<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 2, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _______________TO_______________
Commission File Number: 0-9856
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AM COMMUNICATIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 23-1922958
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Commerce Boulevard, Quakertown, PA 18951-2237
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(215) 538-8700
--------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ____
On October 29, 1999, there were 32,345,596 shares of the Registrant's Common
Stock, par value $.10 per share, outstanding.
<PAGE>
AM COMMUNICATIONS, INC.
FORM 10-QSB
FOR THE QUARTER ENDED OCTOBER 2, 1999
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------- --------
Item 1. Financial Statements
Balance Sheets - October 2 (Unaudited) and
April 3, 1999 3
Statements of Operations - Quarters and Six Months Ended
October 2, 1999 and September 26, 1998 (Unaudited) 4
Statements of Cash Flows -- Six Months Ended
October 2, 1999 and September 26, 1998 (Unaudited) 5
Notes to Financial Statements 6, 7
Item 2. Management's Discussion and Analysis of Operations 8 - 13
PART II. OTHER INFORMATION
- ---------------------------
Item 2. Changes in Securities and Use of Proceeds 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14 - 15
2
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Item 1. Financial Statements
- -----------------------------
AM COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, April 3,
1999 1999
-------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 20,000 $ 24,000
Accounts Receivable, Net of Reserves of $221,000
at October 2 and April 3, 1999 1,333,000 1,489,000
Due from Affiliates 218,000 42,000
Inventory 1,382,000 1,218,000
Prepaid Expenses and Other 57,000 43,000
--------------- --------------
Total Current Assets 3,010,000 2,816,000
Equipment and Fixtures, Net 261,000 396,000
Other Assets 18,000 16,000
--------------- --------------
Total Assets $ 3,289,000 $ 3,228,000
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Capital Lease Obligations $ 9,000 $ 38,000
Current Portion of Notes Payable 30,000 30,000
Bank Line of Credit 750,000 625,000
Accounts Payable 890,000 1,163,000
Accrued Expenses 982,000 889,000
--------------- --------------
Total Current Liabilities 2,661,000 2,745,000
--------------- --------------
Capital Lease Obligations - Long Term 4,000 ---
Notes Payable - Long Term 120,000 120,000
Senior Convertible Redeemable Preferred Stock,
$100 Par Value, Authorized 1,000,000 Shares;
Issued and Outstanding 25,825 Shares at
October 2 and April 3, 1999 2,583,000 2,583,000
--------------- --------------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $.10 Par Value, Authorized 50,000,000
Shares at October 2 and April 3, 1999; Issued
and Outstanding 32,345,596 Shares at October 2
and 31,072,296 Shares at April 3, 1999 3,235,000 3,107,000
Capital in Excess of Par 32,842,000 31,981,000
Accumulated Deficit (38,156,000) (37,308,000)
---------------- --------------
Stockholders' Equity (Deficit) (2,079,000) (2,220,000)
---------------- --------------
Total Liabilities and Stockholders' Equity $ 3,289,000 $ 3,228,000
=============== ==============
</TABLE>
See Notes to Financial Statements
3
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AM COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 2,126,000 $ 2,415,000 $ 4,169,000 $ 4,853,000
Cost and Expenses:
Cost of Sales 966,000 1,500,000 2,032,000 2,775,000
Selling, General and Administrative 639,000 610,000 1,272,000 1,359,000
Research and Development 791,000 912,000 1,678,000 1,952,000
-------------- ------------- ------------- --------------
Operating Loss (270,000) (607,000) (813,000) (1,233,000)
Other Expense 19,000 2,000 35,000 1,000
-------------- ------------- ------------- -------------
Loss Before Income Taxes (289,000) (609,000) (848,000) (1,234,000)
-------------- ------------- ------------- -------------
Net Loss $ (289,000) $ (609,000) $ (848,000) $ (1,234,000)
============== ============ ============== ==============
