1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 1, 1997 .
--------------------------------
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
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Commission file number 0-17168 .
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FASTCOMM COMMUNICATIONS CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1289115 .
- --------------------------------- --------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
45472 Holiday Drive
Sterling, Virginia 20166
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(Address of principal executive offices, Zip code)
(703) 318-7750
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(Registrants telephone number, including area code)
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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. Yes X . No .
----- -----
As of March 6, 1997, there were 10,037,318 shares of the Common Stock, par
value $.01 per share, of the registrant outstanding.
No exhibits are filed with this report, which consists of 13 consecutively
numbered pages.
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FASTCOMM COMMUNICATIONS CORPORATION
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Statements of Operations
Fiscal quarter and three fiscal quarters ended
February 1, 1997 and February 3, 1996 . . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets
February 1, 1997, and April 30, 1996 . . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows
Fiscal quarter and three fiscal quarters ended
February 1, 1997 and February 3, 1996 . . . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements . . . . . . . . . . . . .6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(Page 2 of 13)
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FASTCOMM COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Fiscal quarter ended Three fiscal quarters ended
--------------------------------- --------------------------------
February 01, February 03, February 01, February 03,
1997 1996 1997 1996
------------ ------------ ------------ -----------
Revenue $2,358,065 $3,050,895 $7,796,470 $6,292,148
Expenses
Cost of sales 1,059,744 1,489,821 3,461,559 3,124,341
Selling, general and administrative 1,093,000 1,001,217 3,447,925 3,046,075
Research and development 532,156 350,136 1,397,401 989,346
Depreciation and amortization 63,713 58,555 197,184 199,274
In process research and development 75,000 75,000
------------ ------------ ------------ -----------
Income (loss) from operations (465,548) 151,166 (782,599) (1,066,888)
Other income (expense)
Other income (1,912) 19,572 19,400 21,524
Interest income 23,347 39,933 99,137 97,831
Interest expense (573) (4,527) (10,469) (19,863)
------------ ------------ ------------ -----------
Net income (loss) ($444,686) $206,144 (674,531) ($967,396)
=========== =========== ============ ===========
Earnings (loss) per share
Primary ($0.04) $0.02 ($0.07) ($0.10)
Fully diluted ($0.04) $0.02 ($0.07) ($0.10)
Weighted average number of shares
Primary 10,022,824 9,780,384 9,902,004 9,478,959
Fully diluted 10,022,824 9,780,384 9,902,004 9,478,959
See accompanying notes to unaudited consolidated financial statements
(Page 3 of 13)
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FASTCOMM COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
February 01, April 30,
1997 1996
-------------- -------------
(unaudited)
Current assets
Cash and cash equivalents $2,428,023 $3,807,855
Accounts receivable, net 2,700,662 2,371,149
Inventories, net 2,828,506 1,732,151
Prepaid and other 306,912 244,125
------------ -----------
8,264,103 8,155,280
Property and equipment, net 669,423 435,952
Software license, rights and other intangibles 183,189 255,856
Goodwill 510,262
Other assets 216,456 186,774
------------ -----------
$9,843,433 $9,033,862
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long term debt $137,756 $130,585
Accounts payable 1,452,229 1,637,635
Accrued payroll 115,844 159,091
Other current liabilities 353,401 226,205
------------ -----------
2,059,230 2,153,516
Long term debt 104,985
------------ -----------
2,164,215 2,153,516
------------ -----------
Shareholders' equity
Common stock, $.01 par value, 100,373 97,866
(25,000,000 shares authorized; 10,037,318 and
9,786,619 issued and outstanding)
Additional paid in capital 16,079,359 14,608,463
Accumulated deficit (8,500,514) (7,825,983)
------------ -----------
Total shareholders' equity 7,679,218 6,880,346
------------ -----------
$9,843,433 $9,033,862
============ ===========
