<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
Commission file number 0-20462
CHATCOM, INC.
(Name of Small Business Issuer in Its Charter)
CALIFORNIA 95-3746596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9600 TOPANGA CANYON BOULEVARD, CHATSWORTH, CALIFORNIA 91311
(Address of principal executive offices)
818/709-1778
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
----- ------
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [_]
Page 1 of 12
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State issuer's revenues for its most recent fiscal year: $14,790,335.
As of June 17, 1996, the aggregate market value of the voting stock held by
non-affiliates of the Registrant computed by reference to The Nasdaq Stock
Markets' closing price on June 17, 1996, was approximately $17,121,000.
The number of shares outstanding of the Registrant's only class of common
stock, as of June 17, 1996, was 8,133,583.
Documents incorporated by reference: None
Page 2 of 12
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Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following sets forth biographical information of the seven directors and
the executive officers of the Company. Each director will serve until the next
annual meeting of shareholders. The number of shares of the Company's common
stock, no par value (the "Common Stock") beneficially owned by the directors and
the executive officers is set forth in the section entitled "Security Ownership
of Certain Beneficial Owners and Management."
Richard F. Gordon, Jr., 66 - Chairman of the Board - Director of the Company
since 1982, President of the Company from April 1982 to August 1991;
President and founder of Dick Gordon Enterprises, Inc. (a marketing and
promotional firm) since May 1995; President, Space Age America, Inc. (an
aerospace consulting firm) from August 1991 to September 1995.
A. Charles Lubash, 64 - Director - Director of the Company since 1982; President
and Chief Executive Officer of the Company from August 1991 to July 1995;
Vice Chairman of the Board from July 1995 to June 1996 and Consultant to the
Company from 1988 to 1991.
George L. Lazik, Ph.D., 55 - Director - Director of the Company since 1988.
Consultant to the Company since April 1996; Executive Vice President of the
Company and President of the J&L Information Systems operating division of
the Company from 1988 to March 1996; Chief Operating Officer of the Company
from 1988 to 1991.
Gerald R. Sayer, Ph.D., 57 - Director - Director of the Company since July 1995.
Interim President and Chief Executive Officer from July 1995 to March 1996;
President of GL International (a consulting firm) since 1994; President and
Chief Executive Officer of Developmental Sciences Corporation (an aerospace
company) from 1987 to 1993; Chairman of the Board of Lear Astronics
Corporation (an aerospace company) from 1988 to 1993.
James D. Edwards, 56 - Director - Director of the Company since November 1995.
President, Chief Executive Officer and Director, Tricord Systems, Inc. (a
computer hardware manufacturer) from May 1989 to May 1995. Mr. Edwards is a
director of Capital Associates, Inc. (an equipment leasing company), and
Netstar, Inc. (a network hardware manufacturer), which are public companies.
Sanford C. Sigoloff, 64 - Director - Director of the Company since February
1996. Chairman of the Board, President and Chief Executive Officer of
Sigoloff & Associates, Inc. (a management consulting company) since 1989;
Chief Executive Officer of L.J. Hooker Corporation (a retail conglomerate
company) from August 1989 to June 1992; Chairman of the Board, President and
Chief Executive Officer of Wickes Companies, Inc. (a furniture retail chain)
from March 1982 until 1988. Mr. Sigoloff is a director of Sun America, Inc.,
Kaufman and Broad Home Corporation, Wickes plc-London, England, Digital
Video Systems, Inc. and Movie Gallery, Inc., all of which are public
companies. Mr. Sigoloff is an adjunct full professor at the John E. Anderson
Graduate School of Management at the University of California at Los
Angeles.
Philip B. Smith, 59 - Director - Director of the Company since February 1996.
Vice Chairman of the Board of Spencer Trask Securities Incorporated since
1991; formerly a Managing Director of Prudential Securities in its merchant
bank division; founding General Partner of Lawrence Venture Associates, a
venture capital limited partnership headquartered in New York City;
Executive Vice President and Group Executive of the worldwide corporations
group at Irving Trust Company, from 1981 to 1984. Prior to joining Irving
Trust Company, Mr. Smith was at Citibank for 15 years, where he founded
Citicorp Venture Capital as President and Chief Executive Officer. Since
1988, Mr. Smith also has been the managing general partner of Private
Page 3 of 12
<PAGE>
Equity Partnership, L.P. Mr. Smith is a director of Movie Gallery, Inc.,
DenAmerica Corp., Digital Video Systems, Inc. and StarPress, Inc., all of
which are public companies.
