035
(408) 953-9100
(Address, including zip code, and telephone number, including area code, of the
registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required 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
The number of outstanding shares of the registrant's Common Stock, $0.001 par
value, was 21,992,982 as of June 30, 2000.
COM21, INC.
INDEX
PART I: FINANCIAL INFORMATION Page
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999 3
Condensed Consolidated Statements of Operations and Comprehensive
Loss - Three and Six Months ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk 21
PART II: OTHER INFORMATION
Item 1 Legal Proceedings 21
Item 2 Changes in Securities and Use of Proceeds. 21
Item 3 Defaults Upon Senior Securities 22
Item 4 Submission of Matters to a Vote of Security Holders 22
Item 5 Other Information 22
Item 6 Exhibits and Reports on Form 8-K 22
Signature 23
In addition to historical information, this Form 10-Q contains forward-
looking statements including statements regarding our strategy, financial
performance and revenue sources that involve a number of risks and
uncertainties, including those discussed below at "Risk Factors" and in
the "Risk Factors" section of Com21's Annual Report on Form 10-K dated
March 24, 2000 as filed with the SEC. While this outlook represents our
current judgement on the future direction of the business, such risks and
uncertainties could cause actual results to differ materially from any
future performance suggested below. Readers are cautioned not to place
undue reliance on the forward-looking statements, which speak only as of
the date of this Form 10-Q. Com21 undertakes no obligation to publicly
release any revisions to forward-looking statements to reflect events or
circumstances arising after the date of this document. See "Risk Factors"
below as well as "Risk Factors" in Com21's Annual Report on Form 10-K
dated March 24, 2000 as filed with the SEC.
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements
COM21, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
(Unaudited)
June 30, December 31,
ASSETS 2000 1999
__________ __________
Current assets:
Cash and cash equivalents $ 40,739 $ 16,499
Short-term investments 35,305 89,524
Accounts receivable 32,250 19,207
Inventories 6,206 4,518
Prepaid expenses and other 4,097 2,924
__________ __________
Total current assets 118,597 132,672
Investments 14,986 -
Property and equipment, net 10,540 8,198
Other assets 2,493 296
__________ __________
Total Assets $ 146,616 $ 141,166
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,727 $ 12,870
Accrued compensation and related benefits 3,982 3,732
Deferred revenue 286 317
Other current liabilities 4,734 2,982
Current portion of capital lease 473 538
__________ __________
Total current liabilities 29,202 20,439
Deferred rent 297 304
Capital lease obligations 86 345
__________ __________
Total Liabilities 29,585 21,088
__________ __________
Stockholders' equity:
Common stock, $0.001 par value, 40,000,000 shares
authorized; 21,992,982 and 21,619,172 issued and
outstanding at June 30, 2000 and December 31, 1999 22 22
Additional paid-in capital 183,321 179,138
Deferred stock compensation (700) (230)
Accumulated deficit (65,180) (59,016)
Accumulated other comprehensive income (loss) (432) 164
__________ __________
Total Stockholders' Equity 117,031 120,078
__________ __________
Total Liabilities and Stockholders' Equity $ 146,616 $ 141,166
========== ==========
See notes to condensed consolidated financial statements.
COM21, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
__________ __________ __________ __________
Revenues $ 51,358 $ 21,542 $ 92,914 $ 40,756
Cost of revenues 37,322 13,115 66,314 23,861
__________ __________ __________ __________
Gross profit 14,036 8,427 26,600 16,895
__________ __________ __________ __________
Operating expenses:
Research and development 10,399 7,029 18,882 13,929
Sales and marketing 6,552 3,963 12,673 7,193
General and administrative 2,182 956 3,982 1,796
__________ __________ __________ __________
Total operating expenses 19,133 11,948 35,537 22,918
__________ __________ __________ __________
Loss from operations (5,097) (3,521) (8,937) (6,023)
Total other income, net 1,356 1,386 2,795 2,304
__________ __________ __________ __________
Loss before income taxes (3,741) (2,135) (6,142) (3,719)
Provision for income taxes - 18 22 55
__________ __________ __________ __________
Net loss (3,741) (2,153) (6,164) (3,774)
Other comprehensive loss,
net of tax:
Unrealized gain (loss) on
available-for-sale investments (392) 1,072 (596) 1,019
__________ __________ __________ __________
Comprehensive loss $ (4,133) $ (1,081) $ (6,760) $ (2,755)
========== ========== ========== ==========
Net loss per share,
basic and diluted $ (0.17) $ (0.10) $ (0.28) $ (0.19)
========== ========== ========== ==========
Shares used in computation,
basic and diluted 21,931 21,299 21,847 20,386
========== ========== ========== ==========
See notes to condensed consolidated financial statements
COM21, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2000 1999
__________ __________
Cash used in operating activities:
Net loss $ (6,164) $ (3,774)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,824 1,988
Deferred rent 25 18
Gain on sales and maturities of investments (362) (648)
Changes in operating assets and liabilities:
Accounts receivable (13,043) (8,187)
Inventories (1,688) 1,849
Prepaid expenses and other (1,173) (1,860)
Other assets (2,197) (28)
Accounts payable 6,857 2,669
Accrued compensation and related benefits 250 1,740
Deferred revenue (31) 146
Other current liabilities 1,720 607
__________ __________
Net cash used in operating activities (12,982) (5,480)
__________ __________
Cash flows from investing activities:
Proceeds from sale of investments 92,805 89,993
Purchases of investments (53,806) (96,477)
Purchases of property and equipment (4,418) (2,210)
__________ __________
Net cash provided by (used in) investing activities 34,581 (8,694)
__________ __________
Cash flows from financing activities:
Proceeds from issuance of stock, net - 54,330
Proceeds from exercise of stock options, net 2,965 1,271
Repayments under capital lease obligations (324) (515)
Repayments on debt obligations - (110)
__________ __________
Net cash provided by financing activities 2,641 54,976
__________ __________
Net increase in cash and cash equivalents 24,240 40,802
Cash and cash equivalents at beginning of period 16,499 7,135
__________ __________
Cash and cash equivalents at end of period $ 40,739 $ 47,937
========== ==========
Noncash investing and financing activities:
Deferred stock compensation $ 1,218 $ -
========== ==========
Unrealized (gain) loss on available-for-sale
investments, net $ 596 $ (1,019)
========== ==========
See notes to condensed consolidated financial statements
COM21, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, these unaudited condensed
consolidated financial statements include all adjustments necessary
(consisting of normal, recurring adjustments) for a fair presentation of
Com21's financial position as of June 30, 2000, the results of operations
for the three and six months ended June 30, 2000 and 1999 and cash flows
for the six months ended June 30, 2000 and 1999.