Basic Net Loss Per Share $ (0.01) $ (0.02) $ (0.03) $ (0.04)
=============== ============ ============== ==============
Diluted Net Loss Per Share $ (0.01) $ (0.02) $ (0.03) $ (0.04)
=============== ============ ============== ==============
Shares Used in Computation of Basic
Net Loss Per Share 32,270,000 31,072,000 31,739,000 31,072,000
============== ========== ============= ==========
Shares Used in Computation of Diluted
Net Loss Per Share 32,270,000 31,072,000 31,739,000 31,072,000
============== ========== ============= ==========
</TABLE>
See Notes to Financial Statements
4
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AM COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
October 2, September 26,
1999 1998
----------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (848,000) $ (1,234,000)
Adjustments to Reconcile Net Loss to
Net Cash Provided By (Used in) Operating Activities:
Warrants Issued to NeST for Services 773,000 ---
Depreciation and Amortization 164,000 241,000
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable 156,000 144,000
Due from Affiliates (176,000) ---
Inventory (164,000) 425,000
Prepaid Expenses and Other (15,000) (19,000)
Accounts Payable (273,000) 79,000
Advances --- (194,000)
Accrued and Other Expenses 93,000 (26,000)
--------------- ------------
Net Cash Used In Operating Activities (290,000) (584,000)
--------------- ------------
Cash Flows From Investing Activities:
Purchase of Equipment and Intangible Assets (24,000) (23,000)
--------------- ------------
Net Cash Used In Investing Activities (24,000) (23,000)
--------------- ------------
Cash Flows from Financing Activities:
Proceeds from Borrowings on Bank Line of Credit 125,000 ---
Proceeds from Note Payable --- 135,000
Exercise of Stock Options 191,000 ---
Issuance of Warrants 25,000 ---
Payments Under Capital Lease Obligations (31,000) (72,000)
--------------- ------------
Net Cash Provided By Financing Activities 310,000 63,000
--------------- ------------
Net Decrease In Cash (4,000) (544,000)
Cash:
Beginning 24,000 710,000
--------------- ------------
Ending $ 20,000 $ 166,000
=============== ============
Interest Paid $ 38,000 $ 8,000
=============== ============
Income Taxes Paid $ 2,000 $ ---
=============== ============
Non-Cash Financing Activities:
Equipment Purchased Under Capital Lease $ 6,000 $
=============== ============
</TABLE>
See Notes to Financial Statements
5
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AM COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
As of October 2, 1999 and for the 26 Week Periods Ended
October 2, 1999 and September 26, 1998
1. The accompanying interim financial statements should be read in conjunction
with the annual financial statements and notes thereto included in AM
Communications, Inc.'s Annual Report. The Balance Sheet as of October 2,
1999 and the related Statements of Operations and Statements of Cash Flows
for the quarters and six months ended October 2, 1999 and September 26,
1998 are unaudited, but in the opinion of management include all normal and
recurring adjustments necessary for a fair statement of the results for
such interim periods.
<TABLE>
<CAPTION>
October 2, April 3,
1999 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
2. Inventory Comprises:
Raw Material $ 2,038,000 $ 1,940,000
Work in Process 664,000 595,000
Finished Goods 180,000 183,000
--------------- ---------------
2,882,000 2,718,000
Inventory Reserves (1,500,000) (1,500,000)
---------------- ---------------
Net Inventory $ 1,382,000 $ 1,218,000
=============== ===============
3. Accrued Expenses Comprise:
Accrued Compensation $ 342,000 $ 341,000
Accrued Contracted Services 47,000 ---
Accrued Commissions 11,000 ---
Accrued Trade Show Costs 25,000 ---
Accrued Rent 170,000 180,000
Accrued Real Estate Taxes 67,000 41,000
Warranty Reserve 203,000 203,000
Accrued Income Taxes --- 2,000
Accrued Professional Fees 41,000 63,000
Other 76,000 59,000
--------------- ---------------
$ 982,000 $ 889,000
=============== ===============
</TABLE>
6
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4. Income Taxes:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109.
