As filed with the Securities and Exchange Commission on February 13, 2002
Registration No. 333 _____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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 or organization) Identification Number)
45472 HOLIDAY DRIVE
DULLES, VIRGINIA 20166
TELEPHONE: (703) 318-7750
(Address, including zip code and telephone number, including area code,
of principal executive offices)
MARK H. RAFFERTY COPIES TO:
CHIEF FINANCIAL OFFICER THOMAS G. AMON, ESQ.
FASTCOMM COMMUNICATIONS CORPORATION ROBERT D. MIKLAUTSCH, ESQ.
45472 HOLIDAY DRIVE SOKOLOW, DUNAUD, MERCADIER & Carreras LLP
DULLES, VIRGINIA 20166 770 LEXINGTON AVE, SIXTH FLOOR
TELEPHONE: (703) 318-7750 NEW YORK, NEW YORK 10021
(Name, address and telephone number TELEPHONE: (212) 935-6000
of agent for service) (Counsel for Registrant)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered pursuant
to a dividend or interest reinvestment plans, please check the following box.
[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed maximum Proposed maximum
Title of Shares to be registered Amount to be offering price per aggregated offering Amount of
registered (1) share(2) price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
Common Shares, par value $.01 per share 14,429,883 $0.15 $2,164,482 $517.00
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
(1) Shares of common stock that may be offered pursuant to this
Registration Statement include an estimated 9,900,000 shares
of common stock issued or to be issued to former creditors of
Cronus Technology in connection with the settlement of two
lawsuits. Pursuant to Rule 416 under the Securities Act, this
Registration Statement also covers an indeterminate number of
additional shares as may be issued as a result of adjustments
by reason of any stock split, stock dividend or similar
transaction.
(2) Estimated solely for the purpose of calculating the amount of
the registration fee and based on the average of the high and
low prices for the Company's common stock as reported on the
OTC Bulletin Board on February 8, 2002 in accordance with Rule
457(c) under the Securities Act of 1933
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
FASTCOMM COMMUNICATIONS CORPORATION
PROSPECTUS
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SELLING STOCKHOLDERS MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
14,429,883 Shares
FASTCOMM COMMUNICATIONS CORPORATION
COMMON STOCK
This Prospectus relates to 14,429,883 shares (the "Shares" or
the "Offered Shares") of common stock, par value $.01 per share (the "Common
Stock"), of FastComm Communications Corporation, a Virginia corporation (the
"Company" or "FastComm"). The Offered Shares include Shares issued to (i) Wesley
Clover Corporation upon the exercise of its warrant on December 20, 2001; (ii)
shares to be issued to three former creditors of Cronus Technologies Corporation
(see Selling Stockholders) in connection with settlement of two lawsuits and
(iii) shares issued to officers and private investors.
The selling Stockholders listed on page 11 of this prospectus
are offering and selling up to 14,429,883 shares of our common stock. The
selling Stockholders may offer and sell some, all or none of the common stock
under this prospectus. The selling Stockholders may determine the prices at
which they will sell such common stock, which may be at market prices prevailing
at the time of such sale or some other price. In connection with such sales, the
selling shareholders may use brokers or dealers, which may receive compensation
or commission for such sales. We will not receive any of the proceeds from the
sale of our common stock by the selling Stockholders.
Our common stock is publicly traded on the OTC Bulletin Board
under the symbol "FSCX.0B". On February 8, 2002, the closing sales price for one
share of our common stock on the Nasdaq Bulletin Board was $.15 per share.
THE PURCHASE OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 6 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF OUR COMMON STOCK FROM THE SELLING
STOCKHOLDERS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE NOT,
AND THE SELLING STOCKHOLDERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE SELLING
STOCKHOLDERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE
FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
The date of this Prospectus is __________ , 2002
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Securities Exchange Act of 1934. As required by the Securities Exchange Act, we
file reports, proxy statements and other information with the SEC. The reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at regional offices of the SEC at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. In addition,
we are required to file electronic versions of these documents through the SEC's
Electronic Data Gathering, Analysis and Retrieval System (EDGAR). The SEC
maintains a World Wide Web site at www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549. The common stock is
quoted on the Nasdaq OTC Bulletin Board Market. Information regarding the
trading of our common stock on the Nasdaq OTC Bulletin Board Market can be
obtained from Nasdaq, 9801 Washingtonian Boulevard, Gaithersburg, Maryland 20878
(202) 496-2500).
We have filed with the SEC a Registration Statement on Form
S-3 under the Securities Act of 1933 with respect to the securities being
offered by this Prospectus. As permitted by the rules and regulations of the
SEC, this prospectus does not contain all the information set forth in the
Registration Statement. For further information with respect to us and the offer
and sale of the securities, reference is made to the Registration Statement.
Statements contained in this prospectus concerning the provisions of documents
filed with the Registration Statement as exhibits are necessarily summaries of
those documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable document filed with the SEC. The
Registration Statement may be inspected without charge at the public reference
facilities of the SEC at the addresses contained in the preceding paragraph and
copies of all or any part thereof may be obtained form the SEC at prescribed
rates.
CERTAIN INFORMATION WE ARE INCORPORATING BY REFERENCE
The SEC allows us to "incorporate by reference" the documents
we file with it, which means that we can disclose important information to you
by referring you to those documents instead of reproducing that information in
this prospectus. The information incorporated by reference is considered to be
part of this prospectus, and information in documents that we file later with
the SEC will automatically update and supersede information in this prospectus.
We incorporate by reference the following documents:
1. Our Annual Report on Form 10-K for the fiscal year ended
April 30, 2001, filed with the Commission on July 30,
2001 pursuant to Section 13(a) of the 1934 Act;
2. Our Quarterly Reports on Form 10-Q for the fiscal quarter
ended July 28, 2001 and October 27, 2001, filed with the
Commission on September 12, 2001 and December 11, 2001
respectively pursuant to Section 13(a) of the 1934 Act;
3. Our current report on Form 8-K filed with the SEC on June
12, 2001;
4. The description of the Company's Common Stock registered
under the 1934 Act contained in the Company's Form 8-A
filed with the Commission on September 8, 1988, including
any amendments or reports filed for the purpose of
updating such description.
Upon request, FastComm will provide without charge to each
person to whom a copy of this prospectus has been delivered a copy of any
information that was incorporated by reference in the prospectus (other than
exhibits to documents, unless the exhibits are specifically incorporated by
reference into the prospectus). FastComm will also provide upon request, without
charge to each person to whom a copy of this prospectus has been delivered, a
copy of all documents filed from time to time by FastComm with the SEC pursuant
to the Securities Exchange Act of 1934. Requests for copies should be directed
to:
FastComm Communications Corporation
45472 Holiday Drive, Suite 3
Dulles, VA 20166
Telephone: (703) 318-7750
3
In addition to the documents listed above, we also incorporate
by reference any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, including any filings
after the date of initial filing and prior to the effectiveness of the
registration statement of which this prospectus is a part, until we have sold
all of the offered securities to which this prospectus relates or the offering
is otherwise terminated.
You should rely only on the information incorporated by
reference or provided in this prospectus and any prospectus supplement. We have
authorized no one to provide you with different information. The selling
shareholders are not authorized to make an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of this prospectus or the applicable
prospectus supplement.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus constitute
forward-looking statements that involve substantial risks and uncertainties. In
some cases, you can identify these statements by forward-looking words such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate"
or "continue" and variations of these words or comparable words. In addition,
any statements which refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and situations that may cause our or our industry's actual
results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. The risk factors
contained in this prospectus, as well as any other cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ from the expectations described or implied in our
forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Except as required by law, we do not undertake to update or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise.
We undertake no obligation to release publicly any revisions
to the forward -looking statements to reflect events or circumstances after the
date hereof or to reflect unanticipated events or developments.
SUMMARY DESCRIPTION OF OUR BUSINESS
INTRODUCTION
- ------------
The Company designs, develops and manufactures signaling protocol conversion
products that bridge the gaps that exist between incompatible communications
networks, integrated access devices that serve as advanced voice/data/video/data
convergence routers for enterprise and carrier users and protocol converters
specifically designed for Unisys environments. FastComm also provides advanced
Internet protocol (IP) and data solutions over Frame Relay as well as voice/data
integrated access devices (IAD's) and data routers.
The Company's goal is to provide customers with leading edge technology and a
cost-effective means of incorporating these technologies into existing or new
networks. FastComm is positioning itself in the evolving converged networks with
a customer base that includes domestic and international corporations, carriers,
internet service providers, competitive local exchange carriers, State and
Federal government agencies as well as other telecommunications manufacturers.
The Company targets business customers and designs its products for volume sales
through third party resellers such as network product and service dealers,
systems integrators, telephone carriers and original equipment manufacturers.
These resellers form a primary distribution channel for the Company and also
provide installation and maintenance support services.
The Company was incorporated as MicroTel, Inc. under the laws of the
Commonwealth of Virginia in May 1983. The Company changed its name to Data Safe
Incorporated in February 1984; to Electronic Vaults, Inc., in August 1984; and
to FastComm Communications Corporation, in October 1987.
During the fiscal year ended April 30, 1997, the Company acquired Comstat
Datacomm Corporation, ("CDC or Comstat"), a Georgia corporation engaged in the
data communications business.
4
On March 31, 2000, the Company completed its acquisition of substantially all of
the assets and certain liabilities of Cronus Technology, Inc., ("Cronus") a
privately held Illinois corporation that designs, manufactures and sells
signaling protocol conversion solutions to the telecommunications industry.