The results of operations for the three and six months ended June 30,
2000 are not necessarily indicative of the results to be expected for the
fiscal year ending December 31, 2000. These financial statements should
be read in conjunction with the consolidated financial statements and the
accompanying notes included in the Company's Form 10-K dated March 24,
2000 as filed with the SEC.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements," which provides the SEC staff's views on selected
revenue recognition issues. The guidance in SAB 101 must be adopted
during the fourth quarter of fiscal 2000 and the effects, if any, are
required to be recorded through a retroactive, cumulative-effect
adjustment as of the beginning of the fiscal year, with a restatement of
all prior interim quarters in the year. Our management has not completed
its evaluation of the effects, if any, that SAB 101 will have on the
Company's income statement presentation, operating results or financial
position.
2. Inventories
Inventories consist of (in thousands):
June 30, December 31,
2000 1999
__________ __________
Raw materials and sub-assemblies $ 4,706 $ 917
Work-in-process 226 326
Finished goods 1,274 3,275
__________ __________
Total $ 6,206 $ 4,518
========== ==========
3. Stockholders' Equity
Net Loss Per Share - The following is a reconciliation of the numerators
and denominators of the basic and diluted net loss per share computations
(in thousands, except per share amounts):
Three Months
Ended June 30,
2000 1999
__________ __________
Net Loss (Numerator):
Net loss, basic and diluted $ (3,741) $ (2,153)
__________ __________
Shares (Denominator):
Weighted average common shares outstanding 21,951 21,380
Weighted average common shares outstanding
subject to repurchase (20) (81)
__________ __________
Shares used in computation, basic and diluted 21,931 21,299
__________ __________
Net Loss Per Share, Basic and Diluted $ (0.17) $ (0.10)
========== ==========
Six Months
Ended June 30,
2000 1999
__________ __________
Net Loss (Numerator):
Net loss, basic and diluted $ (6,164) $ (3,774)
___________ __________
Shares (Denominator):
Weighted average common shares outstanding 21,871 20,484
Weighted average common shares outstanding
subject to repurchase (24) (98)
___________ __________
Shares used in computation, basic and diluted 21,847 20,386
___________ __________
Net Loss Per Share, Basic and Diluted $ (0.28) $ (0.19)
=========== ==========
During the three months and six months ended June 30, 2000 and 1999, the
Company had securities outstanding which could potentially dilute basic
EPS in the future, but were excluded in the computation of diluted EPS in
such periods, as their effect would have been antidilutive due to the net
loss reported in such periods. Such outstanding securities consist of the
following at June 30, 2000: warrants to purchase 75,000 shares of common
stock; 14,549 outstanding shares of common stock subject to repurchase;
and options to purchase 4,681,129 shares of common stock.
4. Subsequent Events
On July 3, 2000, the Company completed the acquisition of the privately
held GADline Ltd., a leading developer of integrated end-to-end system
solutions delivering telephone and high-speed data over a hybrid fiber-
coaxial (HFC) infrastructure. The acquisition will be accounted for as a
purchase. Com21 issued approximately 2.5 million shares of common stock
in consideration for all of GADline's shares. An additional 350,000
shares of Com21's common stock may be issued to GADline shareholders upon
completion of predefined milestones through December 31, 2000. Com21 also
issued approximately 267,000 common stock options relating to the assumption
of the GADline option plan.
On July 6, 2000, the Company completed the acquisition of the privately
held BitCom, Inc., an engineering consulting firm. The acquisition will
be accounted for as a purchase. The consideration consisted of $4.0
million in cash. An additional 295,000 shares of Com21's common stock may be
issued upon the occurrence of certain specified future events. Com21 also
issued approximately 100,000 common stock options relating to the assumption
of the BitCom option plan.
PART I: FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with Com21's
unaudited condensed consolidated financial statements and notes thereto.
The results described below are not necessarily indicative of the results
to be expected in any future period. Certain statements in this
discussion and analysis, including statements regarding our strategy,
financial performance and revenue sources, are forward-looking statements
based on current expectations and entail various risks and uncertainties
that could cause actual results to differ materially from those expressed
in the forward-looking statements. Readers are referred to the "Risk
Factors" section contained in Com21's Annual Report on Form 10-K dated
March 24, 2000, and to the "Risk Factors" section contained herein which
identify important risk factors that could cause actual results to differ
from those contained in the forward looking statements.
Overview
Com21, Inc., is a leading global supplier of system solutions for the
broadband access market. Com21's products enable domestic and
international cable operators to provide high-speed, cost-effective
Internet access, reduce operating costs, and maximize revenue
opportunities in a variety of subscriber markets - including corporate
telecommuters, small businesses, and private homes. We develop headend
equipment, subscriber cable modems, network management software, and
noise containment technologies, all designed to support the ATM, DOCSIS
and Digital Video Broadcasting (DVB) industry standards. Since inception,
we have shipped approximately 1,200 headend controllers and more than
708,000 cable modems through June 30, 2000. In the North American market,
we sell directly to cable operators and systems integrators.
Internationally, we sell primarily to systems integrators, who in turn
sell to cable operators.