The provision for taxes on income consisted of:
<TABLE>
<CAPTION>
Six Months Ended
----------------
October 2, September 26,
1999 1998
----------- ------------
<S> <C> <C>
Current Income Taxes $ --- $ ---
Deferred Income Taxes (352,000) (508,000)
Change in Valuation Allowance 352,000 508,000
----------- ------------
Net $ --- $ ---
=========== ============
</TABLE>
A reconciliation between the provision (benefit) for income taxes, computed
by applying the statutory federal income tax rate of 34% to income before income
taxes and the actual provision for income taxes follows:
<TABLE>
<CAPTION>
Six Months Ended
October 2, September 26,
1999 1998
----------- ------------
<S> <C> <C>
Federal Income Tax Provision (Benefit) at
Statutory Rate $ (288,000) $(420,000)
State Income Taxes, Net of Federal Benefit (56,000) (80,000)
Research and Development Credits (10,000) (10,000)
Permanent Differences 2,000 2,000
Change in Valuation Allowance 352,000 508,000
Other --- ---
----------- ------------
Income Tax Provision $ --- $ ---
=========== ============
</TABLE>
The components of the net deferred tax asset as of October 2
and April 3 were as follows:
<TABLE>
<CAPTION>
October 2, April 3,
1999 1999
----------- ------------
<S> <C> <C>
Deferred Tax Items:
Inventory $ 609,000 $ 609,000
Accrued Expenses and Reserves 373,000 379,000
Net Operating Loss Carryforwards 9,159,000 8,811,000
Tax Credit Carryforwards 832,000 822,000
Valuation Allowance (10,973,000) (10,621,000)
----------- ------------
Net Deferred Tax Assets $ --- $ ---
=========== ============
</TABLE>
The Company has total net operating loss carryforwards available to
offset future taxable income of approximately $26 million expiring at various
times from 2000 to 2014. Due to certain statutory limitations under Internal
Revenue Code, a portion of such carryforwards may expire unutilized.
7
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Item 2.Management's Discussion and Analysis of Operations
The following discussion contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements represent the Company's present expectations or beliefs concerning
future events. The Company cautions that such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or anticipated results. Potential risks and
uncertainties include, without limitation, the impact of economic conditions
generally; the competitive nature of the CATV network monitoring market; the
Company's ability to enhance its existing products and develop and introduce new
products which keep pace with technological developments in the marketplace; and
market demand.
The following discussion should be read in conjunction with the Company's
Form 10-KSB for its 1999 fiscal year ended April 3, 1999.
General
The Company is a provider of high technology system level products for the
broadband communications industry, primarily for CATV monitoring and control
systems. As disclosed in the Company's Form 10-KSB for the fiscal year ended
April 3, 1999, the Company experienced a significant downturn in its business
during fiscal 1999, and undertook several major organizational changes including
entering into a strategic development and manufacturing relationship with
Network Systems & Technologies (P) Ltd. (NeST), under which NeST provides a
substantial portion of the Company's engineering and manufacturing requirements.
Using the expanded NeST engineering resources, the Company undertook an
aggressive development program to upgrade its software and certain hardware
products. The Company also elected a new Chairman, Mr. Javad Hassan, who also is
the Chairman, CEO and majority shareholder of NeST. Through certain contractual
agreements associated with Mr. Hassan becoming Chairman and the NeST ownership,
Mr. Hassan controls the voting of 14,391,837 shares of the Company's Common
Stock presently owned by the Company's majority shareholder, Alvin Hoffman and
has rights to acquire an additional 11,660,054 shares through the exercise of
stock options and warrants.
