<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended Commission file number: 0-15895
September 30, 1996
DIGITAL MICROWAVE CORPORATION
(Exact name of registrant specified in its charter)
Delaware 77-0016028
- --------------------------------- ----------------------
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
170 Rose Orchard Way
San Jose, CA 95134
- --------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (408) 943-0777
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1996
- ------------------------------ --------------------------------
Common Stock - $0.01 par value 16,094,161
Page 1 of 17
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
COVER PAGE 1
INDEX 2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 15&17
SIGNATURE 16
</TABLE>
Page 2 of 17
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
DIGITAL MICROWAVE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 9/30/96 03/31/96
---------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,245 $ 8,299
Restricted cash 1,301 719
Accounts receivable, net 35,316 33,398
Inventories, net 47,313 35,347
Other current assets 3,712 2,973
----------- ---------
Total current assets 90,887 80,736
PROPERTY AND EQUIPMENT, NET 14,719 15,061
----------- ---------
Total assets $ 105,606 $ 95,797
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 7,662 $ 3,106
Current maturities of note payable 3,333 3,334
Current maturities of capital lease obligations 886 1,025
Accounts payable 16,517 16,252
Income taxes payable 1,273 973
Other accrued liabilities 20,639 18,590
----------- ---------
Total current liabilities 50,310 43,280
LONG-TERM LIABILITIES:
Note payable, net of current maturities 278 1,944
Capital lease obligations, net of current maturities 424 838
----------- ---------
Total liabilities 51,012 46,062
STOCKHOLDERS' EQUITY 54,594 49,735
----------- ---------
Total liabilities and stockholders' equity $ 105,606 $ 95,797
=========== =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 17
<PAGE> 4
DIGITAL MICROWAVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 41,525 $ 41,792 $ 78,332 $ 81,485
Cost of sales 27,783 31,544 52,685 61,252
-------- -------- -------- --------
Gross profit 13,742 10,248 25,647 20,233
-------- -------- -------- --------
Operating Expenses:
Research and development 2,467 2,884 4,928 5,836
Selling, general and administrative 8,702 6,870 16,629 13,343
-------- -------- -------- --------
Total operating expenses 11,169 9,754 21,557 19,179
-------- -------- -------- --------
Operating income 2,573 494 4,090 1,054
Other income (expense):
Interest and other income, net 83 376 96 756
Interest expense (299) (570) (581) (1,241)
-------- -------- -------- --------
Income before provision for
income taxes 2,357 300 3,605 569
Provision for income taxes 235 30 360 57
-------- -------- -------- --------
Net income $ 2,122 $ 270 $ 3,245 $ 512
======== ======== ======== ========
Net income per share $ 0.13 $ 0.02 $ 0.20 $ 0.04
======== ======== ======== ========
Weighted average number of
common & common
equivalent shares outstanding 16,611 14,784 16,436 14,312
======== ======== ======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 4 of 17
<PAGE> 5
DIGITAL MICROWAVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
` Six Months Ended
September 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,245 $ 512
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 2,716 3,295
Provision for uncollectible accounts 700 241
Provision for inventory reserves 1,683 1,370
Provision for warranty reserves 915 736
Changes in assets and liabilities:
Decrease (increase) in restricted cash (582) 393
Decrease (increase) in accounts receivable (2,611) (4,161)
Decrease (increase) in inventories (13,648) 3,048
Decrease (increase) in other current assets (737) 1,522
(Decrease) increase in accounts payable 265 (5,560)
(Decrease) increase in other accrued liabilities 1,433 (856)
------- -------
Net cash (used for) provided by operating activities (6,621) 540
------- -------
Cash flows from investing activities:
Purchases of property and equipment (2,531) (2,886)
------- -------
Cash flows from financing activities:
Borrowings from (repayments to) bank 2,889 (11,452)
Payment of capital lease obligations (553) (451)
Sale of common stock 1,613 15,393
------- -------
Net cash provided by financing activities 3,949 3,490
------- -------
Effect of exchange rate changes on cash 149 106
------- -------
Net increase (decrease) in cash and cash equivalents (5,054) 1,250
Cash and cash equivalents at beginning of year 8,299 1,919
------- -------
Cash and cash equivalents at end of period $ 3,245 $ 3,169
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
Page 5 of 17
<PAGE> 6
DIGITAL MICROWAVE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Digital Microwave Corporation and its wholly owned subsidiaries.
Intercompany accounts and transactions have been eliminated.