The Company's shares are quoted on the OTC Bulletin Board under the symbol
FSCX.OB.
FASTCOMM'S SUITE OF PRODUCTS INCLUDE:
SIGNALING GATEWAY PRODUCT FAMILY
- --------------------------------
The FastComm line of signaling gateways bridges the gap between incompatible
communications networks, enabling seamless communication between in-band to
in-band, in-band and out-of-band networks and out-of-band to out-of-band SS7,
ISDN, and xGCP networks. There are 5 products in the signaling gateway product
line:
o SIGNALPATH(TM) 230 (SP-230) is a 52 T1/E1 signaling gateway allowing
communication between in-band and out-of-band networks or between networks
supporting different out-of-band protocols. As a signaling gateway supporting
multiple national SS7 and in-band variants, the SP-230 could extend the
softswitch architecture to foreign markets immediately.
o SP-201 is a 4 T1/E1 variant of the SP-230.
o R2 ADAPTER is a new low cost signaling appliance designed to enable PABX and
IP/PABX vendors to penetrate international markets where the need for protocol
conversion is the greatest.
o TSC-100 is a 24 T1/E1 signaling gateway allowing communication between
different variants of in-band signaling.
o MUX-100 is an analog to digital converter. Protocol conversion is an available
option.
INTEGRATED ACCESS DEVICES (IAD'S) PRODUCT FAMILY
- ------------------------------------------------
Integrated Access Devices aggregate multiple traffic types (i.e. voice/fax, IP,
video, etc.) onto a single access port or circuit. The FastComm IADs consist of
the following two products:
o METROLAN(TM) family of IADs is ideal for remote office/branch office
environments. Supports up to 3 analog voice/fax ports, Ethernet, and up to 3
physical ports with extensive IP/legacy support.
o GLOBALSTACK(TM) is a modular IAD that complements the MetroLAN(TM) for medium
to large and central site environments. Supports up to 60 compressed digital
voice/fax channels or 6 voice interfaces, Ethernet and a variety of serial data
interfaces (i.e. V.35, X.21, V.24, T1/FT1, E1/Nx64kbps, and/or 56/64kbps
CSU/DSUs).
ROUTER/FRAD PRODUCT FAMILY
- --------------------------
This product family is geared toward providing data routing capability for IP
and legacy communications.
o QUICK II(TM) is an integrated router, protocol converter and terminal
server all in one easy to manage compact chassis, for attaching Unisys Poll
Select devices into IP networks.
o MONOFRAD(TM) is a data router supporting a Network and a single User port.
o RINGFRAD(TM) is a data router supporting a Token Ring, a Network port and
up to 4 User ports. oWEBrouter(TM) is a compact, low cost Internet/Intranet
router supporting Ethernet and a single Network port.
o ETHERFRAD(TM) is a family of integrated IP and legacy data routers supporting
Ethernet, a Network port and up to 5 User ports.
SIGNALPATH 230
The SignalPath 230 (SP 230) is an advanced signaling protocol converter designed
to solve signaling compatibility problems that exist between communications
networks. Different types of communications protocols, both in-band and
out-of-band, exist globally making communications between such networks
impossible. The SP 230 breaks down the communications barriers presented by
these different protocols and enables a seamless flow of signaling information
across any network. The SP 230 can interface with switches and gateways provided
by Cisco, Lucent, Nortel, Siemens, Ericsson, Alcatel and others. As a signaling
gateway supporting multiple national SS7 and in-band variants, the SP-230 could
extend the softswitch architecture to foreign markets immediately.
5
In May, 2001, FastComm announced the SignalPath Release 7 software which
significantly increases performance and system availability in its SignalPath
Signaling Gateway product line. Release 7 has more capacity and supports higher
calling volumes which in turn means more revenues for carriers who use the
Signaling Gateway product in their networks. This release lays the foundation
for future products aimed at supporting large capacity switch vendors who are
looking to replace entirely the circuit-switch technology used by incumbent
telecom providers with packet network technologies.
R2 ADAPTER
In June 2001, the Company introduced the R2 Adapter, a small low cost signaling
appliance designed for PABX and IP/PABX vendors, small carriers and specific
application providers (such as video conferencing) who want to quickly penetrate
international markets where signaling conversion is required. Using existing
FastComm technology, the R2 Adapter is equipped to handle multiple
country-specific R2 variants that are deployed throughout the world. The R2
Adapter architecture positions the product for future Internet Protocol (IP), R2
to ISDN signaling conversion and IP based PABX applications.
METROLAN
The MetroLAN router combines analog voice from switches, PBXs, key systems,
telephones, and the public telephone network with LAN/legacy data & multimedia
and transports it over switched or dedicated digital networks. MetroLAN
satisfies the needs of small office/branch offices that require optimum phone
line performance. With FastComm's routing software, three analog voice ports,
two data equipment serial interfaces and an Ethernet port, the MetroLAN is the
perfect solution for voice/fax/data and video applications. The MetroLAN is
compliant with FRF.11, supporting voice compression (with silence suppression)
which allows up to 3 compressed voice channels to be transported in less than
30Kbps. Bandwidth is dynamically allocated between voice/video/data so that LAN
traffic may continually adapt to fill the unused bandwidth.
i) GLOBALSTACK
The GlobalStack-EX voice/fax/data/video router combines digital and analog voice
from switches, PBXs, key systems, and remote telephones with LAN/legacy data and
transports it over switched or dedicated digital networks. With digital T1, E1,
ISDN BRI and PRI interfaces, frame relay interfaces for data equipment, an
Ethernet port, and FastComm's routing software, the GlobalStack-EX is the
perfect solution for integrating voice/fax/data and multimedia throughout the
enterprise network. The GlobalStack-EX satisfies large regional and central site
office and POP locations where a confluence of communication mediums converge.
The GlobalStack-EX is compliant with FRF.11, supporting voice compression (with
silence suppression) and allows up to 30 voice channels to be transported in
less than 300Kbps. Bandwidth is dynamically allocated between voice/video/data
so that LAN traffic may continually adapt to fill the unused bandwidth.
ii) QUICK PRODUCT LINE
The Quick II targets Unisys A and C-series mainframe customers who have been
using legacy CP2000 equipment. Unisys sells and supports the Quick II to
customers who require cost-effective network solutions for communication between
legacy mainframe, peripheral and LAN applications. FastComm supports over 100
protocol variations which legacy equipment users depend on for seamless
operations.
NEW PRODUCT DEVELOPMENT
- -----------------------
The Company invests heavily in research and development and expects such
investment to continue.
Recorded expenses for research and development have been as follows:
Fiscal year 2001 $5,684,000 51% of revenue
Fiscal year 2000 $2,966,000 46% of revenue
Fiscal year 1999 $2,388,000 51% of revenue
The Company's ability to anticipate changes in technology, industry standards
and communications service provider offerings, and its ability to develop and
introduce new and enhanced products on a timely basis that are successful in the
market will be a significant factor in the Company's competitive position and in
its prospects for growth. Management believes that the future success of the
Company depends on its ability to continue to enhance its products, improve
product performance and functionality and to develop new products that address
emerging markets. Management believes that significant expenditures for research
and development will continue to be required.
6
To bring a product to market quickly, any design may be done entirely
internally, externally, jointly with another firm, or from licensed technology.
Larger companies, with greater engineering resources and more internal
expertise, may be able to develop a larger portion of their products without
outside technology. Elimination of licensing fees or royalties could provide
them a cost advantage.
Research and development project schedules for high technology products are
inherently difficult to predict, and there can be no assurance that the Company
will achieve its expected initial shipment dates of products in development. The
timely availability of new and enhanced products is critical to the success of
the Company. Delays in availability of these new products, or lack of market
acceptance of such products, could adversely affect the Company.
SIGNALING OPPORTUNITIES
In May 2001, FastComm announced the SignalPath Release 7 software, which
increases performance and system availability in its SignalPath Signaling
Gateway product line. Release 7 software has more capacity and supports higher
calling volumes, which in turn means more revenues for carriers who use the
Signaling Gateway product in their networks. This release lays the foundation
for future products aimed at supporting large capacity switch vendors who are
looking to replace entirely the circuit-switch technology used by incumbent
telecom providers with packet networks. The potential market for such products
is quite large, and worldwide revenues are expected to expand from approximately
$700 million in 2001 to $7 billion in 2004 according to market research
estimates.
The competitive environment that exists in the telecommunications marketplace
today dictates that the telecommunications carriers and Internet Service
Providers must seek additional revenue sources. Voice over Internet protocol
(VoIP) offers unparalleled scalability, flexibility and economy. For this
reason, telecommunications carriers are reselling carrier grand IP telephony
services purchased from business to business outsource providers. A problem
exists in that the VoIP vendors are often limited in terms of supporting
traditional signaling protocols. The Company's SignalPath 230 Signaling Gateway
networks that employ protocols not directly supported by the VoIP network.
Worldwide, VoIP networks carried less than 1% of the number of calls made during
calendar year 2000, however it has been estimated that 40% of large corporations
have some sort of VoIP testing underway. Based on this market data, the Company
believes that VoIP will continue to offer revenue opportunities in the future.