See accompanying notes to unaudited consolidated financial statements
(Page 4 of 13)
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FASTCOMM COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Fiscal quarter ended Three fiscal quarters ended
--------------------------------- ------------------------------
February 1, February 3, February 1, February 3
1997 1996 1997 1996
-------------- --------------- ------------- --------------
Operating activities
Net income (loss) ($444,686) $206,144 ($674,531) ($967,396)
Items not affecting cash
Depreciation and amortization 63,713 58,555 197,184 199,274
Provision for doubtful accounts (30,681) (27,600) 20,007 (2,675)
Provision for inventory obsolescence (15,000) 40,463 (15,000) 110,463
Settlement in litigation (21,570) (21,570)
Changes in assets and liabilities, net of acquisition
Accounts receivable (418,791) (1,018,068) (49,000) (1,448,008)
Inventories 882,229 (27,468) (815,305) (86,995)
Prepaid and other current assets (50,201) (48,314) (53,216) (39,133)
Other non current assets 42,557 (6,772) 39,849 (58,484)
Accounts payable and accrued liabilities (729,258) 206,543 (336,448) 503,113
Other current liabilities 113,078 (78,407) (63,805) (55,444)
------------ ------------ ----------- ------------
Net cash used by operations (587,040) (716,494) (1,750,265) (1,866,855)
------------ ------------ ----------- ------------
Investing activities
Additions of property, plant and equipment (122,063) (37,724) (316,940) (198,692)
Purchase of long term investments (69,531)
Reduction of investment collateral (26,131)
Cash provided by acquisition 355,085 355,085
Purchase of intangibles 374,687
------------ ------------ ----------- ------------
Net cash provided (used) by investing activities 233,022 (37,724) (31,386) 149,864
------------ ------------ ----------- ------------
Financing activities
Proceeds from exercise of options 29,785 8,537 473,404 71,224
Repayment of notes payable (71,585) (201,924)
------------ ------------ ----------- ------------
Net cash provided (used) by financing activities 29,785 8,537 401,819 (130,700)
------------ ------------ ----------- ------------
Net decrease in cash and equivalents (324,233) (745,681) (1,379,832) (1,847,691)
Cash and cash equivalents, beginning of period 2,752,256 2,003,336 3,807,855 3,105,346
------------ ------------ ----------- ------------
Cash and cash equivalents, end of period $ 2,428,023 $1,257,655 $2,428,023 $1,257,655
============ ============ =========== ============
See accompanying notes to unaudited consolidated financial statements
(Page 5 of 13)
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FASTCOMM COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements of FastComm
Communications Corporation (the "Company") have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. 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, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's latest Annual Report
on Form 10-K.
In the opinion of Management, the consolidated financial statements reflect all
adjustments considered necessary for a fair presentation and all such
adjustments are of a normal and recurring nature. The results of operations as
presented in this report are not necessarily indicative of the results to be
expected for the fiscal year ending April 30, 1997.
The Company's fiscal year ends on April 30. For interim reporting purposes,
the interim fiscal quarters are closed on the first weekend following the
calendar quarter end date, unless the quarter end date falls on a weekend, in
which case such weekend is used as the interim fiscal quarter end.
The quarter ended February 1, 1997, consisted of 91 calendar days the same as
that of February 3, 1996.
2. BUSINESS ACQUISITION
On January 31, 1997, the Company acquired Comstat Datacomm Corporation,
("CDC"), a Georgia corporation engaged in the data communications business.
The aggregate purchase price amounted to $1,000,000 (subject to post closing
adjustments) consisting of $900,000 funded at closing and an additional
$100,000 of contingent consideration to be funded pending the occurrence of
certain events the outcome of which management believes is determinable beyond
a reasonable doubt. The Company funded this acquisition through the issuance of
146,563 shares of its common stock. An additional 43,985 shares of common
stock with a fair value of approximately $300,000 have been placed in escrow
and will be issued upon CDC achieving certain revenue targets for the fiscal
year ended May 31, 1998. If such revenue targets are not met, the escrow
shares will be canceled.