Com21 was incorporated in Delaware in June 1992. Our principal executive
offices are located at 750 Tasman Drive, Milpitas, California 95035 and
our telephone number at that address is (408) 953-9100. We can also be
reached at our Web site http://www.Com21.com.
Results of Operations
Total Revenues - Total revenues increased 138% from $21.5 million in the
second quarter of 1999 to $51.4 million in the second quarter of 2000,
and increased 128% from $40.8 million for the first six months of 1999 to
$92.9 million for the first six months of 2000. We experienced revenue
growth in both cable modems and headend products over the comparable
quarter and six month period in the prior year. Unit sales of all our
cable modem products increased 201% from the second quarter of 1999, as
we experienced strong demand for our ATM and DOCSIS cable modems.
Although we anticipate continued revenue growth associated with our cable
modems, we anticipate that this growth could be constrained due to
industry wide component shortages and the inability of our OEM modem
supplier to meet all of its shipping commitments. Revenues associated
with our ATM headend products increased from $4.0 million in the second
quarter of 1999 to $11.4 million in the second quarter of 2000 due to
strong demand in the European and Asian markets.
Cable modem sales accounted for 77% of total revenue in the second
quarter of 2000 as compared to 78% of total revenue in the second quarter
of 1999 and 81% of total revenue for the first six months of 2000 as
compared to 71% for the first six months of 1999. The average sales
price of all cable modems declined from the second quarter of 1999 to the
second quarter of 2000 due to planned price reductions to meet
competitive pricing pressures and product mix as we are selling more of
our lower priced DOCSIS modems. We anticipate that the average sales
price of cable modems will continue to decline moderately during the
remainder of 2000. The average sales price of headend equipment also
declined from the second quarter of 1999 to the second quarter of 2000
due to planned price reductions. We anticipate continued pricing
pressure on our headend equipment and declines in our average sales price
of headend products.
During the quarter ended June 30, 2000, international sales accounted for
69% of total revenues, increasing from the 45% experienced in the second
quarter of 1999. During the six months ended June 30, 2000,
international sales accounted for 67% of total revenues, increasing from
the 45% experienced in the first six months of 1999. The increase is due
to strong demand in Europe and Asia for both of our proprietary and
DOCSIS cable modems.
Gross Margins - Gross margins decreased from 39% in the second quarter of
1999 to 27% in the second quarter of 2000, and decreased from 42% during
the first six months of 1999 to 29% during the first six months of 2000.
The decrease in margins is primarily due to the mix of product sold. As
noted above cable modem sales accounted for 81% of total revenue in the
first half of 2000 as compared to 71% of total revenue in the first half
of 1999. Additionally, revenue from our DOCSIS cable modems has become a
more significant portion of our total cable modem revenue. Cable modems
have lower margins than our headend products and our DOCSIS cable modems
currently have lower margins than our proprietary cable modems.
During the third quarter of 2000 we anticipate margin pressure to
continue from increasing sales of our DOCSIS cable modems and a higher
cost for our OEM modem. As these lower margin modems become a higher
percentage of our total cable modem revenue, we anticipate our total
margin percent will decline. We do not anticipate receiving a
substantial benefit from our cost reduced DOCSIS modems until late in
2000.
Research and Development - Research and development expenses increased
48% from $7.0 million in the second quarter of 1999 to $10.4 million in
the second quarter of 2000, and increased 36% from $13.9 million during
the first six months of 1999 to $18.9 million during the first six months
of 2000. The increase was attributable to higher costs related primarily
to increased personnel, consulting and project related costs. The
increase in personnel costs were a result of expansion in our own
employee base as we continued to focus our efforts on developing new
products and enhancing our current products. We expect these expenses to
increase in absolute dollars in the future as we continue to invest in
research and development in our basic products and expand into wireless
markets.
Sales and Marketing - Sales and marketing expenses increased 65% from
$4.0 million in the second quarter of 1999 to $6.6 million in the second
quarter of 2000, and increased 76% from $7.2 million during the first six
months of 1999 to $12.7 million during the first six months of 2000. The
increase was primarily due to higher costs associated with increased
personnel in sales and marketing organizations necessary to support the
expansion of our sales force in both domestic and international areas.
Also, the increase was due to an increase in commissions related to
higher sales and additional marketing programs. We expect sales and
marketing expenses to increase in absolute dollars in the future as we
develop additional marketing programs and product channels for our DOCSIS
and DVB products.
General and Administrative - General and administrative expenses
increased 128% from $956,000 in the second quarter of 1999 to $2.2
million in the second quarter of 2000, and increased 122% from $1.8
million during the first six months of 1999 to $4.0 million during the
first six months of 2000. We expect general and administrative expenses
to show a moderate increase in absolute dollars as we continue to add
personnel and incur additional costs related to the growth of our
business and to build out our infrastructure.
Total Other Income, Net - Total other income, remained relatively
consistent at $1.4 million in the second quarter of 2000 and 1999, and
increased from $2.3 million during the first six months of 1999 to $2.8
million during the first six months of 2000. The increase in the six
month periods was attributable to earnings on higher cash balances
available and higher interest rates during the second quarter of 2000.
Liquidity and Capital Resources
At June 30, 2000, our cash and cash equivalents and investments were
$91.0 million, compared to $106.0 million at December 31, 1999, a
decrease of $15.0 million. The decrease is primarily a result of cash
used in operations of $13.0 million and cash used for purchases of
property and equipment of $4.4 million. Cash outflows from operations is
due primarily to an increase in accounts receivable, inventory, prepaid
expenses and other assets of $18.1 million and the net loss of $3.6
million after non-cash items offset by an increase to accounts payable
and other current liabilities of $8.9 million. The cash outflow from
operating activities and purchases of property was offset by cash inflow
from the net proceeds from sales of investments of $39.0 million, and the
proceeds of exercise of stock options of $3.0 million. Our capital
requirements primarily relate to the working capital requirements and
investments in property and equipment. We have funded operations
primarily through public offerings of common stock and private sales of
common and preferred stock.