While the financial information furnished is unaudited, the financial
statements included in this report reflect all adjustments (consisting
only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the results of operations for the
interim periods covered and of the financial condition of the Company at
the date of the interim balance sheet. The results for interim periods
are not necessarily indicative of the results for the entire year. The
condensed consolidated financial statements should be read in connection
with the Digital Microwave Corporation financial statements included in
the Company's annual report and Form 10-K for the year ended March 31,
1996.
CASH AND CASH EQUIVALENTS
For purposes of the condensed consolidated statements of cash flows, the
Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
RESTRICTED CASH
The Company is required to segregate and maintain certain cash balances
as security for letters of credit provided to secure performance or bid
bonds under some of the Company's revenue contracts. As of September 30,
1996, the Company was required to segregate and maintain $1.3 million
which is included as restricted cash in the accompanying balance sheets.
Page 6 of 17
<PAGE> 7
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market where cost includes material, labor and manufacturing overhead.
Inventories consist of:
<TABLE>
<CAPTION>
(In thousands)
September 30, 1996 March 31, 1996
------------------ --------------
(Unaudited)
<S> <C> <C>
Raw materials $ 15,547 $ 11,840
Work in process 17,741 16,342
Finished goods 14,025 7,165
--------- ---------
$ 47,313 $ 35,347
========= =========
</TABLE>
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period.
LITIGATION AND CONTINGENCIES
The Company is subject to legal proceedings and claims that arise in
the normal course of its business. In the opinion of management, these
proceedings will not have a material adverse effect on the financial
position and results of operations of the Company.
CONCENTRATION OF CREDIT RISK
Trade receivables concentrated with certain customers primarily in the
telecommunications industry and in certain geographic locations
potentially subject the Company to concentration of credit risk. In
addition to sales in Western Europe and North America, the Company
actively markets and sells products in the Far East, Eastern Europe and
South America. The Company performs on-going credit evaluations of its
customers' financial conditions and generally requires no collateral.
Page 7 of 17
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth items from the Condensed Consolidated Statements
of Operations as percentages of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30,
--------------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 66.9 75.5 67.3 75.2
----- ------ ----- -----
Gross profit 33.1 24.5 32.7 24.8
Research & development 5.9 6.9 6.3 7.1
Selling, general & administrative 21.0 16.4 21.2 16.4
----- ------ ----- -----
Operating income 6.2 1.2 5.2 1.3
Other expense, net (0.5) (0.5) (0.6) (0.6)
----- ------ ----- ----
Income before provision
for income taxes 5.7 0.7 4.6 0.7
Provision for income taxes 0.6 0.1 0.5 0.1
----- ------ ----- ----
Net income 5.1% 0.6% 4.1% 0.6%
===== ====== ===== ====
</TABLE>
Net sales for the second quarter of fiscal year 1997 were $41.5 million,
compared to $41.8 million reported in the same quarter of fiscal year 1996. Net
sales for the first six months of fiscal 1997 were $78.3 million, compared to
net sales of $81.5 million for the similar period in fiscal 1996. The decrease
in net sales in the first half of fiscal 1997 was primarily due to lower sales
in Europe and the Americas. Sales in Europe declined from $39.2 million in the
first half of fiscal 1996 to $35.6 million in the similar period in fiscal 1997.
Sales in the Americas of $19.0 million in the first half of fiscal 1997 were
also lower than the $20.7 million reported in the first half of fiscal 1996. The
Asia Pacific region, however, reported an increase in sales in the first half of
fiscal 1997 to $23.7 million compared to $21.6 million in the first half of
fiscal 1996.
During the second quarter of fiscal 1997, the Company received $48 million in
new orders shippable over the next twelve months, compared to $33 million in the
second quarter of fiscal 1996. An increase in orders was reported in all
regions, with Asia Pacific reporting $19 million in new orders, or a 131%
increase, the Americas reporting $10 million in new orders or a 26% increase,
and Europe reporting $19 million in new orders or a 7% increase
Page 8 of 17
<PAGE> 9
from the first quarter of fiscal 1996. Backlog at September 30, 1996 was $85
million, compared to $81 million at June 30, 1996.
The Company includes in its backlog purchase orders with respect to which a
delivery schedule has been specified for product shipment within one year.
Orders in the Company's current backlog are subject to changes in delivery
schedules or to cancellation at the option of the purchaser without significant
penalty. Accordingly, although useful for scheduling production, backlog as of
any particular date may not be a reliable measure of sales for any future
period.
Gross margins in the second quarter and first half of fiscal 1997 were higher
compared to the same periods in fiscal 1996 primarily due to lower manufacturing
expenses, which were the result of lower component material costs and improved
manufacturing efficiency resulting in less overtime and lower expediting costs.