PABX OPPORTUNITIES
In June 2001, the Company introduced the R2 Adapter, a small low cost signaling
appliance designed to enable PABX vendors to penetrate international markets
where signaling conversion is required. Next generation IP based PABX's are
software driven and far more flexible and cheaper to administer than traditional
PABX's. According to an independent research report, the market for the IP based
PABX's is significant and is expected to grow from $200 million today to $4
billion over the next four years. Currently, some PABX vendors, due to signaling
incompatibilities, cannot sell IP based PABX's in parts of the world that employ
an R2 signaling variant. The R2 Adapter resolves this incompatibility issue and
opens large marketplaces that deploy R2, such as Latin America, the Middle East,
Africa and parts of Southeast Asia, to these vendors. The IP/PABX vendors will
generally sell one R2 Adapter for every IP based PABX sold. There is a very
limited number of suppliers with competing products in the marketplace and
accordingly, the Company anticipates future revenue from this product.
CERTAIN RISK FACTORS
Before you invest in shares of our common stock, you should be
aware that there are various risks involved in an investment, including those
described below. We urge you to carefully consider these risk factors, together
with all of the other information included in this prospectus and the
information incorporated in this prospectus by reference, before you decide to
invest in shares of our common stock. In addition, this Prospectus and the
documents incorporated herein by reference contain certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such forward-looking statements, which are often
identified by words such as "believes", "anticipates", "expects", "estimates",
"should", "may", "will", and "similar" expressions, represent the Company's
expectations or beliefs concerning future events. Numerous assumptions, risks
and uncertainties, including the factors set forth below, could cause actual
results to differ materially from the results discussed in the forward looking
statements.
7
LACK OF LIQUIDITY
THE COMPANY CONTINUES TO EXPERIENCE SEVERE CASH FLOW PROBLEMS RESULTING FROM
REDUCED SALES, SLOW COLLECTIONS AND ECONOMIC RECESSION. FURTHER, THE COMPANY'S
INDEPENDENT AUDITORS HAVE INCLUDED A PARAGRAPH IN THEIR OPINION WHICH INDICATES
THAT, BASED ON RECENT OPERATING LOSSES, ALONG WITH EXISTING WORKING CAPITAL AND
ACCUMULATED DEFICITS, THERE IS SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO
CONTINUE AS A GOING CONCERN.
WE HAVE A HISTORY OF LOSSES AND MAY EXPERIENCE FUTURE LOSSES
We have incurred net losses of $12,815,000, $6,817,000.00 and $5,550,000. for
the years ended April 30, 2001, 2000 and 1999, respectively. We incurred a loss
of $2,046,000 for the fiscal quarter ended July 30, 2001 and a $7,998,000 loss
for the quarter ended October 27, 2001. These losses are primarily attributable
to sales levels insufficient to meet the costs associated with the development
and marketing of new products in an emerging technology and to litigation costs
and costs associated with the Chapter 11 Bankruptcy described below. The loss
for the fiscal quarter ended October 27, 2001 included write down of good will.
Sales levels have been negatively impacted due to the broad based decline in
demand for telecommunications equipment. There can be no assurance that the
Company will generate sufficient revenues to meet expenses or to operate
profitably in the future. These losses present a significant risk to our
Stockholders. If we cannot achieve profitability or positive cash flows from
operating activities, we may be unable to meet our working capital and other
payment obligations, which would have a material adverse effect on our business,
financial condition and results of operation and the price of our common stock.
In addition, if we cannot return to sustained profitability we will be forced to
sell all or part of our business, liquidate or seek to reorganize.
WE ARE ENGAGED IN A HIGHLY COMPETITIVE BUSINESS.
The market for networking systems is extremely competitive. In most of the
markets in which we compete our competitors are more established, benefit from
greater market recognition and have greater financial, technological, production
and marketing resources than we do. Competition could become even more intense
if new companies enter the market or if our existing competitors expand their
product lines. We compete on the basis of product features and capabilities,
performance and price. An increase in competition could have an adverse effect
on our operating results, both in terms of lost market share and revenues and
required investments in research and development and sales and marketing in
order to remain competitive. There can be no assurance that we will be able to
make technological advances or that we will have sufficient resources to fund
the necessary research and development, marketing and sales efforts that will
enable us to profitably compete in our markets.
WE RELY ON A LIMITED NUMBER OF KEY EMPLOYEES; EFFECT OF RESTRUCTURING AND
BANKRUPTCY.
Our success depends to a significant degree upon the continued contributions of
our management, marketing, engineering and technical personnel, many of whom
would be difficult to replace. There is intense competition for qualified
personnel in our industry, and there can be no assurance that we will be able to
attract and retain the qualified personnel necessary for the development of our
business. Loss of the services of any of our key employees would be detrimental
to our development. We do not have "key man" life insurance on any of our
officers or directors. The Company commenced a broad restructuring aimed at
achieving profitability and positive cash flow in its fiscal year 2002 by
reducing costs and focusing on market opportunities, which offer the greatest
revenue potential.
The Company has reduced its headcount from 103 to 50 fulltime employees and
consolidated its two Virginia facilities into one. As a result of these and
other cost saving activities, operating expenses have declined by more the $1
million per quarter. One-time charges for these restructuring activities were
reflected in the Company's operating results for its fourth fiscal quarter for
the year ended April 30, 2001.
The Company will require additional funding to meet future working capital needs
and research and development expenses. It is anticipated that such funding will
be generated by way of additional placements of convertible debt or equity,
through investments made by strategic partners and through the exercise of in
the money common stock warrants and options. 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.
The Company has yet to achieve profitability or positive cash flow. There can be
no assurance that the required increased sales and improved operating
efficiencies necessary to return to profitability will materialize. As part of a
program to retain its employees, the Company adopted a program to re-price the
options of its current employees. The Company also re-priced the options issued
to its board of directors and to its chairman of the board. Under the program,
the exercise price of current stock options was changed to $0.22 per share.
8
On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the Federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. As a direct result of this filing, the
Company has suffered the loss of certain key employees. To date, the Company has
been able to refill some of these positions. At this time, the Company is unable
to predict the long-term effect this filing will have on its ability to attract
and retain key employees.
WE MUST BE ABLE TO ADAPT TO CHANGES IN PROTOCOL AND OTHER TECHNOLOGY.
New Data Protocols may be developed that could displace the protocols currently
supported in Company products, requiring additional software development to
sustain the viability of those products. An announcement of such new protocols
could have a negative effect on sales of older designs, as users hesitate to
install equipment based on existing designs until they have evaluated the new
ones. There can be no assurance that the Company would have the necessary
resources, particularly the knowledgeable employees, to implement new protocols
in a timely manner. Such failure to develop adequate products in response to new
technology could adversely affect the Company's profitability. Asynchronous
Transfer Mode (ATM) is a new technology for transmitting digital information,
including voice and data, over a public or private network. Telephone companies
and other operators of public network are deploying ATM in their backbone
segments. If the ATM technology becomes much less expensive, ATM services could
become economically more attractive than frame relay services that currently are
involved in the bulk of the Company's business. If ATM were to become more
popular than frame replay, the Company would need to develop new products,
retrain its employees, and educate its sales and distribution channel partners.
There can be no assurance that the Company will have the resources necessary to
develop appropriate products in a timely manner.
WE MUST INTRODUCE NEW PRODUCTS TO COMPETE.
The Company's future revenue is dependent on its ability to successfully
develop, manufacture and market products. In this regard, future growth is
dependent on the Company's ability to timely and successfully develop and
introduce new products, establish new distribution channels, develop
affiliations with leading market participants which facilitate product
development and distribution, and market existing and new products with service
providers, resellers, channel partners, and others. The introduction of new or
enhanced products requires the Company to manage the transition from older
products in order to minimize disruption in customer ordering patterns, avoid
excessive levels of older product inventories and ensure that adequate supplies
of new products can be delivered to meet customer demand. In addition, as the
technical complexity of new products increases, it may become increasingly
difficult to introduce new products quickly and according to schedule. There can
be no assurance that the Company will successfully manage the transition to new
products or that the Company's research and development efforts will result in
commercially successful new technology and products in the future.
WE WILL NEED TO SEEK ADDITIONAL CAPITAL TO FULFILL OUR BUSINESS PLAN.
At October 27, 2001, the Company had a cash balance of $2,326. During the
current fiscal quarter, working capital deficit increased from $820,000 at July
28, 2001 to $2.3 million at October 27, 2001. At October 27, 2001, the Company
had a current ratio (current asset - current liabilities) of 0.56 to one.
As of the date of this prospectus, the Company has approximately $58,000 in cash
and $200,000 in accounts receivable. The Company is in various stages of
negotiation with several large potential customers as well as potential sources
of financing. The Company can offer no assurance as to the outcome of these
negotiations.
MAY PRIVATE PLACEMENT
In May 2001, the Company raised $3,000,000 through the sale of a 10% senior
secured convertible debenture ("Debenture") to Wesley Clover Corporation. All or
any portion of this Debenture may be converted into shares of common stock of
the Company by dividing the aggregate principle amount converted together with
all accrued but unpaid interest to the date of conversion by $0.446. The entire
debenture plus accrued interest is due and payable in a single installment on
June 8, 2006, unless sooner accelerated or converted into shares of common stock
of the Company. In connection with this investment, the Company also issued
warrants entitling Wesley Clover to purchase 3,363,229 shares of common stock of
the Company for $0.5575 per share. The warrants expire on June 8, 2006 and may
be called for redemption, by the Company, at such time as the bid price of the
Company's shares of common stock remains above $1.12 for 30 consecutive trading
days. On December 20, 2001 Wesley Clover exercised its warrant at a reduced
exercise price of $.22 per share. Wesley Clover purchased 3,363,229 shares for
an aggregate exercise price of $739,910.