Other than capital lease commitments, we have no material commitments for
capital expenditures. However, we anticipate an increase in capital
expenditures and lease commitments consistent with anticipated growth in
operations which include GADline, Inc. and BitCom, Inc. acquisitions,
infrastructure and personnel. We intend to establish sales offices and
lease additional space, which will require us to commit to additional
lease obligations, purchase or lease equipment and install leasehold
improvements. We are continuing to upgrade and invest in information
technology which will increase capital and software expenditures and
consulting costs.
Going forward, we intend to make cash investments or exchange Com21 stock
for investments in various companies to secure development resources
and/or access to various product lines. We may also more aggressively
pursue market opportunities that leverage our technology platform. These
activities, if pursued, will result in a significant use of cash
resources.
We believe our current cash and cash equivalents and investments will be
sufficient to meet anticipated cash requirements for the next twelve
months, although we may seek to raise additional capital during that time
period.
Risk Factors
You should carefully consider the risks described below before making a
decision to invest in Com21. You may lose all or part of your investment.
The risks and uncertainties described below are not the only ones facing
our Company. Readers are referred to additional risks identified in the
"Risk Factors" section contained in Com21's Annual Report on Form 10-K
dated on March 24, 2000 as filed with the SEC.
We are currently experiencing significant delays in shipments from our
OEM modem supplier and shortages of certain components.
We are currently experiencing delays in shipment from our OEM modem
supplier because of a market shortage of tuners and flash memory, and an
industry wide shortage of components could impact our modem shipments.
If we are unable to purchase OEM modems or key components from our vendors
at a high enough volume to meet demand, or qualify and secure additional
sources of supply, we will be unable to meet our production and delivery
schedules and revenue will be adversely affected.
We do not have long term supply contracts to ensure sources of supply for
all components. Our suppliers may enter into exclusive arrangements with
our competitors, stop selling their products or components to us at
commercially reasonable prices or refuse to sell their products or
components to us at any price. If we are unable to obtain sufficient
quantities of modems or components, or to develop alternative sources for
products and/or components our revenue would be materially adversely
affected.
If any manufacturer or other sole source suppliers delay or halt
production of any of their components, our business, operating results
and financial condition could be materially adversely affected.
Our operating results in one or more future periods are likely to
fluctuate significantly and may fail to meet or exceed the expectations
of securities analysts or investors.
Our operating results are likely to fluctuate significantly in the future
on a quarterly and an annual basis due to a number of factors, many of
which are outside our control. Factors that could cause our revenues to
fluctuate include the following:
- - - - key component shortages or failures from our suppliers in
providing necessary materials and modems;
- - - - delays in introducing standards based products that are
certified as meeting the specifications of various approval
organizations;
- - - - new product introductions by us or by our competitors;
- - - - variations in the timing of orders and shipments of our
products;
- - - - variations in the size of orders by our customers;
- - - - the timing of upgrades of cable plants;
- - - - variations in capital spending budgets of cable operators;
- - - - delays in obtaining regulatory approval for commercial
deployment of cable modem systems; and
- - - - general economic conditions and economic conditions
specific to the cable and electronic data transmission
industries.
The amount and timing of our operating expenses generally will vary from
quarter to quarter depending on the level of actual and anticipated
business activities. Research and development expenses will vary as we
develop new products.
Total revenues for any future quarter are difficult to predict. Supply of
components and OEM DOCSIS modems, manufacturing or testing constraints
could result in delays in the delivery of our products. Delays in the
product deployment schedule of one or more of our cable operator
customers would likely materially adversely affect our operating results
for a particular period.
A variety of factors affect our gross margin, including the following:
- - - - the effectiveness of our cost reduction efforts;
- - - - the sales mix within a product group, especially between
proprietary and DOCSIS modems;
- - - - the average selling prices of our products;
- - - - component prices we secure from our vendors;
- - - - the sales mix between our headend equipment and cable
modems;
- - - - the volume of products manufactured; and
- - - - the distribution channel or customer mix.
In the past we have experienced declines in the average selling price of
our cable modems and headend equipment. We expect average sales prices
of our modems and headend equipment will continue to show decreases to
meet competitive pressures, especially those pressures related to DOCSIS
and other standards based modems. In addition, the sales mix between our
headend equipment and modems also affects our gross margin. Sales of our
cable modems yield lower gross margins than do sales of our headend
equipment, and sales of our DOCSIS cable modems currently yield
substantially lower margins than do sales of our proprietary cable
modems. We anticipate that our sales mix will continue to be weighted
toward cable modems during 2000 and increasingly toward our lower margin
DOCSIS cable modems. If the price declines are not offset by a decline in
the costs of manufacturing our cable modems due to engineering delays in
introducing our cost reduced ATM and DOCSIS modems or in getting
certified by various standards bodies or an increase in sales of higher
margin telephone and office cable modems, our gross margin will be
adversely affected.
Because of these factors, our operating results in one or more future
periods may not meet or exceed the expectations of securities analysts or
investors. In that event, the trading price of our common stock would
likely decline.
We may not be able to produce sufficient quantities of our products
because we depend on third-party manufacturers, their suppliers and OEM
suppliers and have limited manufacturing experience.
We contract for the manufacture of cable modems and integrated circuit
boards on a turnkey basis. Our future success will depend, in significant
part, on our ability to have others manufacture our products cost-
effectively, in sufficient volumes and to meet production and delivery
schedules. A number of risks are associated with our dependence on third-
party manufacturers including:
- - - - failure to meet our delivery schedules;
- - - - quality assurance;
- - - - manufacturing yields and costs;
- - - - the potential lack of adequate capacity during periods of
excess demand;
- - - - difficulty in planning mix of units to be produced by
manufacturer;
- - - - increases in prices and the potential misappropriation of
our intellectual property.
Any manufacturing disruption could impair our ability to fulfill orders.