James B. Mariner, 56 - President and Chief Executive Officer - President and
Chief Executive Officer of the Company since March 1996; President and sole
shareholder of Turnaround Management Consulting, Inc. (a management
consulting firm) since 1990. Chairman and Chief Executive Officer of EFX
Incorporated (an audio post-production firm) from September 1991 to March
1994 and President and Chief Executive Officer of Prime Access, Inc. (a
video editing firm) from June 1992 to June 1993.
James R. Spievak, 49 - Secretary - Secretary of the Company since 1984, Director
of the Company from August 1988 to February 1996; Partner of Annis &
Spievak, Attorneys at Law since February 1996; Shareholder of Shenas, Shaw &
Spievak, A Professional Legal Corporation from 1984 to January 1996.
Russell Jackson, 45 - Senior Vice President - Senior Vice President of the
Company since February, 1996; Senior Vice President of J&L Information
Systems (a former operating division of the Company) from August 1988 to
February 1996.
Ernest Holland, 55 - Vice President of Sales - Vice President of Sales of the
Company since February 1996; Vice President of Sales of J&L Information
Systems (a former operating division of the Company) from August 1993 to
February 1996; Vice President of Sales of Transitional Technologies, Inc. (a
computer peripheral company) from 1991 to July 1993.
Theodore Gordon, 57 - Vice President of Operations - Vice President of
Operations of the Company since February 1996; Vice President of Operations
of J&L Information Systems (a former operating division of the Company) from
August 1993 to February 1996; Vice President of Sales of J&L Information
Systems from April 1991 to August 1993; Chief Operating Officer of Service
Manufacturing Corporation (a truck body manufacturer) from 1990 to
April 1991.
John R. Grady, 37 - Chief Financial Officer - Chief Financial Officer of the
Company since January 1994; Partner of Bogart, Elliott & Grady, Certified
Public Accountants since June 1995; Employed by Deloitte & Touche from
September 1987 to December 1993.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's Directors and executive officers, and persons who own more than 10%
of the Common Stock, file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
Directors, and greater than 10% beneficial owners are required by SEC
regulations to furnish the Company with copies of all 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the fiscal year ended March 31,
1996, all Section 16(a) filing requirements applicable to its Executive
Officers, Directors and greater than 10% beneficial holders were complied with,
except that Mr. Gordon was approximately eleven months late in reporting the
grant of 5,000 options, approximately five months late in reporting the grant of
25,000 options, and approximately one month late in reporting the grant of 3,000
options; Mr. Sayer was approximately one month late in reporting his initial
status as a director and executive officer, approximately eight months late in
reporting the grant of 2,500 options, seven months late in reporting the grant
of 5,000 options, six months late in reporting the grant of 5,000 options, five
months late in reporting the grant of 5,000 options, four months late in
reporting the grant of 30,000 options, three months late in reporting the grant
of 5,000 options, two months late in reporting the grant of 8,000 options, and
one month late in reporting the grant of 5,000 options; Messrs. Lubach and Lazik
Page 4 of 12
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were approximately one month late in reporting their year end beneficial
ownership; Mr. Conrad was approximately five months late in reporting the grant
of 25,000 options, Mr. Spievak was approximately twelve months late in reporting
the grant of 5,000 options, ten months late in reporting the sale of 5,000
shares of Common Stock, and five months late in reporting the grant of 25,000
options; Mr. Edwards was approximately nine months late in reporting his initial
status as a director of the Company; four months late in reporting the grant of
25,000 options, and one month late in reporting the grant of 3,000 options;
Messrs. Sigoloff and Smith were approximately two months late in reporting their
initial status as directors of the Company, and Mr. Jackson was approximately
three months late in reporting his initial status as an executive officer of the
Company and approximately one month late in reporting his year-end benficial
ownership.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain summary information concerning the
annual and long term compensation for all services rendered to the Company in
all capacities for the fiscal years ended March 31, 1996, 1995, and 1994 of (i)
all persons who served as Chief Executive Officer of the Company during the
fiscal year ended March 31, 1996 and (ii) each of the other executive officers
of the Company whose total annual salary and bonus during the fiscal year ended
March 31, 1996 exceeded $100,000. (The Chief Executive Officers and the other
named executives are collectively referred to as the "Named Executives.")