The Company believes the actions taken during fiscal 1999 improved the
Company's ability to compete and the Company is presently undertaking an
aggressive marketing and sales effort to re-establish its market position and
return to profitability. During the second quarter of fiscal 2000, the Company
commenced shipment of its new Omni2000 software platform, Omni2000 Ingress
Management System, and several cost reduced hardware products. Initial market
reaction to these products has been favorable and the Company's future success
depends, in large part, on the successful market acceptance of these new
products.
8
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Results of Operations
Quarter 2 Fiscal 2000 vs. Fiscal 1999
Quarter 2 Quarter 2
Fiscal 2000 Fiscal 1999
----------- -----------
Revenues 100.0% 100.0%
Cost of Sales 45.4 62.1
Selling, General and Administrative 30.1 25.3
Research and Development 37.2 37.8
------ ----
Operating Loss (12.7) (25.2)
Revenues
Revenues were $2.1 million and $4.2 million for the second quarter and
first six months of fiscal 2000 ended October 2, 1999, representing a 12% and
14% decline, respectively, compared to the prior year periods. The decline in
revenues is due to low levels of new account activity as the Company has been
focusing on completion of its new Omni2000 software platform and other related
products to improve its competitive position. These products commenced shipment
in September 1999. The Company has expanded its selling efforts to identify new
opportunities and believes that its competitive position improved. However, the
success of the new products is subject to the risks and uncertainties inherent
during the sales cycle in closing new business. The Company continues to
maintain key strategic OEM relationships with General Instrument, Philips, and
Scientific-Atlanta. Backlog was $2.1 million at October 2, 1999 and $1.6 million
at September 26, 1998. Subsequent to the quarter end, the Company has
experienced an increase in backlog to over $3 million, reflecting positive
results of the new products and strategy.
Development and software revenues totaled $358,000 and $239,000 in the
second quarter of fiscal 2000 and 1999, respectively, and $620,000 and $724,000
in the first six months of fiscal 2000 and 1999, respectively. Development
revenues primarily relate to OEM development efforts which are recognized when
defined milestones are reached, the timing of which may be different from when
the related development expenses were incurred. The related development costs
are reported as research and development expense. All software development costs
are charged to research and development when incurred.
Cost of Sales
Costs of sales include all manufacturing costs of the Company's hardware
products. Cost of sales represented 45.4% of revenues in the second quarter of
fiscal 2000 compared to 62.1% in the second quarter of fiscal 1999 and 48.7% and
57.2% in the first six months of fiscal 2000 and 1999, respectively. The
decrease in cost of sales percentage is due to manufacturing cost reductions
resulting from the Company's transition of manufacturing to a NeST related
off-shore manufacturing operation, the introduction of several cost reduced
hardware products and a change in the mix of products. The Company's margins are
generally dependent on product mix and customer mix, with sales to OEM customers
generally having a lower profit margin.
9
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Selling, General and Administrative
Selling, general and administrative (S, G & A) expenses were $639,000 and
$610,000 in the second quarter of fiscal 2000 and fiscal 1999, respectively, and
$1.3 million and $1.4 million for the first six months of fiscal 2000 and 1999,
respectively. Expenses in sales and marketing have increased as the Company has
added to its direct sales and application engineering staff to support the new
product introductions. Offsetting this has been a decline in administrative
expenses as the Company is performing certain administrative functions for NeST
in return for a fee.
Research and Development
Research and development expense totaled approximately $791,000 and $1.7
million in the second quarter and first six months of fiscal 2000 compared to
$912,000 and $2.0 million reported in the comparable periods a year ago. The
declines in research and development spending during fiscal 2000 have resulted
from improved productivity from the NeST development team as they have gained
experience in working with the Company's technology and products.
The Company was previously limited in its access to development resources
which has negatively impacted its competitive position. As a result of the NeST
partnership announced in November 1998, the Company has significantly increased
the number of engineering staff members working on Company projects and has
released new products in the second quarter of fiscal 2000, including its new
Omni2000 software platform, Omni2000 Ingress Management System, a new lower
cost master control unit, and several new transponders.