9
The Company valued the warrant component of this investment at $525,546 using
the Black-Scholes valuation model, and accordingly, recorded this amount as a
discount. This discount will be amortized into interest expense over the
five-year life of the warrants. Amortization charges to interest expense of
$26,277 have been recorded in the current fiscal quarter. On a fiscal year to
date basis, such charges total $43,795. [update to reflect Wesley Clover Warrant
exercise].
UNEXERCISED WARRANTS
When and if exercised, the unexercised warrants associated with this offering
and other prior offerings and agreements would generate a maximum of $11,135,000
in additional cash for the Company. The Company can give no assurance as to
whether any warrants will be exercised, nor to the amount of cash that will be
generated, if any of these securities are exercised.
ACCOUNTS RECEIVABLE FINANCING AGREEMENT
On February 6, 2001, the company entered into an accounts receivable financing
agreement with Alliance Financial Capital, Inc. Under the terms and conditions
of this agreement, the company can borrow up to the lesser of $3,000,000 or 85%
of eligible accounts receivable, as defined in the agreement. The accounts
receivable financing agreement bears interest at prime rate plus 1.0% plus an
additional 1.5% per invoice funded. The term of this agreement is for twelve
months with a minimum average daily account balance of $750,000.
The Company will require additional funding to meet future expansion and
research and development expenses. It is anticipated that such funding will be
generated by way of additional placements of equity, through research and
development arrangements funded by third parties, by investments by strategic
partners and through the exercise of in the money common stock warrants and
options. 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.
The Company's ability to make future capital expenditures and fund the
development and launch of new products, are dependent on existing cash and
demands on cash to support inventory for the Company's products and the
Company's return to profitability. The timing and amount of the Company's future
capital requirements can not be accurately predicted, nor can there be any
assurance that debt or equity financing, if required, can be obtained on
acceptable terms. There can be no assurance that the company will have cash
available in the amounts and at the times needed.
SOME COMPONENTS OF OUR PRODUCTS ARE AVAILABLE TO US ONLY FROM A LIMITED NUMBER
OF SUPPLIERS.
Certain components used in our products are currently available from only one
source and other of the components are available from only a limited number of
suppliers. Although we have generally been able to obtain adequate supplies of
components to date, our inability to develop alternative sources if and as
required in the future, or to obtain sufficient sole source or limited source
components as required, could result in delays or reductions in product
shipments. Certain products that are or may in the future be marketed with or
incorporated into our products are supplied by or under development by third
parties. These third parties may be the sole suppliers of such products. While
the Company believes there are a number of suitable manufacturers, there can be
no assurance that current or alternative sources will be able to supply all of
our demands on a timely basis. Also, an unanticipated interruption in supply
could have a short-term effect on our business. It will not be economically
practical for the Company to develop its own manufacturing capacity in the
foreseeable future.
WE ARE DEPENDENT ON PATENTS AND PROPERTY RIGHTS TO PROTECT OUR POSITION IN THE
INDUSTRY.
The Company's success depends in part upon its technological expertise and
proprietary product designs. The Company relies upon its trade secret protection
efforts and, to a lesser extent, upon patents and copyrights to protect its
proprietary technologies. There can be no assurance that these steps will be
adequate to deter misappropriation or infringement of its proprietary
technologies or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Further, given the rapid evolution of technology and uncertainties in
intellectual property law, there can be no assurance that the Company's current
or future products will not be determined to infringe proprietary rights of
others. Should the Company be sued for patent infringement, there can be no
assurance that the Company will prevail, or, if required by such litigation,
that it will be able to obtain the requisite licenses or rights to use such
technology on commercially reasonable terms. In addition, any litigation,
regardless of the outcome, could result in substantial costs to the Company.
10
WE COULD BE AFFECTED BY GOVERNMENTAL RESTRAINTS OR CHANGES IN GOVERNMENTAL
POLICY.
The Company's products are subject to regulation by the Federal Communications
Commission (the "FCC"), and each of the Company's products must typically be
tested before it can be introduced into the market. Any inability of the
Company's products to conform to FCC regulations or any failure of the Company's
products to meet FCC testing requirements could delay the introduction of the
Company's products into the market, impact the Company's relationships with its
OEMs and otherwise adversely affect the Company. Foreign authorities often
establish telecommunications standards different from those in the United
States, making it difficult and more time-consuming to obtain the required
regulatory approvals. Any significant delay in obtaining such regulatory
approvals could have an adverse effect on the Company's operating results.
Furthermore, changes in such laws, regulations, policies or requirements could
affect the demand for the Company's products or result in the need to modify
products, which may involve substantial costs or delays in sales and could have
an adverse effect on the Company's future operating results.
OUR OUTSTANDING SHARES MAY BE DILUTED.
A substantial number of shares of Common Stock are or will be issuable by the
Company upon the exercise of warrants and options which the Company has issued,
which could result in dilution to a Shareholder's percentage ownership interest
in the Company and could adversely affect the market price of the Common Stock.
On February 8, 2002, there were issued and outstanding a total of 33,536,534
shares of Common Stock. If all convertible debentures, warrants and stock
options which the Company has issued were deemed converted and exercised, as the
case may be, as of that date, there would be issuable approximately 65,515,000
additional shares of Common Stock. The sale or availability for sale of a
significant number of shares of Common Stock in the public market could
adversely affect the market price of the Common Stock. The availability to the
Company of additional equity financing, and the terms of any such financing, may
also be adversely affected by the foregoing. The Company currently has
50,000,000 authorized shares. If all outstanding options and warrants are
exercised, the Company may not have sufficient authorized shares to cover such
issuances, in which case it will be forced to seek to increase its shares or
otherwise recapitalize its outstanding shares.
OUR BUSINESS IS SUBJECT TO POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND WE
MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY.
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 quarter. Unforeseen delays
in product deliveries or the closing of sales, introduction of new products by
the Company or its competitors, fluctuations in customer capital expenditures or
other conditions affecting the networking industry or the economy during any
fiscal quarter could cause quarterly revenue and net earnings to vary greatly.
Further, the Company schedules some production of its products and budgets
expenses based on forecasts of sales, which are difficult to predict. The
Company's manufacturing procedures are designed to assure rapid response to
customer demand, but may, in certain circumstances, create risk of excess or
inadequate inventory if orders do not match forecast. Moreover, shortages or
delays in the supply of manufacturing components at shipments at acceptable
prices could adversely affect the Company's ability to meet scheduled product
shipments in any particular quarter, which could materially affect the Company's
operating results. Because a substantial portion of customer orders are filled
within the fiscal quarter of receipt, and because of the ability of customers to
revise or cancel orders and change delivery schedules without significant
penalty, quarter to quarter revenues and, to a greater degree, net earnings, may
be subject to greater variability and less predictability.
WE MUST RESPOND QUICKLY TO TECHNOLOGICAL CHANGES.
The markets for the Company's products are characterized by continuous
technological change, evolving industry standards and frequent product
introductions. Such changes in the market may adversely affect the Company's
ability to sell its products. The Company's ability to anticipate changes in
technology, industry standards and to develop and introduce new and enhanced
products on a timely basis that are successful in the market, will be
significant factors in the Company's competitive position and its prospects for
growth. Moreover, if technologies or standards supported by the Company's
products or carrier service offerings based on the Company's products become
obsolete or fail to gain widespread commercial acceptance, the Company's
business may be adversely affected. As a result, Management believes that
significant expenditures for research and development will be required in the
future. Research and development project schedules for high technology products
are inherently difficult to predict and there can be no assurance that the
Company will achieve its expected initial shipment dates for products in
development. Because timely availability of new and enhanced products is
critical to the success of the Company, delays in availability of these
products, or lack of market acceptance of such products, could adversely affect
the Company.
11
OUR STOCK PRICE MAY BE SUBJECT TO SIGNIFICANT VOLATILITY.
The market for technology stocks has been and will likely
continue to be extremely volatile. The following factors could cause the market
price of our common stock to fluctuate significantly:
- loss of any of our major customers;
- changes in the financial condition of any of our major customers;
- the addition or departure of key personnel;
- variations in our quarterly operating results;
- announcements by us or our competitors of significant contracts,
new products or product enhancements, acquisitions,
distribution partnerships, joint ventures or capital commitments;
- changes in financial estimates by securities analysts;
- sales of common stock or other securities by us or by our
Stockholders in the future
- release and sale of shares of common stock currently held in
escrow;
- any acquisitions, distribution partnerships, joint ventures or
capital commitments;
- the impact of recessions in economies outside the United States;
and
- unexpected changes in regulatory requirements and currency
exchange rates.
SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN THE FUTURE COULD CAUSE OUR
STOCK PRICE TO FALL
Some Stockholders who acquired shares in connection with our
acquisition of Cronus and settlement of related lawsuits may hold a substantial
number of shares of our common stock that have not yet been sold in the public
market. Further, additional shares may become available for sale upon the
conversion or redemption of outstanding convertible subordinated notes and
issuance of shares to former creditors of Cronus (see "Selling Stockholders").
Sales of a substantial number of shares of our Common Stock within a short
period of time in the future could cause our stock price to fall. In addition,
the sale of these shares could impair our ability to raise capital through the
sale of additional debt or stock.