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
--------------------------------------- ----------------------- -------
Other Rest- Securities All
Annual ricted Underlying LTIP Other
Name/Principal Fiscal Compen- Stock Options Pay- Compen-
Position Year Salary* Bonus sation Awards /SARs outs sation
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James B. Mariner, 1996 9,520 -0- -0- -0- 360,000 -0- -0-
President and Chief
Executive Officer
(1)
Gerald R. Sayer 1996 86,250 -0- -0- -0- 68,000 -0- -0-
Interim President and
Chief Executive Officer
(2)
A. Charles Lubash 1996 $150,000 -0- -0- -0- -0- -0- -0-
President and Chief
Executive Officer (3) 1995 $150,000 -0- -0- -0- 425,000(6) -0- -0-
1994 $205,877 -0- -0- -0- -0- -0- -0-
George L. Lazik, 1996 $130,000 -0- -0- -0- -0- -0- -0-
PhD., Executive 1995 $130,000 -0- -0- -0- 225,000(6) -0- -0-
Vice President (4) 1994 $200,877 -0- -0- -0- -0- -0- -0-
Russell Jackson, 1996 $145,000 -0- -0- -0- 83,000 -0- -0-
Senior Vice 1995 $130,000 -0- -0- -0- 30,000 -0- -0-
President 1994 $115,000 -0- -0- -0- 60,000(7) -0- -0-
Ernest Holland 1996 $114,620 -0- -0- -0- 3,000 -0- -0-
Vice President 1995 $115,875 -0- -0- -0- -0- -0- -0-
of Sales (5) 1994 $ 67,338 -0- -0- -0- -0- -0- -0-
</TABLE>
- --------------
* Includes accrued vacation salary
(1) Mr. Mariner began service as President and Chief Executive Officer of the
Company on March 11, 1996.
Page 5 of 12
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(2) Mr. Sayer served as interim President and Chief Executive Officer from
July 1995 to March 1996. Mr. Sayer also served on the Board of Directors
during this period and the table above includes options to purchase
28,000 shares of Common Stock granted for Mr. Sayer's service as a
director.
(3) Mr. Lubash was President and Chief Executive Officer of the Company from
August 1991 until July 1995. From July 1995 to June 1996, Mr. Lubash
has served as Vice Chairman of the Board of Directors.
(4) Mr. Lazik served as Executive Vice President of the Company until March
1996.
(5) Mr. Holland was hired by the Company in July 1993.
(6) Represents the extension of the exercise terms of nonstatutory stock
options, which were originally granted in 1992.
(7) Represents stock options granted pursuant to the terms of an employment
agreement.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
In March 1996, the Company employed James B. Mariner as President and
Chief Executive Officer pursuant to a letter agreement. The agreement provides
for annual cash compensation of $165,000, a cash bonus of up to $50,000 for the
year ending March 31, 1997 and the grant of options to purchase 360,000 shares
of the Company's Common Stock. The options have an exercise price equal to the
last trading price of the Common Stock on the date of grant and expire on March
7, 2003. The cash bonus will be determined based on the Company achieving
certain predetermined revenue and profit goals. The stock options vest at a rate
of 120,000 options per year if all revenue and profit goals are achieved and any
options that remain unvested at March 31, 1999 due to failure to meet such goals
shall vest pro-rata over the following three years. Pursuant to the agreement,
Mr. Mariner is an "at will" employee of the Company.
In April 1994, the Company entered into Employment Agreements (the
"Agreements") with A. Charles Lubash, (who was the Company's President and Chief
Executive Officer until July 1995 and the Company's Vice Chairman from July 1995
to June 1996), and George L. Lazik (who was the Company's Executive Vice
President until March 1996). The Agreements were both for three-year terms,
unless sooner terminated in accordance with the terms of the Agreements. The
Agreements provided for an annual base salary level of $150,000 for Mr. Lubash
and $130,000 for Mr. Lazik. The Agreements provide that cash and/or stock
option bonuses could be awarded at the discretion of the Board of Directors for
each fiscal year during the Agreements' terms, to both Mr. Lubash and Mr. Lazik.