We have no long-term contracts or arrangements with any of our vendors
that guarantee product availability, the continuation of particular
payment terms or the extension of credit limits. We may experience
manufacturing or supply problems in the future. We are dependent on our
manufacturers to secure components at favorable prices, but we may not be
able to obtain additional volume purchase or manufacturing arrangements
on terms that we consider acceptable, if at all. Any such difficulties
could harm our relationships with customers.
Our future success will depend in part upon our ability to enhance our
existing products and to develop and introduce, on a timely basis, new
products and features that meet changing customer requirements and
emerging industry standards.
The market for cable modem systems and products is characterized by
rapidly changing technologies and short product life cycles. Our future
success will depend in large part upon our ability to:
- - - - identify and respond to emerging technological trends in
the market;
- - - - develop and maintain competitive products;
- - - - enhance our products by adding innovative features that
differentiate our products from those of our competitors;
- - - - bring products to market on a timely basis at competitive
prices; and
- - - - respond effectively to new technological changes or new
product announcements by others.
If our product development and enhancements take longer than planned, the
availability of products would be delayed. Our future success will depend
in part upon our ability to enhance our existing products and to develop
and introduce, on a timely basis, new products and features that meet
changing customer requirements and evolving and emerging industry
standards.
The technical innovations required for us to remain competitive are
inherently complex, require long development cycles, are dependent in
some cases on sole source suppliers and require us, in some cases, to
license technology from others. We must continue to invest in research
and development to attempt to maintain and enhance our existing
technologies and products, but we may not have the funds available to do
so. Even if we have sufficient funds, these investments may not serve the
needs of customers or be compatible with changing technological
requirements or standards. Most expenses must be incurred before the
technological feasibility or commercial viability can be ascertained.
Revenues from future products or product enhancements may not be
sufficient to recover the development costs associated with the products
or enhancements.
Competition for qualified personnel in the cable networking equipment and
telecommunications industries is intense, and we may not be successful in
attracting and retaining these personnel.
Our future success will depend, to a significant extent, on the ability
of our management to operate effectively, both individually and as a
group. We are dependent on our ability to retain and motivate high
caliber personnel, in addition to attracting new personnel. Competition
for qualified personnel in the cable networking equipment and
telecommunications industries is extremely intense, especially in the San
Francisco Bay Area, and we may not be successful in attracting and
retaining such personnel. We expect to add additional personnel in the
near future. There may be only a limited number of people with the
requisite skills to serve in those positions and it may become
increasingly difficult to hire these people. We are actively searching
for research and development engineers, who are in short supply. Our
business will suffer if we encounter delays in hiring additional
engineers.
In response to the intense competition for qualified personnel in the San
Francisco Bay Area, we have opened up development facilities in Ireland
and New York, and a customer service center in The Netherlands and are
exploring setting up additional centers in other locations.
Competitors and others have in the past and may in the future attempt to
recruit our employees. We do not have employment contracts with any of
our key personnel. We are experiencing higher turnover than in 1999 due
to increased competition for qualified personnel. We do not maintain key
person life insurance on our key personnel. The loss of the services of
any of our key personnel, the inability to attract or retain qualified
personnel in the future or delays in hiring required personnel,
particularly engineers, could negatively affect our business.
We may be subject to risks associated with acquisitions.
Subsequent to June 30, 2000, we acquired GADline Ltd., an Israeli
developer of integrated end-to-end system solutions delivering telephone
and high-speed data over a hybrid fiber-coaxial infrastructure, and
BitCom, Inc., an engineering consulting firm, specializing in wireless,
satellite, and networking engineering. We continually evaluate strategic
acquisitions of other businesses. The process of integrating any acquired
business into our business and operations is risky and may create
unforeseen operating difficulties and expenditures. The areas in which
we may face difficulties include:
- - - - assimilating the acquired operations and personnel;
- - - - limits on our ability to retain the acquired customers;
- - - - risks of entering markets in which we have no or limited
direct prior experience and where competitors in such markets
have stronger market positions;
- - - - disruption of our ongoing business;
- - - - limits on our ability to successfully incorporate acquired
technology and rights into our service offerings and sell the
acquired products; and
- - - - implementation of controls, procedures and policies
appropriate for a larger public group of companies that prior
to acquisition had been smaller, private companies.
We have very limited experience in managing the integration process.
Moreover, we may not be able to successfully overcome potential problems
encountered with these acquisitions or other potential acquisitions. In
addition, future acquisitions could materially adversely affect our
operating results by diluting our stockholders' equity, causing us to
incur additional debt, incurring significant immediate expenses related
to write-offs, or incurring amortization of acquisition expenses and
acquired assets.
We must reduce the cost of our cable modems to remain competitive.
Certain of our competitors' cable modems are priced lower than our cable
modems. As headend equipment becomes more widely deployed, the price of
cable modems and related equipment will continue to decline. In
particular, industry standards, including the DOCSIS standard in North
America, has caused increased price competition for cable modems.
We may not be able to continually reduce the costs of manufacturing our
cable modems sufficiently to enable us to lower our modem prices and
compete effectively with other cable modem suppliers. In addition we may
not be able to get our DOCSIS modems certified in a timely manner by
various standards bodies including CableLabs. If we are unable to reduce
the manufacturing costs of our cable modems, our gross margin and
operating results would be harmed.
We have a short operating history, have incurred net losses since our
inception and expect future losses.
We did not commence product shipments until April 1997. As a result, we
have only a limited operating history upon which you may evaluate our
prospects or us. We have incurred net losses since inception and expect
to continue to operate at a loss through at least the first half of
fiscal year 2001. To achieve and subsequently maintain profitable
operations, we must successfully design, develop, test, manufacture,
introduce, market and distribute our products on a broad commercial basis
and secure higher revenues and gross profit.
Our ability to generate future revenues will depend on a number of
factors, many of which are beyond our control. These factors include the
following:
- - - - cable operators' success and timeliness in the
installation of subscriber site equipment;
- - - - our ability to meet competitive pricing pressures;
- - - - the rate at which cable operators upgrade their cable
plants;
- - - - our ability and the ability of cable operators to
coordinate timely and effective marketing campaigns with the
availability of upgrades;
- - - - cable operators' success in marketing data-over-cable
services and our modems to subscribers; and
- - - - cable operators' success in setting prices for data
transmission installation service.