INSIDERS OWN A SUBSTANTIAL NUMBER OF OUR SHARES AND COULD LIMIT YOUR ABILITY
TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS, INCLUDING A CHANGE OF CONTROL
As of February 8, 2002 our executive officers, directors and
entities affiliated with them beneficially owned, in the aggregate,
approximately 15% of our outstanding Common Stock. These Stockholders, if acting
together, would be able to influence significantly all matters required approval
by our Stockholders, including the election of directors and the approval of
mergers or other business combination transactions.
PROVISIONS OF OUR CHARTER DOCUMENTS AND VIRGINIA LAW MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT A CHANGE OF CONTROL.
Provisions of our amended and restated certificate of
incorporation, amended and restated by-laws and Virginia law could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our Stockholders.
OTHER FACTORS AND EVENTS OF SEPTEMBER 11, 2001
The Company further cautions that the factors referred to above and those
referred to as part of particular forward looking statements may not be
exhaustive, and that new risk factors emerge from time to time in its rapidly
changing business. Further, the Company's independent auditors have included a
paragraph in their opinion which indicates that, based on recent operating
losses, along with existing working capital and accumulated deficits, there is
substantial doubt about the Company's ability to continue as a going concern.
The Company does not undertake to update any forward looking statements it may
make or has made on its behalf to reflect changes it its expectations or
assumptions or the risks and uncertainties referred to. Operating results were
impacted in the days and weeks immediately after the tragic events of September
11, 2001. The events of September 11, 2001 resulted in delayed buying decisions
and changes to capital spending plans of may of our customers. We hope that this
phenomenon is short-term and most of the business affected was not necessarily
lost but deferred. Coupled with the general economic slow-down, there can be no
assurance of this, however.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Offered
Shares by the selling Stockholders. If Warrants held by certain of the selling
Stockholders are exercised, we may receive up to $11,135,000 reflecting the
total exercise price of the Warrants (See "Warrant Repricing"). If any or all of
these warrants held by the Selling Stockholders are exercised, we intend to use
the net proceeds for general corporate purposes and for working capital.
12
SELLING STOCKHOLDERS
We are registering the shares in order to permit the selling
Stockholders to offer these shares for resale from time to time. Except for the
ownership of Shares, these selling Stockholders have not had any material
relationship with us within the past three years. The shares being offered were
issued to the selling Stockholders in connection with the settlement of
litigation related to the acquisition of Cronus (the "Settlement") in a private
placement of convertible debentures in May 2001 to Wesley Clover Corporation,
and to certain officers and private investors in private placements.
The table set forth below includes certain information
regarding the beneficial ownership of our common stock by each of the selling
Stockholders as of February 8, 2002 [see footnote 1] and after the offering. The
information provided in the table below assumes that each selling stockholder
will sell all of such stockholder's FastComm common stock being registered
hereby. Our registration of the shares of common stock covered by this
prospectus does not necessarily mean that the selling Stockholders will sell all
or any of the shares. None of the selling Stockholders has, or within the past
three years has had, any position or other material relationship with FastComm
or any of its predecessors or affiliates. Because the selling Stockholders may
sell all or some portion of the shares of common stock beneficially owned by
them, only an estimate (assuming each selling stockholder sells all of their
shares offered hereby) can be given as to the number of shares of common stock
that will be beneficially owned by the selling Stockholders after this offering.
In addition, the selling Stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or from
time to time since the date on which they last provided to FastComm any
information regarding the shares of common stock beneficially owned by them, all
or a portion of the shares of common stock beneficially owned by them in
transactions exempt form the registration requirements of the Securities Act of
1933.
=============================================================================================================
Common Shares
Number of Shares Owned After Offering
Beneficially Owned (1) Common Shares Percentage of
Name of Selling Stockholder Prior to Offering Offered Hereby Number Outstanding
- --------------------------- ------------------ -------------- ------ -----------
- ------------------------------- ----------------------- ---------------------- ------------------------------
CTI Liquidating Trust (2) 1,125,000 1,125,000 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Richard Abrahams Trust (3) 3,300,000 3,300,000 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Wesley Clover Corporation (4) 3,363,229 3,363,229 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Joseph C. Koch 54,033 54,033 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
George Pardonnet 54,033 54,033 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Plymouth Market Group 56,452 56,452 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Peter C. Madsen (5) 2,898,510 100,000 2,898,510 8.4
- -------------------------------------------------------------------------------------------------------------
Mark H. Rafferty (6) 583,976 45,000 583,976 1.7
- -------------------------------------------------------------------------------------------------------------
Gordon Turner 53,500 18,500 153,500 ---
- -------------------------------------------------------------------------------------------------------------
Michael Harmon 88,636 13,636 88,636 ---
- -------------------------------------------------------------------------------------------------------------
Robert Bellick (7) 52,945 3,300,000 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
Chris L. Gust (7) 52,945 3,300,000 - 0 - - 0 -
- -------------------------------------------------------------------------------------------------------------
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes (1) any securities that are or
will become exercisable within the next sixty days, and (2) consideration of
voting or investment power with respect to the securities at issue. Information
with respect to beneficial ownership is based upon information as of February 8,
2002, and assumes that there is outstanding an aggregate of 33,530,534 shares of
common stock, not including treasury shares. Except as otherwise indicated in
the footnotes below, and subject to community property laws where applicable, we
believe, based upon information furnished by selling Stockholders, that the
persons named in this table have sole voting and investment power with respect
to all shares of common stock shown as beneficially owned by them.
(2) On March 31, 2000, the Company acquired substantially all of the assets and
assumed certain liabilities of Cronus Technology Inc. ("Cronus") for
approximately $9,300,000 of the purchase price was funded through the issuance
of 3,700,000 shares of the Company's common stock and approximately $300,000 was
paid in cash. Cronus manufactures and sells telecommunications equipment and
provides consulting services for satellite telecommunications planning. The
purchase and debt assumption agreements related to the Cronus acquisition
obligated the Company to issue up to 1,125,000 additional common shares if the
fair value of its common stock has not reached $7.30 per share prior to the
13
one-year anniversary date of these agreements. These shares were issued to CTI
Telecom Inc. in ______, 2000. In addition to the foregoing adjustment, the
acquisition agreement provided for the adjustment of the purchase price based
upon an audit of Cronus as at December 31, 1999. This audit resulted in a
downward adjustment of net worth and a corresponding reduction of shares due the
former Cronus shareholders by 812,460 shares. An additional 555,000 shares were
placed in escrow pending resolution of any post-closing claims by the Company
against Cronus which total $___________________.
(3) Represents shares to be issued to this trust in settlement of indebtedness
of Cronus owed to the Trust plus accrued interest to March 31, 2000. The
settlement agreement between the Company and the Trust provides for the possible
issuance of additional shares, based upon a calculation of the price per share
of the Company's common stock prior to the effective date of this Registration
Statement. If there is a change in the number of shares, the Company will amend
this Registration Statement by pre-effective amendment. As part of the
Settlement, the trust has agreed to enter into an arrangement with one or more
broker allowing for the orderly sale of these shares.
(4) In May 2001, the Company raised $3,000,000 through the sale of a 10% senior
secured convertible debenture to Wesley Clover Corporation. All or any portion
of this Debenture may be converted into shares of common stock of the Company by
dividing the aggregate principle amount converted together with all accrued but
unpaid interest to the date of conversion by $0.446. The entire debenture plus
accrued interest is due and payable in a single installment on June 8, 2006,
unless sooner accelerated or converted into shares of common stock. In
connection with this investment, the Company also issued warrants entitling
Wesley Clover to purchase 3,363,229 shares of common stock of the Company for
$0.5575 per share. The warrants expire on June 8, 2006 and may be called for
redemption, by the Company, at such time as the bid price of the Company's
shares of common stock remains above $1.12 for 30 (thirty) consecutive trading
days.
On December 11, 2001, the Company's Board of Directors approved the
temporary re-pricing of all outstanding warrants to purchase shares of common
stock of the Company. For a limited period of time, warrant holders were given
the opportunity to convert their warrants into common stock at an exercise price
of $0.22 per share. On December 21, 2001, Wesley Clover converted all of its
3,363,229 warrants into common shares of the Company. Wesley Clover is 100%
owned by Terence Matthews who may be deemed to have shared investment power and
shared dispositive power with respect to the Shares owned by or issuable to
Wesley Clover.
(5) Gives effect to 1,005,000 options owned by Mr. Madsen exercisable within
60 days.
(6) Gives effect to 525,556 options owned by Mr. Rafferty exercisable within
60 days.
(7) In January 2001 Messrs Gust and Bellick commenced an action in Cook County
Circuit Court, Chicago Illinois, seeking damages and other relief against the
Company, Cronus and others. The Company settled all claims of Messrs Gust &
Bellick on November 30, 2001. In connection with the settlement, the Company
agreed to issue and register a stated dollar value of shares to be calculated
prior to the effective date of this registration statement (the "Effective
Date"). The amount of shares registered hereby are estimated, and the number of
shares to be and issued and registered may increase or decrease prior to the
effective date of the Registration Statement. If there is a change in the number
of shares, the Company will amend this Registration Statement by pre-effective
amendment. Messrs Gust and Bellick have agreed, as part of the Settlement, to
enter into arrangements with one or more brokers , allowing for the orderly sale
of these shares.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.01 par value per share, of which 33,536,534 shares were outstanding at
February 8, 2002, fully paid and non-assessable prior to this offering. There
were 4,655,631 options outstanding under the Company's Stock Option Plan as at
that date.
COMMON STOCK
The holders of common stock are entitled to one vote for each share
held of record in the election of directors and with respect to all other
matters to be voted on by Stockholders. Holders of shares of common stock do not
have cumulative voting rights. Therefore, the holders of more than 50 percent of
such shares voting for the election of directors can elect all of the directors.