The acquisition was accounted for as a purchase and, accordingly, the acquired
assets and liabilities were recorded at their estimated fair market values at
the date of acquisition. The purchase price plus costs directly attributable
to the completion of the acquisition have been allocated to the assets and
liabilities acquired. The Company recorded approximately $510,000 in goodwill
related to this transaction. This goodwill will be amortized over a seven year
period.
Approximately $75,000 of the total purchase price represented the value of in
process research and development that had not reached technological feasibility
and was charged to the Company's operations. As this transaction was concluded
on the last business day of the Company's third fiscal quarter, the results of
operations presented herein do not include that of CDC.
3. EARNINGS (LOSS) PER SHARE
Net income (loss) per common share is calculated using the weighted average
number of shares of common stock outstanding and common share equivalents
outstanding for the period. The quarter ended February 1, 1997, and the three
quarters ended February 1, 1997, do not include common share equivalents in
that the inclusion of such equivalents would be antidilutive.
(Page 6 of 13)
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4. INVENTORIES
Inventories are valued at the lower of cost or market and consist of the
following:
February 01, April 30,
1997 1997
------------------------------
Production materials $1,766,367 $1,018,417
Work in process 173,427 176,818
Finished goods 888,712 536,916
------------------------------
$2,828,506 $1,732,151
==============================
At February 1, 1997, inventory includes $190,000 in finished goods and $76,000
in raw materials purchased as part of the acquisition of Comstat Datacomm
Corporation.
5. RELATED PARTY TRANSACTIONS
During the three quarters ended February 1, 1997, the Company sold
approximately $44,000 in product under normal terms and conditions to Newbridge
Networks Corporation, a Canadian telecommunications company. FastComm sells to
Newbridge under net 30 terms with prompt payment discounts. Such terms are
consistent with that of similar customers. Title passes on shipment of
product. Peter C. Madsen, President, Chief Executive Officer and Chairman of
the Board of Directors of FastComm Communications Corporation is a Director of
Newbridge Networks Corporation. The accounts receivable due from Newbridge
totaled $900 at February 1, 1997, and $25,000 at April 30, 1996.
Thomas G. Amon, Director, is a partner in the law firm of Amon & Sabatini.
Payments for services rendered to the Company by Amon & Sabatini in the current
fiscal quarter totaled $1,009 and $81,009 for three quarters ended February 1,
1997.
6. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF RISK
The quarter ended February 1, 1997, includes sales of $899,502, $329,204 and
$309,305 representing, 38%, 14%, and 13%, respectively, of total revenues to
three unrelated third party domestic corporations. As of February 1, 1997,
accounts receivable includes $703,632, $211,649, and $68,294, respectively, due
from these corporations.
On a fiscal year to date basis, sales include $2,002,768 and $1,479,685,
representing 26% and 19% respectively, to two unrelated third party domestic
corporations. As of February 1, 1997, accounts receivable includes $703,632
and $149,553, respectively, due from these corporations.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Details of CDC acquisition: ( Note 2 )
Fair value of assets acquired $1,291,536
Liabilities assumed (291,536)
Stock issued (1,000,000)
-----------
Cash paid -
Cash acquired 355,084
-----------
Net cash provided by acquisition $ 355,084
===========
(Page 7 of 13)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUE
Fiscal quarter ended Three fiscal quarters ended
---------------------------- -----------------------------
February 01, February 03, February 01, February 03,
1997 1996 1997 1996
------------- ------------ ------------- -------------
Sales $2,358,065 $3,050,895 $7,796,470 $6,292,148
Total revenues increased $711,000 (43%) compared with that of the previous
quarter. This increase is primarily attributable to a increase in unit sales
of frame relay access devices ($1,981,000 in the current fiscal quarter as
compared with $1,388,000 in the second fiscal quarter). Increased unit sales of
analog modems ($151,000) further contributed to this quarter over quarter
increase in sales. The quarter ended February 1, 1997, included $137,000 in
revenue derived from the upgrade of previously sold frame relay access devices.