The Company has the option of paying for development services provided by
NeST in cash or warrants to purchase shares of the Company's stock. NeST
expenses incurred during the second quarter and six months ended October 2, 1999
were $383,000 and $820,000, respectively, and have been paid by the issuance of
warrants to purchase 2,489,248 shares of the Company's Common Stock, The
warrants are exercisable at $0.01 per share, subject to the application of
certain anti-dilution provisions set forth in the warrants, on or before April
3, 2004.
Operating Income (Loss)
The Company experienced operating losses of $270,000 and $813,000 for the
second quarter and first six months of fiscal 2000, respectively, compared to
losses of $607,000 and $1.2 million, respectively, in the comparable prior year
periods. The reduction in operating losses is a result of reduced operating
costs, including product costs and research and development. This reduction in
operating costs is primarily attributable to the cost savings achieved from the
Company's strategic relationship with NeST. While the Company has operated at a
loss for the most recent second quarter, the Company's focus for the remainder
of this fiscal year is to increase revenues from the introduction of its new
platform products and to return to profitability.
Income Taxes
Due to the significant net operating loss carryforward, the Company is
subject to minimum income taxes which include state income taxes and federal
income taxes based on an "alternative minimum tax" calculation.
Industry Factors
The cable and broadband communications industry is undergoing significant
change as cable television (CATV) operators continue to expand and consolidate
their operations. Operators are also implementing new interactive services such
10
<PAGE>
as video on demand, Internet access and telephony. In addition, competition for
video services has increased with new entrants, including telephone and
satellite providers. This has resulted in existing CATV operators planning to
expand and upgrade their distribution infrastructures and new providers planning
to construct new distribution systems capable of providing a mix of services.
There continues to be many unresolved issues and uncertainties impacting this
convergence of CATV and telecommunications industries including governmental
regulations, competing distribution technologies, and significant capital costs.
Demand for CATV network monitoring products has generally increased as
monitoring of cable distribution systems has become an important factor in
increasing operating efficiency and reliability. However, the Company's
operations are subject to the timing and success of new product introductions,
the scheduling of orders by customers and the Company's ability to support its
technology in the field. The Company continues to identify product development
needs in excess of its available development resources, which could negatively
impact its competitive position. Due to the effects of these factors on future
operations, past performance is a limited indicator in assessing potential
future performance and such factors could impact the trading price of the
Company's common stock.
Liquidity and Capital Resources
The Company has financed its operating losses through reductions in cash,
accounts receivables and inventory, an increase in accounts payables, drawdowns
on its line of credit and the payment of NeST development expenses through the
issuance of warrants.
As of October 2, 1999, the Company's cash totaled $20,000 and outstanding
borrowings under its bank line of credit was $750,000 compared to $24,000 and
$625,000, respectively at April 3, 1999. The Company's line of credit is limited
to $750,000 and borrowings are based on 80% of the value of qualified accounts
receivable. Under the terms of the agreement, all the Company's assets are
pledged and interest is payable at 2% above prime. As of October 2, 1999, the
Company's working capital totaled $349,000. The Company is in technical default
of the bank line of credit agreement which requires $500,000 minimum working
capital and is presently working with the financial lender to amend certain of
the financial covenants.
In June 1999, the Company entered into an agreement with its chairman,
Javad K. Hassan, whereby Mr. Hassan will provide a $500,000 line of credit to
the Company, with interest payable at 10%. Payment of all outstanding borrowings
and interest is due by December 31, 2000. No amounts have been drawn under this
line.
Under the terms of the NeST Development Agreement, the Company has the
option to pay for NeST development services either in cash or by the issuance of
warrants to purchase AM Common Stock. As of October 2, 1999, the Company issued
2,489,248 warrants to purchase common stock at an exercise price of $.01 per
share as payment for $820,000 owed NeST for services performed from April 4,
1999 through October 2, 1999.