The holders of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of legally available funds. In the event
of liquidation, dissolution or winding up of FastComm Communications
Corporation, the holders of common stock of liquidation, dissolution or winding
up of FastComm Communications, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the common stock. Holders of shares of common stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the common stock. The rights of the
holders of common stock are subject to any rights that may be fixed for holders
of preferred stock, when and if any preferred stock is issued. All of the shares
of common stock currently outstanding are duly authorized, validly issued, fully
paid and non-assessable.
14
WARRANTS AND DEBENTURES
In connection with its reorganization under Chapter 11 of the Federal
Bankruptcy Act, the Company issued debentures, totaling $2,490,357 issued to
unsecured creditors. The debentures are convertible into common stock of the
Company between the first and fourth anniversary of the effective date of the
Plan. The debentures are convertible at the average of the closing price of the
Company's common stock for the ten consecutive trading days ending on the
trading day immediately prior to conversion. The debentures bear interest at
7.5%, payable in common stock of the Company. If not converted sooner, all
debentures must be converted to common stock by April 2003. The Company has the
right, at anytime, to redeem for cash at par value all of the outstanding
debentures plus any accrued interest. Each debenture holder had the additional
right to surrender the entire debenture to the Company on April 12, 2000 and
receive cash equal to 15% of the holder's original allowed claim plus interest.
As at February 8, 2002 there were $732,643 debentures remaining outstanding.
There are currently outstanding 5,148,203 warrants to purchase common
stock. Each warrant entitles the registered holder to purchase one share of our
common stock, $.01 par value, at exercise prices ranging from $0.52 to $7.30 per
share, exercisable at various times until February 27,2006.
In January 2000 the Company issued warrants to purchase 200,000 shares
of its common stock to Kaufman Bros, LLP, an investment banking firm. These
warrants are exercisable at a price of $7.50 per share for a period of three
years and contain standard anti-dilution and other provisions.
On September 8, 2000, the Company completed a Private Placement of
$3,500,000 of its securities with a group of accredited investors represented by
Zanett Securities Corporation ("Zanett") New York, New York, acting as Placement
Agent. The offering consisted of 3,500 Units, each Unit consisting of (i) a
Prepaid Common Stock Purchase Warrant, (the "Prepaid Warrants"), which entitles
the holder thereof to acquire such number of shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), as is equal to One
Thousand Dollars ($1,000) divided by the Exercise Price set forth in the Prepaid
Warrants, and (ii) an additional warrant, to acquire shares of Common Stock (the
"Incentive Warrants"). In addition, the Company granted to the Purchasers, an
option to purchase an additional 3,500 Units on the same terms and conditions
and with such changes as are stated herein exercisable during the period
starting on February 1, 2001 and ending on November 1, 2001 (the "Option"). The
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Prepaid Warrants and the Incentive Warrants are referred to herein as the
"Warrant Shares." The Prepaid Warrants, the Incentive Warrants and the Warrant
Shares are collectively referred to herein as the "Securities" and each of them
may individually be referred to herein as a "Security."
Contemporaneous with the execution and delivery of the Securities
Agreement, the parties entered into a Registration Rights Agreement, pursuant to
which the Company agreed to provide certain registration rights to the owners of
the Warrant Shares and the Placement Warrants under the Securities Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
The Exercise Price of the Prepaid Warrants equals the lower of the
Fixed Exercise Price and the Variable Exercise Price, each in effect as of such
date and subject to adjustment as provided in the Warrant. The "Fixed Exercise
Price" means $2.00 and shall be subject to adjustment as provided in the
Warrant. The "Variable Exercise Price" means, as of any date of determination,
the average of the lowest five (5) Closing Bid Prices for the ten (10)
consecutive trading day period ending on the trading day immediately preceding
the date of determination, provided, however, in no event shall the Variable
Exercise Price exceed the Closing Bid Price on the date of determination
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events during such ten (10) day period), and shall
be subject to adjustment as provided herein.
Each Incentive Stock Purchase Warrant allows the holder thereof to
purchase up to 875,000 shares of the Company's Common Stock at an exercise price
of $2.50 per share. The Incentive Warrants are exercisable for a period of five
years and carry with them other customary terms and conditions including
anti-dilution protection.
Zanett acted as Placement Agent for the offering and received a
Placement Agent fee equal to ten percent (10%) of the purchase price of the sale
of Units and Warrants to purchase up to 437,500 shares of the Company's Common
Stock for an exercise price of $2.50 per share. The Warrants are exercisable for
a period of five years. In addition, Zanett was reimbursed certain costs and
expenses of the offering.
On May 22, 2001, the Company completed a sale of $3,000,000 of its
Convertible Subordinated Secured Debentures (the "Purchaser") to Wesley Clover
Corporation. The sale was made pursuant to a Debenture Purchase and Security
Agreement, also dated as of May 22, 2001 (the "Debenture Purchase Agreement").
15
The principal and accrued interest of the Debentures are convertible,
at any time into fully paid and non assessable shares of the Company's common
stock at a conversion price of $.446 per share, subject to adjustment in the
event of a stock dividend, stock split, combination, reclassification or other
similar event. Principal disbursements of the debenture are to be made in three
tranches. The debentures bear interest at the rate of ten percent (10%) per
annum. The obligations of the Company under Debentures are secured by a security
interest in the assets of the Company, which is expressly prior and subordinate
to the prior payment in full of all Senior Indebtedness of the Company. Senior
Indebtedness is defined to mean the principal of and premium if any, and
interest on all indebtedness of the Company under the existing financing
agreement with Alliance Financial Capital Corporation and its successors and
assigns and any other indebtedness of the Company, which the Company and the
Purchaser specifically agree in writing, shall constitute Senior Indebtedness.
In connection with the sale of the Debentures, the Purchaser was
granted the right, but not the obligation to designate one member to the
Company's board of directors, who shall also be nominated to chair the Audit
committee. In addition, the Purchaser was issued a warrant (the "Warrant") to
purchase 3,363,229 of the Company's common stock at a price of $.5575 per share
(subject to price adjustment in the event of any stock divide, stock split,
combination, reclassification or other similar event). The Warrants are subject
to the right of call by the Company if, for a period of thirty consecutive
trading days prior to a notice of call, the closing price of the common stock is
equal to a greater than $1.12 per share (as adjusted) and no event of default
has occurred under the Debenture Purchase Agreement.
The Debenture Purchase Agreement contains provisions granting to the
Purchaser, certain registration rights, pursuant to which the Company agreed to
provide certain registration rights to the holders of the Debentures and the
Warrants under the Securities Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
On February 26, 2001, the Company completed a Private Placement of
$850,000 of its securities with a group of accredited investors represented by
Zanett Securities Corporation ("Zanett") New York, New York, acting as Placement
Agent. The offering consisted of 850 Unites, each Unit consisting of (i) a
Prepaid common Stock Purchase Warrant, (the "Prepaid Warrants"), which entitles
the holder thereof to acquire such number of shares of the Company's common
Stock, par value $.01 per share (the "Common Stock"), as is equal to One
Thousand Dollars ($1,000) divided by the Exercise Price set forth in the Prepaid
Warrants, and (ii) an additional warrant, to acquire shares of Common Stock (the
"Incentive Warrants"). The shares of Common Stock issuable upon exercise of or
otherwise pursuant to the prepaid Warrants and the Incentive Warrants are
referred to herein as the "Warrant Shares." The Prepaid Warrants, the Incentive
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities" and each of them may individually be referred to herein as a
"Security."
Contemporaneous with the execution and deliver of the Securities
Agreement, the parties entered into a Registration Rights Agreement, pursuant to
which the Company agreed to provide certain registration rights to the owners of
the Warrant Shares and the Placement Warrants under the Securities Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
The Exercise Price of the Prepaid Warrants equals the lower of the
Fixed Exercise Price and the Variable Exercise Price, each in effect as of such
date and subject to adjustment as provided in the Warrant. The "Fixed Exercise
Price" means $.6195 and shall be subject to adjustment as provided in the
Warrant. The "Variable Exercise Price" means, as of any date of determination,
the average of the lowest five (5) Closing Bid Prices for the ten (10)
consecutive trading day period ending on the trading day immediately preceding
the date of determination, provided, however, in no event shall the Variable
Exercise Price exceed the Closing Bid Price on the date of determination
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events during such ten (10) day period), and shall
be subject to adjustment as provided herein.
Each incentive Stock Purchase Warrant allows the holder thereof to
purchase up to 1,372,096 shares of the Company's common Stock for an exercise
price of $0.7744 per share. The Incentive Warrants are exercisable for a period
of five years and carry with them other customary terms and conditions including
anti-dilution protection.
Zanett acted as Placement Agent for the offering and received a
Placement Agent fee equal to 10% of the purchase price of the sale of Units and
Warrants to purchase up to 343,024 shares of the Company's Common Stock for an
exercise price of $.7744 per share. The Warrants are exercisable for a period of
five years. In addition, Zanett was reimbursed certain costs and expenses of the
offering.