No stock options or bonuses were awarded for fiscal years 1996 or 1995.
Effective March 31, 1996, the Company renegotiated its employment agreement
with Mr. Lazik. Pursuant to the terms of the amended agreement. Mr. Lazik will
serve as a consultant to the Company until September 30, 1997 and receive base
compensation of $80,000 and $50,000 for the years ended March 31, 1997 and the
six months ended September 30, 1997, respectively. During the eighteen months
term of Mr. Lazik's consulting contract, Mr. Lazik will receive $608 per month
as an expense allowance, and the Company will pay health, vision and dental
insurance premiums for Mr. Lazik and his spouse.
Effective as of August 14, 1995, the Company entered into a consulting
agreement (the "Consulting Agreement") with Gerald R. Sayer, Ph.D., pursuant to
which Mr. Sayer served as President and Chief Executive Officer of the Company
for approximately three days per week. The Consulting Agreement provided for
compensation of $1,200 per day and the grant of options to acquire 5,000 shares
of Common Stock per month for each month during the term of the Consulting
Agreement. The options granted to Mr. Sayer are exercisable for three years from
the date of grant at an exercise price equal to the market price of the Common
Stock on the date of grant and are fully vested upon the date of grant. The
Consulting Agreement was terminated on March 8, 1996.
The Company has entered into an Employment Agreement with Russell
Jackson, who is currently the Senior Vice President of the Company. The Jackson
agreement, as amended, initially had a term of three years, beginning April 1,
1993, and ended March 31, 1996. The Jackson agreement provided for a base salary
of $115,000 for the first year, $130,000 for the second year, and $145,000 for
the third year. Mr. Jackson's employment has continued after March 31, 1996 on
an "at-will" basis, with the same compensation terms as those contained in his
prior agreement until either he or the Company provides written notification of
termination to the other.
The Jackson agreement provides him with the opportunity to earn cash
bonuses for each fiscal year during the agreement's term in the amount of 3% of
the Company's net pre-tax profits, after all salary and salary adjustments. In
no event, however, can the amount of the cash bonus exceed $150,000
Page 6 of 12
<PAGE>
for any one fiscal year. The Jackson agreement also provided for the issuance
on April 1, 1993, of options to purchase 20,000 shares of the Company's Common
Stock at a price of $3.00 per share, the issuance on April 1, 1994, of options
to purchase 20,000 shares of the Company's Common Stock at a price of $4.00 per
share and the issuance on April 1, 1995, of options to purchase 20,000 shares of
the Company's Common Stock at a price of $5.00 per share.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not otherwise employed by the
Company for service to the Company, a fee of $1,500 per regular board meeting
attended, $750 per special meeting or meeting of a committee of the Board of
Directors attended and $400 per telephonic meeting in which they participated.
Employee directors receive no fees.
The Company's 1994 Stock Option Plan provides for the grant of a fixed
amount of options to each director who is not an employee of the Company. The
amended formula option provision provides for the grant of options to purchase
25,000 shares of Common Stock to all persons who were non-employee directors of
the Company on November 13, 1995 and to any person elected or appointed as a
non-employee director subsequent to that date. Additionally, the formula
provision provides for the grant of options each year thereafter to purchase
3,000 shares of Common Stock to each non-employee director upon re-election at
the annual meeting of shareholders. All options granted pursuant to the formula
provision are exercisable for a period of ten years, exercisable at a price
equal to the closing price of the Company's Common Stock on the date of grant.
On April 1, 1995, options to purchase 5,000 shares of Common Stock were granted
to each of the Company's three then non-employee directors at an exercise price
of $4.03 per share pursuant to the prior formula provision of the Company's 1994
Stock Option Plan that was in effect at the time of grant. On November 13, 1995,
25,000 stock options were granted to each of the Company's five then non-
employee directors. On February 8, 1996, 25,000 stock options were granted to
each of the two non-employee directors elected on that date and 3,000 stock
options were granted to each of the three non-employee directors that were re-
elected on that date.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during the fiscal year ended March 31, 1996, to the Names Executives:
<TABLE>
<CAPTION>
Option Grants in Fiscal Year 1996 (1)
--------------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or
Options/SARs to Employees Base Price Expiration
Name Granted (#) in FY 1996 Per Share Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James B. Mariner 360,000(2) 65% $1.875 Mar. 7, 2003
Gerald R. Sayer, Ph.D. 68,000(3) 13% (3) (3)
A. Charles Lubash -0- 0% N/A N/A
George L. Lazik, Ph.D. -0- 0% N/A N/A
Russell Jackson 83,000 16% $2.125 Feb. 7, 2001
Ernest Holland 3,000 * $2.125 Feb. 7, 2001
- ------------------------------------
* Less than 1%
(1) The Company has no plans pursuant to which stock appreciation rights may be granted.