The Company has undertaken several restructuring actions during fiscal 1999
and during the first two quarters of fiscal 2000, which are designed to reduce
operating cash expenses. The Company expects to continue to utilize the NeST
technology resources in India for a substantial portion of its development
11
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efforts, which is expected to allow the Company to reduce its overall expenses
for research and development and provide flexibility in payment of services
through the issuance of warrants or payment in cash, at the Company's option.
During the last quarter of fiscal 1999, the Company began the transfer of a
substantial portion of its manufacturing operations to a NeST associated company
located in India. The use of NeST manufacturing operations has reduced the
Company's manufacturing costs and overhead expenses. The Company will continue
to manage and provide technical support to the NeST manufacturing operations
from its facility in Quakertown.
During the first quarter of fiscal 2000, the Company agreed to provide
certain administrative and manufacturing support services and provide office
space to NeST and several other entities associated with Mr. Hassan's non-AM
business ventures. The Company is to receive a fee of $142,000 per quarter for
such services. Should the level of services exceed planned levels, the parties
will negotiate an increase in the quarterly fee.
As previously described, the Company was required to undertake a
significant upgrade to its software products during fiscal 1999 and fiscal 2000
which impacted its ability to attract new customers and increase revenues
sufficient to cover the operating costs of the business. The new software
product platform has commenced shipment in the second quarter of fiscal 2000 and
the Company has re-focused its marketing efforts in an attempt to expand its
revenue base.
The Company believes its present operating structure has reduced its cash
operating requirements to a level which can be supported under the Company's
present revenue levels. It is the Company's goal to increase revenue levels
through successful marketing of its upgraded product offerings during fiscal
2000. During the first six months of fiscal 2000, the Company expanded its
marketing efforts by replacing and adding to its sales and technical support
staff and launched an aggressive marketing program. The Company believes that
existing cash, available lending lines, and the ability to pay for NeST
development services in cash or warrants will provide sufficient liquidity to
support operations through the next fiscal year. However, should operating
losses continue beyond levels which can be supported, the Company would expect
to implement further actions to reduce expenses or raise additional capital to
enable continued execution of its strategy. There can be no assurance that
additional capital can be raised under acceptable terms.
Capital expenditures totaled $30,000 in the first six months of fiscal 2000
and $23,000 in the comparable period in fiscal 1999 which included capital
leases, computers, manufacturing assembly and test equipment, and facility
related improvements and fixtures.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
12
<PAGE>
failure or miscalculations causing disruption of operations, including among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company believes that it has minimal exposure to contingencies related
to the Year 2000 Issue for the products it has sold.
The Company has determined that its internal reporting system will not
properly utilize dates beyond December 31, 1999. A plan has been initiated to
implement a replacement software system. Management expects this software system
will be installed and fully operational during 1999. The anticipated cost of
this project is $150,000, of which $10,000 has been expensed to date.
The Company plans to engage in formal communication with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 Issue. There can be no guarantee that the systems of other companies
on which the Company's systems rely or interface with will be timely converted,
or that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
On October 2, 1999, the Company issued warrants to purchase 2,489,248
shares of the Company's Common Stock (the "Warrants") to Network Systems &
Technologies (P) Ltd. ("NeST"). The Warrants were issued by the Company in
exchange for certain development services in the amount of $820,000 provided by
NeST to the Company during the six month period ended on October 2, 1999. The
Warrants entitle the holder(s) thereof to purchase the indicated number of
shares of the Company's Common Stock at a price of $0.01 per share, subject to
the application of certain anti-dilution provisions set forth in the Warrants,
on or before April 3, 2004.
The Warrants were issued by the Company in reliance upon the exemption from
registration provided for in Section 4(2) of the Securities Act of 1933, as
amended, as a transaction not involving any public offering. The Warrants were
issued only to NeST, as compensation for services provided by NeST to the
Company. No offer of the securities was made by the Company to any other person.