Due to these factors, we cannot forecast with any degree of accuracy what
our revenues will be or how quickly cable operators will adopt our
systems and buy our cable modems. Therefore, we may not achieve, or be
able to sustain, profitability.
Both our proprietary products and our standards based products are
subject to evolving industry standards. If our products do not comply
with any standard that achieves market acceptance, customers may refuse
to purchase our products.
The DOCSIS standard has achieved substantial market acceptance in North
America. Conformance with the DOCSIS standard is being determined
through certification tests performed by CableLabs. On December 9, 1999
CableLabs certified two models of our DOXport cable modem product line
representing four modems for use with DOCSIS cable networks. On March 9,
2000 CableLabs certified a DOCSIS modem supplied by our OEM supplier. On
July 20, 2000 CableLabs certified the new USB-compatible DOXport 121
cable modem to be in compliance with DOCSIS 1.0. As we continue to
enhance current DOCSIS products and develop new products and as the
evolution of the DOCSIS standard continues we may incur additional costs
associated with making our cable modems compliant with various versions
of the DOCSIS standard. Additionally, we cannot assure you that future
enhancements or new DOCSIS product offerings will be CableLabs certified
according to our anticipated schedule, or that if certified, will meet
with market acceptance.
The emergence or evolution of industry standards, either through adoption
by official standards committees or widespread use by cable operators or
telephone companies could require us to redesign current products.
There is movement by some cable operators in Europe towards either a DVB
or EuroDOCSIS standard. We currently have DVB products that we OEM from a
third party supplier, but we cannot assure you that our DVB products will
meet the evolving DVB specifications. Moreover, our relationship with
our OEM supplier will cease on September 26, 2000. Currently, we are
developing our own products to replace this source; however, these
products may not be available in time for market requirement.
Additionally, we cannot assure you that if a EuroDOCSIS standard obtains
widespread acceptance we will be able to design and produce a EuroDOCSIS
modem that meets EuroDOCSIS specifications.
The widespread adoption of DOCSIS, DVB, EuroDOCSIS or other standards
outside North America could cause aggressive competition in the cable
modem market and result in lower sales of our proprietary headend
products and lower revenues from licensing of our network management
software. Any of these events would adversely affect our gross margin and
our operating results.
The development of new competing technologies and standards increases the
risk that current or new competitors could develop products that would
reduce the competitiveness of our products. If any of these new
technologies or standards achieve widespread market acceptance, any
failure by us to develop new products or enhancements, or to address
these new technologies or standards, would harm our business.
We rely on indirect distribution channels for our products and need to
develop additional distribution channels.
Today, cable operators and systems integrators purchase cable modems from
vendors through direct and indirect sales channels. Due to the DOCSIS
standard achieving widespread market acceptance, we anticipate that the
North American cable modem market may at some point shift to a consumer
purchase model. If this occurs, we will sell more of our cable modems
directly through consumer sales channels. Our success will then be
dependent on our ability to market effectively to end users, to establish
brand awareness, to set up the required channels of distribution and to
have cable operator's reference sell our products. We have started to
establish new distribution channels for our cable modems. We may not have
the capital required or the necessary personnel, or expertise to develop
these distribution channels, which could materially adversely affect our
business, operating results and financial condition. To the extent that
large consumer electronics companies enter the cable modem market, their
well-established retail distribution capabilities would provide them with
a significant competitive advantage.
The market in which we sell our products is characterized by many
competing technologies, and the technology on which our product is based
may not compete effectively against other technologies.
The market for high-speed data transmission services has several
competing technologies which offer alternative solutions. Technologies
which compete with our solution include the following:
- - - - telephone company-related wireline technologies such as:
dial-up (analog modems);
digital subscriber line, known as DSL , ADSL, among
others; and
integrated services digital network, known as ISDN.
- - - - wireless technologies such as:
local multipoint distribution service, known as LMDS;
multi-channel multipoint distribution service,
commonly known as MMDS;
direct satellite.
- - - - fiber optic technologies such as:
fiber to a residence; and
fiber to a multi-dwelling unit.
Because of the widespread reach of telephone networks and the financial
resources of telephone companies, competition from telephone company-
related solutions is expected to be intense. Cable modem technology may
not be able to compete effectively against wireline or wireless
technologies.
In addition, one of our competitors has developed a commercially
available alternative modulation technology. Significant market
acceptance of alternative solutions for high-speed data transmission
could decrease the demand for our products if these alternatives are
viewed as providing faster access, greater reliability, increased cost-
effectiveness or other advantages.
Our market is highly competitive and has many more established
competitors.
The market for our products is intensely competitive, rapidly evolving
and subject to rapid technological change.
Many of our current and potential competitors have been operating longer,
have better name recognition, more established business relationships and
significantly greater financial, technical, marketing and distribution
resources than we do. These competitors may undertake more extensive
marketing campaigns, adopt more aggressive pricing policies and devote
substantially more resources to developing new or enhanced products than
we do.
Our failure to adequately protect our proprietary rights may adversely
affect us.
We rely on a combination of patent, copyright and trademark laws, and on
trade secrets and confidentiality provisions and other contractual
provisions to protect our proprietary rights. These measures afford only
limited protection. Our means of protecting our proprietary rights in the
U.S. or abroad may not be adequate and competitors may independently
develop similar technologies. Our future success will depend in part on
our ability to protect our proprietary rights and the technologies used
in our principal products. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our products
or to obtain and use trade secrets or other information that we regard as
proprietary. In addition, the laws of some foreign countries do not
protect our proprietary rights as fully as do the laws of the U.S. Issued
patents may not preserve our proprietary position. Even if they do,
competitors or others may develop technologies similar to or superior to
our own. If we do not enforce and protect our intellectual property, our
business will be harmed.