</TABLE>
Page 7 of 12
<PAGE>
(2) The stock options vest at a rate of 120,000 options per year if all
revenue and profit goals are achieved and any options that remain
unvested at March 31, 1999 due to failure to meet such goals shall vest
pro-rata over the following three years.
(3) Consists of options granted pursuant to the terms of a consulting
agreement, with exercise prices ranging form $1.75 to $3.69 per share and
expiring on various dates from July 30, 1998 to February 27, 1999 and
options to purchase 28,000 shares of Common Stock that were granted
pursuant to the formula option provision of the 1994 Stock Option Plan,
as amended, for Mr. Sayer's service as a member of the Board of
Directors.
The following table provides information with respect to the exercise of
options during the fiscal year ended March 31, 1996 by the Named Executives, and
unexercised options held by the Named Executives as of March 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996(1)
AND FISCAL YEAR END OPTION VALUES
------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Options @ 3/31/96 Options @ 3/31/96(2)
Acquired Value ----------------------- -------------------------
on Exercise Realized Unexer- Unexer-
Name (#) (3) Exercisable cisable Exercisable cisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James B. Mariner -0- N/A -0- 360,000 -0- $225,000
A. Charles Lubash -0- N/A 425,000(3) -0- $807,500 N/A
Gerald R. Sayer -0- N/A 49,375 18,625 $ 14,766 $ 6,984
George L. Lazik -0- N/A 225,000(5) -0- $427,000 N/A
Russell Jackson -0- N/A 188,000 -0- $ 41,025 N/A
Ernest Holland -0- N/A 3,000 -0- $ 1,125 N/A
- -------------------------------
</TABLE>
(1) The Company has no plans pursuant to which stock appreciation rights may
be granted.
(2) Value of unexercised "in-the-money" options is the difference between the
market price of the Company's Common Stock on March 31, 1996 ($2.50 per
share), and the exercise price of the option, multiplied by the number of
shares subject to the option.
(3) 225,000 of the options were granted in 1992 as consideration for Mr.
Lubash's personal guarantee of the Company's bank loan and other
obligations. 200,000 of the options vested under Mr. Lubash's employment
agreement with the Company for attaining certain sales goals set forth
therein.
(4) Includes options to purchase 28,000 shares of Common Stock granted
pursuant to the formula plan provision of the 1994 Stock Option Plan for
Mr. Sayer's service as a member of the Board of Directors.
(5) 25,000 of the options were granted in 1992 as consideration for Mr.
Lazik's personal guarantee of the Company's bank loan and other
obligations. 200,000 of the options vested under Mr. Lazik's employment
agreement with the Company for attaining certain sales goals set forth
therein.
Page 8 of 12
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 15, 1996, certain information
regarding the beneficial ownership of the Company's Common Stock by each
director, each of the Named Executive and by all directors and executive
officers of the Company as a group, and of certain other beneficial owners of
more than 5% of the Company's Common Stock. The number of shares beneficially
owned is deemed to include shares of Common Stock acquirable within sixty (60)
days pursuant to the exercise of stock options and warrants. Each such person
has sole voting and dispositive power with respect to such securities, except as
otherwise indicated.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name and Address Amount and Nature of Percent
Of Beneficial Owner Beneficial Ownership of Class (1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
D.H. Blair Investment 2,113,000 (2) 25.8%
Banking Corporation
44 Wall Street
New York, NY 10005
Strategic Growth International, Inc. 700,000 (3) 7.9%
111 Great Neck Road, Suite 606
Great Neck, NY 11021
Legong Investments N.V. 558,659 (4) 6.9%
International Trade Center TM 126
Piscadera Bay, Curacso
Netherlands Antilles
Dominion Income 500,000 6.1%
Management Corporation
15302 25th Drive S.E.