Total revenues decreased $693,000 (23%) when compared with that of the
corresponding quarter in the previous fiscal year. This decrease is primarily
attributable to a decrease in unit sales of frame relay access products
($635,000), a decrease in the sale of data compression products ($161,000),
offset by increased sales of analog modems ($138,000) and the previously
mentioned upgrade revenue.
On a fiscal year to date basis, total revenues increased $1,504,000 when
compared with that of the corresponding period in the previous fiscal year.
This increase is primarily attributable to increased unit sales of frame relay
access devices ($838,000), revenue derived from the upgrade of previously sold
frame relay access devices ($505,000) and increased unit sales of analog modems
($197,000).
The quarter ended February 1, 1997, includes sales of $899,502, $329,204 and
$309,305 representing, 38%, 14%, and 13%, respectively, of total revenues to
three unrelated third party domestic corporations. On a fiscal year to date
basis, sales include $2,002,768 and $1,479,685, representing 26% and 19%
respectively, to two unrelated third party domestic corporations.
A significant portion of the Company's sales are derived from products shipped
against firm purchase orders received in each fiscal quarter and from products
shipped against firm purchase orders released in that fiscal quarter.
Unforeseen delays in product deliveries or the closing of sales, introduction
of new products by the Company or its competitors, supply shortages, varying
patterns of customer capital expenditures or other conditions affecting the
digital access product industry or the economy during any fiscal quarter could
cause quarterly revenue and net earnings to vary greatly.
COST OF GOODS SOLD AND GROSS MARGIN
Fiscal quarter ended Three fiscal quarters ended
-------------------------- -----------------------------
February 01, February 03, February 01, February 03,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Cost of sales $1,059,744 $1,489,821 $3,461,559 $3,124,341
Gross margin 55% 51% 56% 50%
Gross margin is calculated by subtracting cost of sales from sales. Gross
margins during the current fiscal quarter approximated 55%, as compared with
51% for the quarter ended February 3, 1996. The current quarter included
approximately $137,000 in revenue from equipment upgrades. Gross margin on
equipment upgrades is generally greater than that of product sales.
(Page 8 of 13)
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On a fiscal year to date basis, gross margin approximated 56% as compared with
50% for the three fiscal quarters ended February 3, 1996. This 6% improvement
is primarily attributable to $505,000 in sales of equipment upgrades and
software development services both of which yield margins greater than that of
product sales. This improvement is further attributable to reduced component
costs and improved manufacturing efficiencies. The Company continues to focus
on improving its gross margins, however, it can offer no assurance that the
improvement experienced will continue.
SELLING AND GENERAL AND ADMINISTRATIVE EXPENSES
Fiscal quarter ended Three fiscal quarters ended
-------------------------- -----------------------------
February 01, February 03, February 01, February 03,
1997 1996 1997 1996
------------ ------------ ------------ -----------
$ 1,093,000 $1,001,217 $3,447,925 $3,046,075
Selling, general and administrative expenses increased $92,000 or 9% over that
of the corresponding quarter in the previous fiscal year. This increase is
primarily attributable to costs associated with the opening of the Company's
Australasia headquarters ($47,000), sales and marketing staff expansion
($27,000), increased bad debt expense ($72,000), offset by a decline in general
and administrative salary and benefit costs ($26,000) and legal fees ($40,000).
On a fiscal year to date basis, selling, general and administrative expense
increased $402,000 or 13% over that of the corresponding period in the previous
fiscal year. This increase is primarily attributable to increased sales
compensation costs associated with increased year to date sales and sales and
marketing staff expansion ($199,000), increased advertising and promotion costs
($148,000), costs associated with the opening of the Company's Australasia
operation ($109,000), increased bad debt expense ($123,000), offset by a decline
in general and administrative salary and benefit costs ($161,000).