Improved manufacturing yields also contributed to the better gross margin, as
did the new expanded product line of SPECTRUM II(TM). Also, the first half
of fiscal 1996 was negatively impacted by the shipments of interim product to
E-Plus at no margin due to delays in acceptance of SPECTRUM II(TM) equipment.
The Company subsequently received SPECTRUM II(TM) product acceptance from E-Plus
during the second quarter of fiscal 1996. In addition, net sales for the first
six months of fiscal 1997 of SPECTRUM II(TM) increased to $30.3 million or 244%
from $8.8 million for the similar period of fiscal 1996, while net sales for the
M-series product line decreased from $39.8 million to $20.1 million for the same
periods.
Research and development expenses decreased by $0.4 million, from $2.9 million
in the second quarter of fiscal 1996 to $2.5 million in the same period in
fiscal 1997. For the first half of fiscal 1997, research and development
expenses of $4.9 million were $0.9 million lower than the $5.8 million reported
in the comparable period of fiscal 1996. This decrease was primarily
attributable to lower project material costs in connection with the SPECTRUM
II(TM) product as it transitioned from the development stage to the expansion to
other bandwidths in fiscal 1997.
Selling, general and administrative expenses of $8.7 million in the second
quarter of fiscal 1997 were higher by $1.8 million compared to $6.9 million in
the second quarter of fiscal 1996. For the first six months of fiscal 1997,
selling, general and administrative expenses increased by $3.3 million to $16.6
million from $13.3 million in the similar period of fiscal 1996. The increase
was mostly attributable to an increase in personnel and related travel expense,
as well as increased sales office costs, as the Company continued to increase
its sales and worldwide support capability. In addition, there was an increase
in management bonus expense in the first half of fiscal 1997 compared to the
similar period of fiscal 1996 due to the improved profitability of the Company
during that period. Also, the Company accrued consulting fees related to
company-wide process improvement programs in such period.
Page 9 of 17
<PAGE> 10
Interest and other income, net was $83,000 in the second quarter of fiscal 1997
compared to $0.4 million in the similar quarter of fiscal 1996. For the first
half of fiscal 1997, interest and other income, net was $96,000 compared to $0.8
million in the same period of fiscal 1996. This decrease was primarily due to
unfavorable exchange rates on receivables denominated in foreign currencies
during the first half of fiscal 1997 compared to the similar period of fiscal
1996. Interest expense in the second quarter of fiscal 1997 was $0.3 million
compared to $0.6 million in the second quarter of fiscal 1996. For the first six
months of fiscal 1997, interest expense was $0.6 million compared to $1.2
million in the comparable period in fiscal 1996. The decrease in interest
expense for both periods was primarily attributable to lower average principal
balances outstanding on the Company's line of credit and note payable in fiscal
1997 as compared to the prior year.
The Company recorded an income tax provision in the second quarter and first
half of both fiscal years 1997 and 1996 at an effective rate of 10%. This was
less than the statutory rate primarily due to the utilization of the net
operating loss and tax credit carry forwards.
Page 10 of 17
<PAGE> 11
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The statements in this Form 10-Q concerning the Company's expenses, revenue,
liquidity and cash needs contain forward-looking statements concerning the
Company's future operations and financial results within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. The Company
cautions investors that its business is subject to significant risks and
uncertainties. Throughout this Form 10-Q, the Company has made certain estimates
and projections relating to, among other things, new orders, backlog and the
Company's process improvement programs. These forward-looking statements are
based on current expectations and the Company assumes no obligation to update
this information. Numerous factors set forth in the following five paragraphs
and more general risks, such as economic and competitive conditions, incoming
order levels, shipment volumes, product margins, and foreign exchange rates,
could cause actual results to differ from those described in these statements,
and prospective investors and stockholders should carefully consider the factors
set forth below in evaluating these forward-looking statements.
Sales of the Company's products are concentrated in a small number of customers.
For the second quarter and first half of fiscal 1997, the top four customers
accounted for 37% and 38% of the net sales, respectively. As of September 30,
1996, four of the Company's customers accounted for 42% of the backlog. The
worldwide telecommunications industry is dominated by a small number of large
corporations, and the Company expects that a significant portion of its future
product sales will continue to be concentrated in a limited number of customers.
The loss of any existing customer, a significant reduction in the level of sales
to any existing customer, or the failure of the Company to gain additional
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, a substantial
portion of shipments may occur near the end of each quarter. Accordingly, the
Company's results are difficult to predict and delays in product delivery or
closing of a sale can cause revenues and net income to fluctuate significantly
from anticipated levels and from quarter to quarter.