From time to time, third parties, including our competitors, have
asserted patent, copyright and other intellectual property rights to
technologies that are important to us. We expect that we will
increasingly be subject to infringement claims as the number of products
and competitors in the cable modem market grows and the functionality of
products overlaps.
The results of any litigation matter are inherently uncertain. In the
event of an adverse result in any litigation with third parties that
could arise in the future, we could be required to pay substantial
damages, including treble damages if we are held to have willfully
infringed, to halt the manufacture, use and sale of infringing products,
to expend significant resources to develop non-infringing technology, or
to obtain licenses to the infringing technology. Licenses may not be
available from any third party that asserts intellectual property claims
against us, on commercially reasonable terms, or at all. In addition,
litigation frequently involves substantial expenditures and can require
significant management attention, even if we ultimately prevail. There
can be no assurance that we would be able to successfully resolve legal
disputes in the future.
Our failure to manage growth could adversely affect us.
We have rapidly and significantly expanded our operations and anticipate
that further significant expansion will be required to address potential
growth in our customer base and market opportunities. To manage the
anticipated growth of our operations, we will be required to:
- - - - improve existing and implement new operational, financial
and management information controls, reporting systems and
procedures;
- - - - hire, train and manage additional qualified personnel;
- - - - expand and upgrade our core technologies; and
- - - - effectively manage multiple relationships with our
customers, suppliers and other third parties.
We compete for skilled personnel in a labor market where there is a
shortage of qualified personnel and salary demands are above the norm.
We must be able to continue to recruit and retain personnel, and failure
to do so would result in us not meeting our anticipated growth goals.
In addition, our management team may not be able to achieve the rapid
execution necessary to fully exploit the market for our products and
services.
We may not be able to install enhanced management information and control
systems in an efficient and timely manner, and our current or planned
personnel, systems, procedures and controls may not be adequate to
support our future operations.
In the future, we may experience difficulties meeting the demand for our
products and services. We cannot assure you that our systems, procedures
or controls will be adequate to support the anticipated growth in our
operations. Any failure to manage growth effectively could materially
adversely affect our business, operating results and financial condition.
We depend on strategic relationships.
Our business strategy relies to a significant extent on our strategic
relationships with other companies. These relationships include:
- - - - software license arrangements for our network management
system;
- - - - technology licensing agreements for certain products;
- - - - development and OEM arrangements with certain suppliers
for advanced products;
- - - - marketing arrangements with system integrators, and
others; and
- - - - collaboration agreements with suppliers of routers and
headend equipment to ensure the interoperability of our cable
modems with these suppliers.
These relationships may not be successful because we may not be able to
continue to maintain, develop or replace them in the event any of these
relationships are terminated. In addition, any failure to renew or extend
any licenses between any third party and us may adversely affect our
business.
Our customer base is concentrated and the loss of one or more of our
customers could cause our business to suffer.
A relatively small number of customers (which include system integrators)
have accounted for a large part of our revenues to date, and we expect
that this trend will continue. We expect that our largest customers in
the future could be different from our largest customers today due to a
variety of factors, including customers' deployment schedules and budget
considerations. In addition, certain of our system integrators could
develop and manufacture products that compete with us and therefore could
no longer distribute our products. Because a limited number of cable
operators account for a majority of our prospective customers, our future
success will depend upon our ability to establish and maintain
relationships with these companies. We may not be able to retain our
current accounts or to obtain additional accounts. Both in the U.S. and
internationally, a substantial majority of households passed are
controlled by a relatively small number of cable operators. The loss of
one or more of our customers or our inability to successfully develop
relationships with other significant cable operators could cause our
business to suffer.
We are subject to risks associated with operating in international
markets.
We expect that a significant portion of our sales will continue to be in
international markets for the foreseeable future. We have expanded
operations in our existing international markets and intend to enter new
international markets, which will demand management attention and
financial commitment. In addition, a successful expansion of our
international operations and sales in certain markets will require us to
develop relationships with international systems integrators and
distributors. We may not be able to identify, attract or retain suitable
international systems integrators or distributors. We may not be able to
successfully expand our international operations.
Furthermore, to increase revenues in international markets, we will need
to continue to establish foreign operations, to hire additional personnel
to run these operations and to maintain good relations with our foreign
systems integrators and distributors. To the extent that we are unable to
successfully do so, our growth in international sales will be limited and
our operating results could be adversely affected.
Our international sales to date have been denominated in U.S. dollars. We
do not currently engage in any foreign currency hedging transactions. A
decrease in the value of foreign currencies relative to the U.S. dollar
could make our products more expensive in international markets.
In addition to currency fluctuation risks, international operations
involve a number of risks not typically present in domestic operations.
These risks include the following:
- - - - changes in regulatory requirements;
- - - - costs and risks of deploying systems in foreign countries;
- - - - licenses, tariffs and other trade barriers;
- - - - political and economic instability;
- - - - difficulties in staffing and managing foreign operations;
- - - - potentially adverse tax consequences;
- - - - difficulties in obtaining governmental approvals for
products;
- - - - the burden of complying with a wide variety of complex
foreign laws and treaties; and
- - - - the possibility of difficult accounts receivable
collections.
We are also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of high
technology products. We cannot predict whether charges or restrictions
upon the importation or exportation of our products will be implemented
by the U.S. or other countries.
Future international activity may result in sales denominated in foreign
currencies. Gains and losses on the conversion to U.S. dollars of
accounts receivable, accounts payable and other monetary assets and
liabilities arising from international operations may contribute to
fluctuations in our operating results. Any of these factors could
materially and adversely affect our business, operating results and
financial condition.
The industry in which we compete is subject to consolidation.
There has been a trend toward industry consolidation for several years,
which has continued through the second quarter of 2000. We expect this
trend toward industry consolidation to continue as companies attempt to
strengthen or hold their market positions in an evolving industry. We
believe that industry consolidation may provide increasingly stronger
competitors that are better able to compete as sole-source vendors for
customers. This could lead to more variability in operating results as we
compete to be a single vendor solution and could have a material adverse
effect on our business, operating results and financial condition.