RESEARCH AND DEVELOPMENT EXPENSES
Fiscal quarter ended Three fiscal quarters ended
-------------------------- -----------------------------
February 01, February 03, February 01, February 03,
1997 1996 1997 1996
------------ ------------ ------------ -----------
$532,156 $350,136 $1,397,401 $989,346
Research and development expenditures consist primarily of hardware and
software engineering, personnel expenses, subcontracting costs, equipment,
prototypes and facilities. Such expenditures increased $182,000 or 52% over
that of the corresponding quarter in the previous fiscal year and $408,000 or
41% on a fiscal year to date basis. The increase in such expenses is
primarily attributable to increased labor and material costs and international
travel associated with new product development and new product prototypes.
The markets for the Company's products are characterized by continuing
technological change. Management believes that significant expenditures for
research and development will continue to be required in the future.
LIQUIDITY AND CAPITAL RESOURCES
At February 1, 1997, the Company had $2,428,000 in cash and cash equivalents
including $355,000 in cash acquired with the purchase of CDC. Working capital
amounted to $6,205,000 at February 1, 1997 and increased $123,000 during the
fiscal quarter ended February 1, 1997, and increased $203,000 during the three
fiscal quarters ended February 1, 1997. Such increases reflect the $744,000 in
working capital acquired with the acquisition of CDC. Exclusive of the working
capital attributable to CDC, working capital decreased by $621,000 during the
fiscal quarter ended February 1, 1997, and decreased by $541,000 during the
three fiscal quarters ended February 1, 1997 due principally to the operating
losses incurred in each respective period.
(Page 9 of 13)
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The Company believes it has adequate capital for the foreseeable future to
support its core business. However, the Company anticipates additional funding
requirements to meet future expansion and research and development expenses.
It is anticipated that such funding will be generated by way of additional
placements of debt or equity, through research and development arrangements
funded by third parties and by investments by strategic partners. The Company
can give no assurance as to whether it will be able to conclude such financing
arrangements, or that, if concluded, they will be on terms favorable to the
Company.
THIRD FISCAL QUARTER OF 1997 COMPARED TO THIRD FISCAL QUARTER OF 1996
Cash used by operations decreased from $716,000 in the quarter ended February
3, 1996 to $587,000 in the quarter ended February 1, 1997. The $129,000
decrease is primarily attributable to the $445,000 net loss for the current
quarter as compared to a $206,000 net gain in the third quarter of fiscal 1996;
decreased inventory purchases ($909,000) (net), decreased accounts receivable
balances offset by decreased accounts payable balances.
Cash provided by investing activities totaled $233,000 resulting from the
$355,000 provided by the acquisition of CDC offset by $122,000 in fixed asset
purchases required to develop and produce new products.
THREE FISCAL QUARTERS ENDED FEBRUARY 1, 1997 COMPARED TO THREE FISCAL QUARTERS
ENDED FEBRUARY 3, 1996
Cash used by operations decreased from $1,867,000 in the three fiscal quarters
ended February 3, 1996 to $1,750,000 in the three fiscal quarters ended
February 1, 1997. This $117,000 decrease in cash used in operating activities
is primarily attributable to $675,000 net loss in the period as compared to the
$967,000 net loss in the corresponding period of the prior fiscal year,
improved accounts receivable balances $1,399,000 offset by $729,000 in net
increased inventory expenditures and the pay down of accounts payable
($839,000).
Cash used by investing activities totaled $31,000 in the three fiscal quarters
ended February 1, 1997. The Company utilized $317,000 to purchase fixed assets
required to develop and produce new products. In addition, the Company
utilized $70,000 for investment purposes. This was offset by the $355,000
provided by the acquisition of CDC.
During the three fiscal quarters ended February 1, 1997, the Company generated
$473,000 through the exercise of employee stock options.