Mill Creek, WA 98012
James B. Mariner 0 (5)
9600 Topanga Canyon Boulevard
Chatsworth, CA 91311
Richard F. Gordon, Jr. 437,732 (6) 5.3%
3115 Calle del Montana
Sedona, AZ 86336
A. Charles Lubash 914,826 (7) 11.2%
9600 Topanga Canyon Blvd.
Chatsworth, CA 91311
George L. Lazik 650,000 (8) 7.9%
9600 Topanga Canyon Blvd.
Chatsworth, CA 91311
Gerald R. Sayer 57,500 (9) *
25481 Bootstrap Place
Laguna Hills, CA 92653-6101
</TABLE>
9 of 12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Name and Address Amount and Nature of Percent
Of Beneficial Owner Beneficial Ownership of Class (1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
James D. Edwards 12,375 (10) *
5415 Sunshine Canyon Road
Boulder, CO 80302
Sanford C. Sigoloff 6,250 (11) *
3340 Ocean Park Boulevard #3050
Santa Monica, CA 90405
Philip B. Smith 6,250 (12) *
535 Madison Avenue
New York, NY 10022
James R. Spievak 72,441 (13) *
701 "B" Street, Suite 2200
San Diego, CA 92101
Russell Jackson 188,000 (14) 2.5%
9600 Topanga Canyon Blvd.
Chatsworth, CA 91311
Ernest Holland 3,000 (15) *
9600 Topanga Canyon Blvd.
Chatsworth, CA 91311
All Officers and Directors 2,350,374 (16) 28.9%
as a Group (11 Persons)
* Less than 1%
</TABLE>
(1) Shares which the person (or group) has the right to acquire within 60
days after July 15, 1996 are deemed to be outstanding in calculating the
percentage ownership of the person (or group), but are not deemed to be
outstanding as to any other person (or group).
(2) Includes 625,000 shares issuable upon the exercise of Common Stock
purchase warrants.
(3) Includes 100,000 shares of Common Stock and 128,500 shares issuable upon
the exercise of common stock purchase warrants owned by Richard E.
Cooper, 97,250 shares of Common Stock and 121,500 shares issuable upon
the exercise of common stock purchase warrants owned by Stanley
Altschuler, and 200,000 options granted to Strategic Growth
International, Inc. ("SGI"). Both Mr. Cooper and Mr.Altschuler are
founders and principals of SGI.
(4) Represents 62.5 shares of Series C Preferred Stock. The Series C
Preferred Stock, together with any accrued but unpaid dividends that the
Company may pay in shares of its Common Stock, is convertible into shares
of the Company's Common Stock. The actual number of shares of Common
Stock into which the preferred stock is convertible is variable with the
conversion price of the Common Stock equal to the lesser of (a) the
Market Price (as hereinafter defined) of the Common Stock on the date of
issuance of the preferred stock, or (b) 75% of the Market Price of the
Common Stock on the date of conversion or redemption of the Series C
Preferred Stock. The Market Price of the common stock is equal to the
average closing bid price of the Common Stock for the five trading day
period immediately preceding the applicable date of issuance, conversion
Page 10 of 12
<PAGE>
or redemption. The 558,659 shares is based on the assumption that the
Market Price of the Common Stock at the time of issuance of the Series C
Preferred Stock is less than 75% of the Market Value of the Common Stock
at the time of conversion or redemption of the Series C Preferred Stock.
(5) Excludes 360,000 unvested options to purchase Common Stock. The vesting
schedule of such options is variable depending upon future performance of
the Company, with March 31, 1997 as the first possible date of vesting of
a portion of the options.
(6) Includes 110,000 shares issuable upon the exercise of stock options.
(7) Includes 425,000 shares issuable upon the exercise of stock options and
12,500 shares issuable upon the exercise of common stock purchase
warrants.
(8) Includes 225,000 shares issuable upon the exercise of stock options. Does
not include 14,500 shares owned by Mr. Lazik's wife; and 12,500 shares
issuable upon the exercise of common stock purchase warrants owned by Mr.