Item 5. Other Information
Stockholder proposals intended to be considered at the 2000 Annual Meeting
of Stockholders and which the proponent would like to have included in the proxy
materials distributed by the Company in connection with such meeting, pursuant
to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), must be received at the principal executive offices of the
Company no later than 120 calendar days in advance of the date in 2000
corresponding to the date in 1999 on which the Company's proxy materials were
first mailed to the Company's stockholders in connection with the Company's 1999
Annual Meeting of Stockholders. Such proposals may be included in next year's
proxy materials if they comply with certain rules and regulations promulgated by
the Securities and Exchange Commission.
Stockholder proposals intended to be considered at the 2000 Annual Meeting
of Stockholders and for which the proponent does not intend to seek inclusion of
the proposal in the proxy materials to be distributed by the Company in
connection with such meeting, must be received at the principal executive
offices of the Company no later than forty-five calendar days prior to the date
in 2000 corresponding to the date in 1999 on which the Company's proxy materials
for the Company's 1999 Annual Meeting of Stockholders were first mailed to the
Company's stockholders. Any stockholder proposal received after such date will
not be considered to be timely submitted for purposes of the discretionary
voting provisions of Rule 14a-4 promulgated under the 1934 Act. In accordance
with Rule 14a-4(c), the holders of proxies solicited by the Board of Directors
of the Company in connection with the Company's 2000 Annual Meeting of
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Stockholders may vote such proxies in their discretion on certain matters as
more fully described in such Rule, including without limitation on any matter
coming before the meeting as to which the Company does not have notice on or
before the forty-fifth calendar day preceding the date in 2000 corresponding to
the date in 1999 on which the Company's proxy materials for the Company's 1999
Annual Meeting of Stockholders were first mailed to the Company's stockholders.
Item 6. Exhibits and Reports on Form 8-K
(a)(1) Exhibits
See end of exhibit list for footnote references indicated by
asterisks.
*3-a. (3.1) Restated Certificate of Incorporation of
Registrant.
*3-b. (3.2) Amended By-Laws of Registrant.
*4-a. (4.1) Specimen of Common Stock Certificate, par value
$.10 per share.
4-b Warrant issued to NeST.
****9-a Voting Trust and Share Participation Agreement (Exhibit
9.1)
**10-a. 1991 Incentive Stock Option Plan.
***10-b. Joint Development Agreement between AM Communications
and Scientific-Atlanta dated May 1996.
***10-c. Distribution Agreement and Manufacturing License dated
June 14, 1996.
***10-d. Registration Rights Agreement dated June 17, 1996.
***10-e. Warrant Agreement dated June 17, 1996.
****10-f. 1999 Stock Option Plan.
10-g. Line of Credit Commitment Letter with Progress Bank
dated June 29, 1999.
****10-h. Services Agreement between the Company and Jay Hassan
(Exhibit 10.1)
****10-i. Consulting Services Agreement between the Company and
NeST. (Exhibit 10.2)
27. Financial Data Schedule
* Incorporated by reference to the Exhibit with the number
indicated in Registrant's Registration Statement on
Form S-1, File No. 33-10163.
14
<PAGE>
** Incorporated by reference to the Exhibit number
indicated in Annual Report on Form 10-K for the fiscal
year ended March 28, 1992.
*** Incorporated by reference to the Exhibit number
indicated in Registrant's Annual Report on Form 10-KSB
for the fiscal year ended March 30, 1996.
**** Incorporated by reference to the Exhibit number
indicated in Registrant's Report on Form 8-K dated
November 9, 1998.
**** Incorporated by reference to the Exhibit number
indicated in Registrant's Report on 10-KSB for the
fiscal year ended April 3, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AM COMMUNICATIONS, INC.
(Registrant)
Date: November 15, 1999 By: /s/ Keith D. Schneck
-------------------------- ------------------------------------
Keith D. Schneck
President and Chief Financial Officer
15
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