INVENTORIES
The Company's inventory balances decreased $882,000 in the current fiscal
quarter (exclusive of the $266,000 in inventory acquired from CDC) and
increased $815,000 on a fiscal year to date basis (exclusive of the inventory
acquired from CDC). The inventory balance as reported includes $266,000 in
inventory purchased as part of the acquisition of CDC. The decrease in the
current fiscal quarter is primarily attributable to the sale, at cost, of raw
materials valued at $679,000 to a turnkey electronics equipment manufacturer.
Under the terms and conditions of the agreement between the Company and this
manufacturer, the Company will repurchase finished product from the
manufacturer.
The fiscal year to date increase in inventory balances is primarily
attributable to increased frame relay product subassemblies. The Company will
use this inventory in the normal course of business in support of future
selling efforts. This increase is offset by decreases in analog modem
inventory ($113,000) and data compression product inventory ($71,000).
The Company currently has recorded a reserve for inventory obsolescence of
$744,000. The specific targets of this reserve are data compression and analog
modem inventories, which have been declining, and inventory acquired from CDC.
The market for the Company's data compression products is in the international
market where circuit costs are higher and the economies offered by compression
are greater. The Company continues to sell analog modems for specialized
applications, however, it has no plans to sell into the consumer market for low
end modems. The Company believes it will be able to ship and/or liquidate its
current inventory levels profitably and that its reserve for inventory
obsolescence and excess inventory is adequate.
(Page 10 of 13)
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SHAREHOLDERS' EQUITY
Shareholders' equity increased $585,000 in the current quarter and increased
$799,000 on a fiscal year to date basis. The changes in shareholders' equity
are attributable to the current quarter and year to date losses offset by
funds generated from the exercise of employee stock options and the issuance of
common stock related to the CDC acquisition.
INCOME TAXES
The Company anticipates its effective tax rate will approximate 3% as the
Company is subject to alternative minimum taxes and expects to be subject to
such tax for the entire fiscal year.
CERTAIN PARTS OF THE FOREGOING DISCUSSION AND ANALYSIS MAY INCLUDE
FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES.
AS A CONSEQUENCE, ACTUAL RESULTS MIGHT DIFFER MATERIALLY FROM RESULTS FORECAST
OR SUGGESTED IN ANY FORWARD-LOOKING STATEMENTS. SEE "MARKETS FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -- CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
(Page 11 of 13)
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The United States Securities and Exchange Commission ("SEC") is currently
conducting a confidential inquiry pursuant to a formal order directing a
private investigation relating to certain prior public disclosures and periodic
reports of the Company. This inquiry, which commenced in September 1994, is
confidential and should not be construed as an indication by the SEC or its
staff that any violations of law have occurred. The Company is cooperating
fully with the SEC Staff. The Company is confident that the inquiry will be
resolved in the near future, although no assurance can be given that such will
be the case.
On April 9, 1996, Gary H. Davison, a former officer and director of the Company
commenced an action in the Circuit Court of Loudon County, Virginia seeking
indemnification for legal fees to be incurred in connection with his testimony
as it relates to the investigation by the SEC. On February 24, 1997, the court
issued an opinion awarding Davison $18,883 in attorneys fees, and certain
costs, in connection with this matter. Davison's additional claim against
FastComm for $56,745 in attorney's fees in connection with obtaining the
indemnification order was reduced to $12,950 by the court. Davison's demand
for advances for future expenses was also denied by the court.
No other material legal proceeding to which the Company is party or to which
the Company is subject is pending and no such proceeding is known by the
Company to be contemplated.
(Page 12 of 13)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
FASTCOMM COMMUNICATIONS CORPORATION
(Registrant)
/s/ Peter C. Madsen
Date: March 17, 1997 By:
-----------------------------
Peter C. Madsen
President, Chief Executive Officer
and Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Mark H. Rafferty
Date: March 17, 1997 By:
-----------------------------
Mark H. Rafferty
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
(Page 13 of 13)