Lazik's wife. Mr. Lazik disclaims beneficial ownership of the shares owned
by his wife or which may be acquired upon exercise of her stock purchase
warrants.
(9) Includes 53,000 shares issuable upon the exercise of stock options. Does
not include 12,500 shares issuable upon the exercise of unvested options.
(10) Consists of 12,375 shares issuable upon the exercise of stock options.
Does not include 15,625 shares issuable upon the exercise of unvested
options.
(11) Consists of 6,250 shares issuable upon the exercise of stock options. Does
not include 18,750 shares issuable upon the exercise of unvested options.
(12) Consists of 6,250 shares issuable upon the exercise of stock options. Does
not include 18,750 shares issuable upon the exercise of unvested options.
(13) Includes 57,000 shares issuable upon the exercise of stock options.
(14) Consists of 188,000 shares issuable upon the exercise of stock options.
(15) Consists of 3,000 shares issuable upon the exercise of stock options.
(16) Includes the 1,098,375 shares issuable upon the exercise of options and
warrants described in footnotes 6, 7, 8, 9, 10, 11, 12, 13, 14, and 15
above. Does not include 425,625 shares issuable upon the exercise of
unvested options described in footnotes 5, 9, 10, 11, and 12 above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid finder's fees of $150,000 and $125,000 to Maximum Partners,
Ltd. relating to private placements of the Company's preferred stock in March
and May, 1996, respectively. A principal of Maximum Partners, Ltd. is the son of
Mr. Lubash, who is a Director of the Company.
James R. Spievak, a former director and the Secretary of the Company, is a
principal in the law firm of Annis & Spievak and was senior shareholder in the
law firm of Shenas, Shaw & Spievak, a Professional Corporation until February
1996. Each of these firms have performed legal services for the
Page 11 of 12
<PAGE>
Company during the last two years. For the year ended March 31, 1996, the fees
related to services provided to the Company by Annis & Spievak and Shenas, Shaw
& Spievak were $10,101 and $236,839, respectively. For the year ended March 31,
1995, the fees related to services provided to the Company by Shenas, Shaw &
Spievak were $238,756.
In November 1994, the Company entered into an investor relations consulting
agreement with Strategic Growth International, Inc. ("SGI"). The agreement was
for a period of one year and provided for cash compensation of $6,750 per
month. Options to purchase 200,000 shares of Common Stock were also issued
pursuant to the terms of the agreement. In March 1995, the Company paid SGI
$40,000 in finders' fees relating to a private placement of Common Stock and
warrants of the Company. In August 1995, the agreement between the Company and
SGI was replaced with an agreement expiring on January 1, 1997. The replacement
agreement provides for a monthly fee of $11,600 and for SGI to provide
additional services to the Company, including merger and acquisition consulting
services, capital financing consulting services and services relating to the
introduction of the Company's products to potential customers.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this Amendment to its Report on Form 10-KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.
CHATCOM, INC.
a California corporation
Dated: July 29, 1996 By: /s/ JAMES B. MARINER
-----------------------------------
James B. Mariner, President and
Chief Executive Officer
Dated: July 29, 1996 By: /s/ JOHN R. GRADY
-----------------------------------
John R. Grady, Chief Financial
Officer and principal accounting
officer
Page 12 of 12
<PAGE>
TROY & GOULD
Professional Corporation
1801 Century Park East, 16th Floor
Los Angeles, California 90067-2367
(310) 553-4441
July 29, 1996
AST5.1
VIA EDGAR
- ---------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: ChatCom, Inc.;
Amendment to Annual Report on Form 10-KSB
for fiscal year ended March 31, 1996
-----------------------------------------
Dear Sir:
On behalf of ChatCom, Inc. (the "Company"), we are transmitting, via EDGAR,
for filing the Amendment to the Company's Annual Report on Form 10-KSB for
fiscal year ended March 31, 1996. If you have any questions, please call me or
Sandy Hillsberg of this office at (310) 553-4441.
Very truly yours,
/s/ Young J. Kim
Young J. Kim
Enclosures
cc: James B. Mariner (w/encl.)
John R. Grady (w/encl.)
Nasdaq Stock Market (w/three copies)
James R. Spievak, Esq. (w/encl.)
Sanford J. Hillsberg, Esq. (w/encl.)
Gary Dickey (w/encl.)
AST5-1.185