16
WARRANT REPRICING
On December 11, 2001, the Company's Board of Directors approved the
temporary re-pricing of all outstanding warrants to purchase shares of common
stock of the Company. For a limited period of time, warrant holders were given
the opportunity to convert their warrants into common stock at an exercise price
of $0.22 per share. On December 21, 2001, Wesley Clover converted all of its
3,363,229 warrants into common shares of the Company.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
Stockholders or their donees, pledgees, transferees and other successors in
interest in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. When used herein, the term "selling Stockholders" refers to all of their
donees, pledgees, transferees and other successors in interest. The shares of
common stock may be sold in one or more of the following transactions:
-- ordinary brokers' transactions, which may include long sales or
short sales effected after the effective date of the registration statement of
which this prospectus is a part;
-- transactions involving cross or block trades or otherwise on The
Nasdaq National Market, any exchange upon which our shares may be traded in the
future, in the over-the-counter market or otherwise;
-- purchases by brokers, dealers or underwriters as principal and
resale by the purchasers for their own accounts pursuant to this prospectus;
-- "at the market" to or through market makers or into an existing
market for the shares;
-- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents;
-- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise); or
-- any combination of the foregoing, or by any other legally available
means.
The shares of common stock described in this prospectus may be sold
from time to time directly by the selling Stockholders. Alternatively, the
selling Stockholders may from time to time offer shares of common stock to or
through brokers, dealers or underwriters who may acquire shares as principals or
agents. In connection with the Settlements, each of Abrahams, Gust & Bellick has
agreed to sell his shares through a registered broker-dealer recommended by the
Company during a set selling period. During the period of any such sales, each
settling party has agreed not to engage in any other sales activity in the
Company's Common Stock, including hedging transactions or short selling. The
selling Stockholders and any broker/dealers or agents that participate in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933. Any profits on the resale of
shares of common stock and any compensation received by any broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. The selling Stockholders will be subject to the
prospectus delivery requirement of the Securities Act of 1933.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather
than pursuant to this prospectus. The selling Stockholders may decide not to
sell all or any of their shares. The selling Stockholders may transfer, devise
or gift such shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, if
applicable, the common stock must be offered or sold only through registered or
licensed brokers or dealers. In addition, in certain jurisdictions, the common
stock may not be offered or sold unless registered or qualified for sale or an
exemption is available and complied with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in a distribution of the common stock offered
hereby may not simultaneously engage in market-making activities with respect to
our common stock for a specified period prior to the start of the distribution.
In addition, each selling stockholder and any other person participating in a
distribution will be subject to the Securities Exchange Act and the rules and
regulations promulgated under the Exchange Act, including Regulation M, which
may limit the timing of purchases and sales of common stock by the selling
Stockholders or any such other person. These factors may affect the
marketability of the common stock and the ability of brokers or dealers to
engage in market-making activities.
17
Upon the Company being notified by a selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act of 1933, disclosing (i) the name of each such selling Stockholder
and of the participating broker-dealer(s); (ii) the number of shares involved;
(iii) the price at which such shares were sold; (iv) the commissions paid or
discounts or concessions allowed to such broker-dealer(s), where applicable; (v)
that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and (vi)
other facts material to the transaction. In addition, upon the Company being
notified by a selling Stockholder that a donee, pledgee, transferee or other
successor in interest intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
All expenses of this registration will be paid by FastComm. These
expenses include the SEC's filing fees and fees under certain state securities
or "blue sky" laws. The selling Stockholders will pay all selling commissions,
if any.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is
being passed upon by Sokolow, Dunaud, Mercadier & Carreras, LLP New York New
York, and Paris France, counsel to the Company. As of April 30, 2001 attorneys
at Sokolow, Dunaud, Mercadier & Carreras LLP owned, in the aggregate 195,251
shares and options to purchase shares of FastComm Communications Common Stock.
EXPERTS
The financial statements incorporated in this registration statement by
reference from the Annual Report on Form 10-K of FastComm Communications
Corporation for the year ended April 30, 2001 have been audited by BDO Seidman,
LLP, independent certified public accountants, as stated in their report (which
contains an explanatory paragraph regarding the Company's ability to continue as
a going concern), which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Cronus Communications, Inc. included in the
Company's Form 8-K and incorporated by reference in this registration statement
have been audited by BDO Seidman, LLP, independent certified public accountants,
as stated in their report (which contains an explanatory paragraph regarding
Cronus Communication's ability to continue as a going concern), which is
incorporated herein by reference and have been so incorporated in reliance upon
the report of such firm given upon the authority of said firm of experts in
accounting and auditing.
18
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION
WHERE AN OFFER OR SOLICITATION IS NOT PERMITTED. NO SALE MADE PURSUANT TO THIS
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF FASTCOMM SINCE THE DATE OF THIS
PROSPECTUS.
-----------------------
FASTCOMM COMMUNICATIONS CORPORATION
-----------------------
14,429,883
SHARES OF
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
19
TABLE OF CONTENTS
PAGE
Where You Can Find Additional information.................................. 3
Certain Information We Have Incorporated by Reference...................... 3
Special Note Regarding Forward Looking Statements.......................... 4
Summary Description of Our Business........................................ 4
Certain Risk Factors....................................................... 7
Use of Proceeds............................................................12
Selling Stockholders.......................................................13
Description of the Securities..............................................14
Plan Distribution..........................................................17
Legal Matters..............................................................18
Experts....................................................................18
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than
underwriting discounts and commissions), which, other than the SEC registration
fee are estimates, payable by the Company in connection with the sale and
distribution of the Shares registered hereby.
================================================================================
SEC registration fee................................. $517.00
- --------------------------------------------------------------------------------
Blue Sky fees and expenses (including legal fees).... $ 2,500*
- --------------------------------------------------------------------------------
Legal fees and expenses.............................. $12,500*
- --------------------------------------------------------------------------------
Accounting fees and expenses......................... $ 2,500*
- --------------------------------------------------------------------------------
Printing expenses.................................... $ 5,000*
- --------------------------------------------------------------------------------
Miscellaneous........................................ $ 2,105*
- --------------------------------------------------------------------------------
Total................................................ $25,000*
================================================================================
* Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS AND EMPLOYEES.
Article Six of the Company's By-Laws, as amended, empowers the
Company to indemnify current or former directors, officers, employees or agents
of the Company or persons serving by request of the Company in such capacities
in any other enterprise or persons who have served by the request of the Company
in such capacities in any other enterprise to the full extent permitted by the
laws of the State of Virginia.
Article Tenth of the Virginia Stock Corporation Act (the
"Act") contains provisions authorizing indemnification by the Company of
directors, officers, employees or agents against certain liabilities and
expenses which they may incur as directors, officers, employees or agents of the
Company or of certain other entities. Section 13.1 - 699 of the Act also
provides that such indemnification may include payment by the Company of
expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
ultimately found not to be entitled to indemnification under the Section.
Indemnification may be provided even though the person to be indemnified is no
longer a director, officer, employee or agent of the Company or such other
entities. Section 13.1 - 703 of the Act also contains provisions authorizing the
Company to obtain insurance on behalf of any such director, officer employee or
agent against liabilities, whether or not the Company would have the power to
indemnify such person against such liabilities under the provisions of the
Section. The Company currently maintains a policy of insurance under which the
directors and officers of the Company are insured, within the limits and subject
to the exclusions and limitations of the policy, against certain expenses in
connection with the defense of actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
The indemnification and advancement of expenses provided
pursuant to Section 13.1 - 699 are not exclusive, and subject to certain
conditions, the Company may make other or further indemnification or advancement
of expenses of any of its directors, officers, employees or agents. Because the
Articles of Incorporation, as amended, of the Company do not otherwise provide,
notwithstanding the failure of the Company to provide indemnification and
despite a contrary determination by the Board of Directors or its Stockholders
in a specific case, a director, officer, employee or agent of the Company who is
or was a party to a proceeding may apply to a court of competent jurisdiction
for indemnification or advancement of expenses or both, and the court may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses if it
determines that the petitioner is entitled to mandatory indemnification pursuant
to Section 13.1 - 698 because he has been successful on the merits, or because
the Company has the power to indemnify on a discretionary basis pursuant to
Section 13.1 - 699 or because the court determines that the petitioner is fairly
and reasonably entitled indemnification or advancement of expenses or both in
view of all the relevant circumstances.
II-1
Section 13.1-692.1 of the Act provides that the damages
assessed against any officer or director arising out of a single transaction,
occurrence or course of conduct shall not exceed the lesser of (1) the monetary
amount specified in the Articles of Incorporation; or (2) the greater of (i)
$100,000 or the amount of cash compensation received by the officer or director
from the corporation for the twelve (12) months immediately proceeding the act
or omission for which liability was imposed. The liability of an officer or
director engaged in willful misconduct or a knowing violation of criminal law or
of any federal or state securities law including without limit of any claim of
unlawful insider trading or manipulation of the market for any security is not
covered by such provision.
The Registration Rights Agreements between the Company and the
Selling Stockholders provides that the Selling Stockholders and, under certain
circumstances, persons participating as underwriters in the offering or sale of
the Common Stock being registered will indemnify and hold harmless the Company
and each director, officer and controlling person of the Company with respect to
any statement or omission in the Registration Statement or the Prospectus based
upon written information furnished to the Company by or on behalf of the Selling
Stockholders or such underwriters, as the case may be, for inclusion therein.