Additionally we believe that industry consolidation may lead to fewer
larger possible customers. If we are unable to maintain our current
customers or secure additional customers our business could be adversely
affected.
We may be subject to product returns and product liability claims due to
defects in our products.
Our products are complex and may contain undetected defects, errors or
failures. These errors have occurred in our products in the past and
additional errors may be expected to occur in our products in the future.
The occurrence of any defects, errors, or failures could result in delays
in installation, product returns and other losses to us or to our cable
operators or end-users. Any of these occurrences could also result in the
loss of or delay in market acceptance of our products, which could have a
material adverse effect on our business, operating results and financial
condition. We would have limited experience with the problems that could
arise with any new products that we introduce.
Although we have not experienced any product liability claims to date,
the sale and support of our products entail the risk of these claims. A
successful product liability claim brought against us could have a
material adverse effect on our business, operating results and financial
condition.
The location of our facilities subjects us to the risk of earthquakes and
or other natural disasters.
Our corporate headquarters, including most of our research and
development operations and our in-house manufacturing facilities, are
located in the Silicon Valley area of Northern California, a region known
for seismic activity. A significant natural disaster in the Silicon
Valley, such as an earthquake, could have a material adverse impact on
our business, financial condition and operating results.
Our stock price is highly volatile and broad market fluctuations may
adversely affect the market price of our common stock.
The trading price of our common stock has fluctuated significantly since
our initial public offering in May 1998. In addition, the trading price
of our common stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations or new products by us or our competitors, announcements by
certification and standards bodies, developments with respect to patents
or proprietary rights, changes in financial estimates by securities
analysts and other events or factors. In addition, the stock market has
experienced volatility that has particularly affected the market prices
of equity securities of many high technology companies and that often has
been unrelated or disproportionate to the operating performance of these
companies. These broad market fluctuations may adversely affect the
market price of our common stock.
Additionally, we may choose to structure acquisitions or other
transactions by issuing additional Com21 common stock or warrants or
options to purchase Com21 stock that would have a dilutive affect on the
common stock currently outstanding. Although we anticipate these types
of transactions will increase the overall value of Com21, Inc., they may
have an adverse affect on the market price of our common stock.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which reflect our management's view only as of the
date of this Form 10-Q. We undertake no obligation to update these
statements or publicly release the result of any revisions to the
forward-looking statements that we may make to reflect events or
circumstances after the date of this Form 10-Q or to reflect the
occurrence of unanticipated events.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity. Com21 maintains an investment portfolio
consisting mainly of government and corporate debt obligations purchased
with an average maturity of less than one year. These available-for-sale
securities are subject to interest rate risk and will fall in value if
market interest rates increase. If market interest rates were to increase
immediately and uniformly by 10% from levels at June 30, 2000, the fair
value of the portfolio would decline by an immaterial amount. We
generally have the ability to hold our fixed income investments until
maturity and therefore we would not expect our operating results or cash
flows to be affected to any significant degree by the effect of a sudden
change in market interest rates on our securities portfolio.
Com21 is also exposed to market price risk on investments in a marketable
equity securities held as available-for-sale investments. These
investments are in the volatile high-technology industry sector. A 50%
adverse change in the equity price would result in an approximate $1.8
million decrease in the fair value of the investments in the marketable
equity securities as of June 30, 2000.
Com21 has fixed rate debt of approximately $559,000 as of June 30, 2000,
that have no interest rate risk. The fixed rate on such obligations was
approximately 13% during the second quarter of 2000.
PART II: OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities and Use of Proceeds
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
The following proposals were voted upon by the Company's stockholders at
the Annual Stockholders' Meeting held on May 25, 2000:
1. The following persons were elected as directors of the Company to
serve until the 2001 Annual Stockholders' Meeting and until their
successors are elected and qualified with the votes indicated beside
their respective names:
Schedule of votes cast for each director:
Votes For Votes Withheld
Peter D. Fenner 19,989,707 230,596
Paul Baran 19,997,159 223,144
C. Richard Kramlich 19,994,722 225,581
Jerald L. Kent 19,997,732 222,571
Robert C. Hawk 19,997,525 222,778
Daniel J. Pike 19,997,832 222,471
James Spilker Jr. 19,946,912 273,391
Robert W. Wilmot 19,858,152 362,151
2. A proposal to approve an amendment to Com21's Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 40,000,000 to 160,000,000 shares was approved by the vote of
15,072,530 shares for; 5,122,229 shares withheld or voted against the
proposal; and 25,544 shares abstained.
3. A proposal to approve the implementation of the Com21, Inc. 2000
Stock Option Plan pursuant to which 1,500,000 shares of Com21's Common
Stock will be reserved for issuance to individuals in Com21's service,
including officers, employees, Board members, and independent accountants
was approved by the vote of 9,230,546 shares for; 3,545,636 shares
withheld or voted against the proposal; 33,280 shares abstained; and
7,410,841 shares broker non-vote.
4. A proposal to approve an additional 450,000 shares of common stock to
the Company's 1998 Employee Stock Purchase Plan was approved by the vote
of 11,672,967 shares for; 1,112,552 shares withheld or voted against the
proposal; 23,943 shares abstained; and 7,410,841 shares broker non-vote.
5. A proposal to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31,
2000 was approved by the vote of 20,168,237 shares for; 26,717 shares
withheld or voted against the proposal; and 25,349 shares abstained.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit
Number Description
27.1 Financial Data Schedule
b) Reports on Form 8-K
The Company filed a report with the SEC on Form 8-K on April 18,
2000 to announce the acquisition of GADline. Ltd.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Com21, Inc.
Date: August 14, 2000 By: /s/ David L. Robertson
_________________ _________________________
David L. Robertson
Chief Financial Officer
Vice President, Finance