The markets for the Company's products are extremely competitive and the Company
expects that competition will increase. The Company's existing and potential
competitors include large and emerging domestic and international companies,
such as California Microwave Corporation, Alcatel, Ericsson, Siemens AG, Harris
Corporation, Nokia, NEC, and P-Com, many of which have significantly greater
financial, technical, manufacturing, marketing, sales and distribution resources
and management expertise than the Company. The Company believes that its ability
to compete successfully will depend on a number of factors both within and
outside its control, including price, quality, availability, product performance
and features; timing of new product introductions by the Company, its customers
and its competitors; the ability of its customers to obtain financing; and
customer service and technical support. The Company continues to experience
customer demands for shorter delivery cycles. The
Page 11 of 17
<PAGE> 12
Company increased its inventory levels in order to respond to this demand, which
in turn, may increase the risk of obsolescence of the inventories.
The Company expects that international sales will continue to account for the
majority of its net product sales for the foreseeable future. As a result, the
Company is subject to the risks of doing business internationally, including
unexpected changes in regulatory requirements; fluctuations in foreign currency
exchange rates; imposition of tariffs and other barriers and restrictions; the
burdens of complying with a variety of foreign laws and general economic and
geopolitical conditions, including inflation and trade relationships.
Manufacturers of digital microwave telecommunications equipment are
experiencing, and are likely to continue to experience, intense price pressure,
which has resulted, and is expected to continue to result in downward pricing
competition on the Company's products. As a result, the Company has experienced,
and expects to continue to experience, declining average sales prices for its
products. The Company's future profitability is dependent upon its ability to
reduce costs in line with, or faster than, declines in prices.
The Company's manufacturing operations are highly dependent upon the delivery of
materials by outside suppliers in a timely manner. From time to time the Company
has experienced delivery delays from key suppliers which has impacted sales.
There can be no assurance that the Company will not experience material supply
problems or component or subsystem delays in the future.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities in the first half of fiscal 1997 was $6.6
million, compared to net cash provided by operating activities of $0.5 million
in the similar period of fiscal 1996. The increase in cash usage was primarily
due to the increased level of inventory purchases. Total assets at September 30,
1996 increased by $9.8 million to $105.6 million from $95.8 million at March 31,
1996, principally due to the increases in inventory. Inventories increased
primarily as a result of inventory purchases in anticipation of a higher volume
of shipments, and finished goods shipped to customers for which revenue has been
deferred. As a result of the increased inventory, cash and cash equivalents,
decreased from $8.3 million at March 31, 1996 to $3.2 million at September 30,
1996 and borrowings on the Company's line of credit increased from $3.1 million
at March 31, 1996 to $7.7 million at September 30, 1996.
Total liabilities at September 30, 1996 of $51.0 million were $4.9 million
higher than the $46.1 million in total liabilities at March 31, 1996. The
increase was primarily due to higher borrowings for inventory purchases and the
increase in other accrued liabilities for payments received in advance from
customers.
Page 12 of 17
<PAGE> 13
At September 30, 1996, the Company's principal sources of liquidity consisted of
$3.2 million in cash and cash equivalents and a revolving bank credit facility.
At September 30, 1996, $7.7 million was outstanding under the credit facility
with $12.3 million remaining available at such time.
The Company's line of credit and term note payable require the Company to meet
certain financial covenants, including minimum tangible net worth, minimum debt
coverage ratios and profitability requirements. As of September 30, 1996, the
Company was in compliance with the covenants.
The Company believes that the liquidity provided by existing cash balances,
anticipated future cash flows from operations, and the Company's existing
borrowing arrangements will be sufficient to meet both working capital and
capital expenditure requirements for the remainder of fiscal 1997.
Page 13 of 17
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held an Annual Meeting of Stockholders on August 8, 1996.
(b) At the Annual Meeting of Stockholders, the following directors were
elected:
<TABLE>
<CAPTION>
Votes
-----
For Withheld
--- --------
<S> <C> <C>
Charles D. Kissner 13,741,439 478,751
Richard C. Alberding 13,743,560 476,630
Clifford H. Higgerson 13,572,802 647,388
James D. Meindl 13,740,750 479,440
Billy B. Oliver 13,740,250 479,940
</TABLE>
(c) At the Annual Meeting of Stockholders, the following additional
matters were voted upon:
1. A proposal to approve the Company's 1996 Employee Stock Purchase
Plan.