Item 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
THE EXHIBITS LISTED BELOW HAVE BEEN FILED AS PART OF THIS REGISTRATION STATEMENT
--------------------------------------------------------------------------------
2.1 Securities Purchase Agreement by and among FastComm Communications Corporation, and certain Purchasers listed
therein, dated as of February 26, 2001. ***
4.1 Restated Articles of Incorporation of the Company (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.2 Restated By-Laws of the Company, as amended (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.3 Specimen Certificate of Common Stock of the Registrant (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.4 Registration Rights Agreement between the Company and the Purchasers*
4.5 Securities Purchase Agreement dated September 8, 2000 between the Company and a group of Purchasers*
4.6 Prepaid Warrants issued to the Purchasers on September 8, 2000*
4.7 Incentive Warrants issued to the Purchasers on September 8, 2000*
4.8 Placement Agency Agreement between the Company and The Zanett Securities Corporations*
4.9 Debenture Purchase and Security Agreement by and between FastComm communications Corporation and Wesley Clover
Corporation dated as of May 22, 2001. **
4.10 Form of Convertible Subordinated Secured Debenture dated June 8, 2001. **
4.11 Form of Common Stock Purchase Warrant between FastComm Communications Corporation in favor of Wesley Clover
Corporation dated as of June 8, 2001. **
10.1 Registration Rights Agreement made by FastComm Communications Corporation, in favor of the Investors listed
therein, dated as of February 26, 2001. ***
10.2 Form of Prepaid Common Stock Purchase Warrant between FastComm Communications Corporation in favor of certain
Purchasers listed therein, dated as of February 26, 2001.***
10.3 Placement Agency Agreement between FastComm Communications Corporation and Zanett Securities Corporation, dated
February 26, 12001.***
10.4 Form of Stock Purchase and Incentive Stock Purchase Warrant Agreement between FastComm Communications Corporation
and Zanett Securities Corporation and Affiliates and between FastComm and the Purchasers dated February 26, 2001.***
5.1 Opinion on Legality .****
23.1 Consent of BDO Seidman LLP, certified public accountants.
23.2 Consent of Sokolow, Dunaud, Mercadier & Carreras LLP (contained in Exhibit 5.1).****
24.1 Power of Attorney (included within Signature Page II-4)
II-2
- ----------
* Incorporated by reference to the Registrant's current report on Form 8-K
filed with the Securities and Exchange Commission on September 13, 2000.
** Incorporated by reference to the Registrant's current report on Form 8-K
filed with the Securities and Exchange Commission on June 12, 2001.
*** Incorporated by reference to the Registrant's current report filed with the
Securities and Exchange Commission on March 26, 2001.
**** Filed herewith.
Item 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing...[include remainder
of undertaking]; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against pubic
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Dulles, Commonwealth of
Virginia, on this 13th day of February, 2002.
FASTCOMM COMMUNICATIONS CORPORATION
By: /s/ Peter C. Madsen
---------------------------------------------------
Peter C. Madsen, President, CEO and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Mark H. Rafferty and Peter C.
Madsen, and each of them, his true and lawful agent, proxy and attorney-in-fact,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to (i) act on, sign and file with
the Securities and Exchange Commission any and all amendments (including
post-effective amendments) to this Registration Statement together with all
schedules and exhibits thereto, (ii) act on, sign and file such certificates,
instruments, agreements and other documents as may be necessary or appropriate
in connection therewith, (iii) act on and file any supplement to any prospectus
included in this Registration Statement or any such amendment, and (iv) take any
and all actions which may be necessary or appropriate in connection therewith,
granting unto such agents, proxies and attorneys-in-fact, and each of them, full
power and authority to do and perform each and every act and thing necessary or
appropriate to be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming all that such
agents, proxies and attorneys-in-fact, any of them or any of his or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
NAME TITLE DATE
- ---- ----- ----
/S/ PETER C. MADSEN CHAIRMAN OF THE BOARD; CHIEF EXECUTIVE OFFICER FEBRUARY 14, 2002
- --------------------------------------- AND DIRECTOR
PETER C. MADSEN
/S/ MARK H. RAFFERTY VICE PRESIDENT; PRINCIPAL FINANCIAL AND FEBRUARY 14, 2002
- --------------------------------------- ACCOUNTING OFFICER; DIRECTOR
MARK H. RAFFERTY
/S/THOMAS G. AMON DIRECTOR FEBRUARY 14, 2002
- ---------------------------------------
THOMAS G. AMON
/S/MICHAEL PASCOE DIRECTOR FEBRUARY 14, 2002
- ---------------------------------------
MICHAEL PASCOE
II-4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Securities Purchase Agreement by and among FastComm Communications Corporation, and certain Purchasers
listed therein, dated as of February 26, 2001. ***
4.1 Restated Articles of Incorporation of the Company (Previously filed as Exhibit to Form S-18, Reg. No
33-19785)
4.2 Restated By-Laws of the Company, as amended (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.3 Specimen Certificate of Common Stock of the Registrant (Previously filed as Exhibit to Form S-18,
Reg. No 33-19785)
4.4 Registration Rights Agreement between the Company and the Purchasers*
4.5 Securities Purchase Agreement dated September 8, 2000 between the Company and a group of Purchasers*
4.6 Prepaid Warrants issued to the Purchasers on September 8, 2000*
4.7 Incentive Warrants issued to the Purchasers on September 8, 2000*
4.8 Placement Agency Agreement between the Company and The Zanett Securities Corporations*
4.9 Debenture Purchase and Security Agreement by and between FastComm communications Corporation and Wesley
Clover Corporation dated as of May 22, 2001. **
4.10 Form of Convertible Subordinated Secured Debenture dated June 8, 2001. **
4.11 Form of Common Stock Purchase Warrant between FastComm Communications Corporation in favor of Wesley Clover
Corporation dated as of June 8, 2001. **
10.1 Registration Rights Agreement made by FastComm Communications Corporation, in favor of the Investors listed
therein, dated as of February 26, 2001. ***
10.2 Form of Prepaid Common Stock Purchase Warrant between FastComm Communications Corporation in favor of
certain Purchasers listed therein, dated as of February 26, 2001. ***
10.3 Placement Agency Agreement between FastComm Communications Corporation and Zanett Securities Corporation,
dated February 26, 12001. ***
10.4 Form of Stock Purchase and Incentive Stock Purchase Warrant Agreement between FastComm Communications
Corporation and Zanett Securities Corporation and Affiliates and between FastComm and the Purchasers dated
February 26, 2001. ***
5.1 Opinion on Legality. ****
23.1 Consent of BDO Seidman LLP, certified public accountants. ****
23.2 Consent of Sokolow, Dunaud, Mercadier & Carreras LLP (contained in Exhibit 5.1). ****
24.1 Power of Attorney (included within Signature Page II-4)
- ----------
* Incorporated by reference to the Registrant's current report on Form 8-K
filed with the Securities & Exchange Commission on September 13, 2000.
** Incorporated by reference to the Registrant's current report on Form 8-K
filed with the Securities and Exchange Commission on June 12, 2001.
*** Incorporated by reference to the Registrant's current report on Form 8-K
filed with the Securities And Exchange Commission on March 26, 2001.
**** Filed Herewith.
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SOKOLOW, DUNAUD, MERCADIER & CARRERAS LLP
770 Lexington Ave
Sixth Floor
New York, NY 10021
(212) 935-6000
February 14, 2002
FastComm Communications Corporation
45472 Holiday Drive
Dulles, VA 20166
Ladies and Gentlemen:
We have acted as counsel to FastComm Communications Corporation, a
Virginia corporation (the "Company"), in connection with the registration
statement on Form S-3 (No. __________) (the "Registration Statement") pertaining
to the proposed resale by certain shareholders of up to 14,429,883 shares of
common stock, $.01 par value per share (the "Shares"), as described in the
Registration Statement. The Shares were issued or are to be issued in connection
with (i) the acquisition of Cronus Technology, Inc.; (ii) in a private placement
to certain accredited investors, (iii) are issuable upon the exercise of certain
warrants described in the Registration Statement (the "Warrants"); (iv) to a
group of private investors represented by Zanett Securities Corporation and (v)
to three former creditors of Cronus Technology, Inc. in connection with the
Settlement of two lawsuits against the Company. As such counsel, you have
requested our opinion as to the matters described herein relating to the Shares.
All capitalized terms used but not defined herein shall have the meanings
assigned to them in the Registration Statement.
We have examined the Company's certificate of incorporation and
by-laws, in each case as amended or restated through the date hereof; the
agreements related to each of the Warrants (the "Warrant Agreements"); minutes
of the Company's corporate proceedings throughout the date hereof, as made
available to us by officers of the Company; an executed copy of the Registration
Statement and all exhibits thereto in the form filed with the Securities and
Exchange Commission; and such matters of law and such documents and other
instruments as we have deemed necessary by us in order to deliver the within
opinion. In the course of our examination, we have assumed the genuineness of
all signatures, the authority of all signatories to sign on behalf of their
principals, if any, the authenticity of all documents submitted to us as
original documents and the conformity to original documents of all documents
submitted to us as certified or photostatic copies. As to certain factual
matters, we have relied upon information furnished to us by officers of the
Company.
Based on the foregoing and solely in reliance thereon, it is our
opinion that the Shares have been duly authorized, and in the case of shares
underlying the warrants, when they are issued upon exercise of the Warrants,
against payment of the consideration therefore contemplated by the Warrant
Agreements, as the case may be, and sold in the manner described in this
Registration Statement, the Shares will be validly issued, fully paid and
non-assessable.
A member of our firm is a member of the Board of Directors of the
Registrant and owns outright, or has options to purchase 195,251 shares of the
Company's Common Stock.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to it in the prospectus included
therein under the caption "Legal Matters." In giving such consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
SOKOLOW, DUNAUD, MERCADIER & CARRERAS LLP
By:
A member of the Firm
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