<TABLE>
<S> <C> <C>
Affirmative votes: 8,371,551
Negative votes: 423,883
Abstain: 44,642
Non-votes: 5,380,114
</TABLE>
2. A proposal to ratify and approve certain amendments to the
Company's 1994 Stock Incentive Plan, including an increase in
the number of shares of common stock reserved for issuance
thereunder from 1,183,330 to 2,183,330.
<TABLE>
<S> <C> <C>
Affirmative votes: 5,364,238
Negative votes: 2,729,807
Abstain: 48,562
Non-votes: 6,077,583
</TABLE>
3. A proposal to ratify the selection of Arthur Andersen LLP as
independent public accountants for fiscal year 1997.
<TABLE>
<S> <C> <C>
Affirmative votes: 14,171,716
Negative votes: 18,305
Abstain 30,169
Non-votes --
</TABLE>
Page 14 of 17
<PAGE> 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
For a list of exhibits to this Form 10-Q, see exhibit index located on
page 17.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K for the three-month period
ended September 30, 1996.
Page 15 of 17
<PAGE> 16
SIGNATURE
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.
DIGITAL MICROWAVE CORPORATION
Date: November 13, 1996 By /s/ Carl A. Thomsen
----------------- ---------------------------
Carl A. Thomsen
Vice President and Chief Financial Officer
Page 16 of 17
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1 Restated Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to the Company's Registration Statement on Form
S-1 (File No. 33-13431)).
3.2 Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
year ended March 31, 1993).
4.1 Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
year ended March 31, 1988).
4.2 Rights Agreement dated as of October 24, 1991, between the
Company and Manufacturers Hanover Trust Company of California,
including the Certificate of Designations for the Series A
Junior Participating Preferred Stock (incorporated by reference
to Exhibit 1 of the Company's Current Report on 8-K filed on
November 5, 1991).
10.38 Amendment to Loan Agreement dated June 24, 1996, between the
Company and CoastFed Business Credit Corporation (incorporated
by reference to Exhibit 10.38 of the Company's Quarterly Report
on Form 10-Q filed on August 14, 1996).
10.39 Amendment to Loan Agreement effective as of June 25, 1996,
between the Company and CoastFed Business Credit Corporation.
27.1 Financial data schedule
</TABLE>
Page 17 of 17
<PAGE> 1
EXHIBIT 10.39
AMENDMENT TO LOAN DOCUMENTS
Borrower: Digital Microwave Corporation
Address: 170 Rose Orchard Way
San Jose, California
Date: As of June 25, 1996
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association (successor by
merger to CoastFed Business Credit Corporation) ("Coast"), whose address is
12121 Wilshire Blvd., Suite 1111, Los Angeles, California and the borrower named
above (the "Borrower").
The Parties agree to amend the Amended and Restated Accounts and
Inventory Collateral Security Agreement between them, dated June 25, 1996 (the
"Accounts Agreement"), as follows. (This Amendment, the Accounts Agreement, the
Loan and Security Agreement between Coast and Borrower dated June 25, 1996 (the
"Loan Agreement"), any prior written amendments to said agreements signed by
Coast and the Borrower, and all other written documents and agreements between
Coast and the Borrower are referred to herein collectively as the "Loan
Documents." Capitalized terms used but not defined in this Amendment shall have
the meanings set forth in the Loan Agreement.)
1. Eligible Receivables. Clause (ii) of Exhibit A to the Accounts
Agreement, which presently reads: "(ii) ... are on terms which require
payment in full within 30 days from the date of invoice and are not
unpaid more than 90 days from the date of the original invoice
applicable thereto," is amended to read as follows:
"(ii) ...are not unpaid more than 90 days from the date of the original
invoice applicable thereto."
2. Representations True. Borrower represents and warrants to Coast that
all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
3. General Provisions. This Amendment, the Loan Agreement, and the other
Loan Documents set forth in full all of the representations and
agreements of the parties with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof.
Except as herein expressly amended, all of the terms and provisions of
the Loan Agreement and the other Loan Documents shall continue in full
force and effect and the same are hereby ratified and confirmed.
<PAGE> 2
Borrower: Coast:
Digital Microwave Corporation Coast Business Credit, a division of
Southern Pacific Thrift & Loan Association
By: /s/ Carl A. Thomsen By: /s/ Edit Kondorosi
______________________________ _______________________________________
Carl A. Thomsen Edit Kondorosi
Vice President & Chief Vice President
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,245
<SECURITIES> 0
<RECEIVABLES> 35,316
<ALLOWANCES> 0
<INVENTORY> 47,313
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0
0
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</TABLE>
