<PAGE> 1
As filed with the Securities and Exchange Commission on December 21, 1999
Registration No. 333-26459
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FASTCOMM COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
VIRGINIA 54-289115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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45472 HOLIDAY DRIVE
STERLING, VIRGINIA 20166
TELEPHONE: (703) 318-7750
(Address of principal place of business, and address and telephone number
of principal executive offices)
MARK H. RAFFERTY COPY TO:
CHIEF FINANCIAL OFFICER THOMAS G. AMON, ESQ.
FASTCOMM COMMUNICATIONS CORPORATION SOKOLOW, DUNAUD, MERCADIER
45472 HOLIDAY DRIVE & CARRERAS LLP
STERLING, VIRGINIA 20166 50 ROCKEFELLER PLAZA, SUITE 928
TELEPHONE: (703) 318-7750 NEW YORK, NEW YORK 10020
(Name, address and telephone number TELEPHONE: (212) 315-0175
of agent for service) (Counsel for Registrant)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to a dividend or interest reinvestment plans, please check the following box.
[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ X ] Registration Statement No. 333-26459
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed
maximum Proposed
offering maximum Amount of
Title of each class of Amount to be price per aggregated registration
securities to be registered registered(1) share(2) offering price fee
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Common Shares, par value $.01
per share ......... 1,539,434 $2.375 $3,656,156 $1,097
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===========================================================================================
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<PAGE> 2
(1) Pursuant to Rule 416(a), also registered hereunder is an
indeterminate number of Shares of Common Stock issuable as a result
of the anti-dilution provisions of the Debentures and warrants
exercisable for the shares of Common Stock registered hereby.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee and based, pursuant to Rule 457, on the closing
price of the Common Stock of the Company on the NASDAQ on December
16, 1999.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
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<PAGE> 3
FastComm Communications Corporation
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Showing Location in Prospectus of
information required by Items of Form S-3.
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Item Number and heading in Form
S-3 Registration Statement Caption or Location in Prospectus
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Forepart of the Registration
Statement and Outside Front Cover Forepart of the Registration Statement;
1. Page of Prospectus Outside Front Cover Page of Prospectus
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Inside Front and Outside Back Inside Front and Outside Back Cover Page of
2. Cover Pages of Prospectus Prospectus
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Summary Information and Risk
3. Factors The Company; Certain Risk Factors
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4. Use of Proceeds Use of Proceeds
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5. Determination of Offering Price Outside Front Cover Page of Prospectus
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6. Dilution Not Applicable
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7. Selling Security Holders Selling Shareholders
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Outside Front Cover Page of Prospectus; Plan
8. Plan of Distribution of Distribution
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Description of Securities to be
9. Registered Not Applicable
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Interests of Named Experts and
10. Counsel Experts
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11. Material Change Not Applicable
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Incorporation of Certain
12. Information by Reference Documents Incorporated by Reference
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13. Disclosure of Commission Position Not Applicable
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<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
1,539,434 SHARES
FASTCOMM COMMUNICATIONS CORPORATION
COMMON STOCK
This Prospectus relates to 1,539,434 shares (the "Shares" or the
"Offered Shares") of common stock, par value $.01 per share (the "Common
Stock"), of FastComm Communications Corporation, a Virginia corporation (the
"Company"). The Shares are issuable by the Company upon the exercise of the
warrants (the "Warrants") owned by the Selling Shareholder and which were issued
upon conversion of the Company's 1997 Convertible Debentures (the "Debentures").
The Company issued the Debentures in a private placement transaction to four
accredited investors in April, 1997. To date $ 5,000,000 all of the Debentures
have been converted and 1,539,434 warrants to purchase shares have been issued
and are outstanding. See "Selling Shareholders." Additional Shares that may
become issuable as a result of the anti-dilution provisions of the Warrants are
offered hereby pursuant to Rule 416 under the Securities Act of 1933, as amended
(the "Securities Act").
The Company will receive the exercise price payable upon the
exercise of the Warrants if those Warrants are exercised for cash. There can be
no assurance that all or any part of the Warrants will be exercised for cash. If
all outstanding warrants were exercised, the Company would receive $7,534,000.
All expenses incurred in connection with this offering are being borne by the
Company, other than any commissions or discounts paid or allowed by the Selling
Shareholders to underwriters, dealers, brokers or agents and legal fees of
counsel to the Selling Shareholders, if any.
The Shares being registered under the Registration Statement of
which this Prospectus is a part may be offered for sale from time to time by or
for the account of such Selling Shareholders in the open market, on the NASDAQ
OTC - Bulletin Board, in privately negotiated transactions, in an underwritten
offering, or a combination of such methods, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Offered Shares are intended to be sold through one or
more broker-dealers or directly to purchasers. Such broker-dealers may receive
compensation in the form of commissions, discounts or concessions from the
Selling Shareholders and/or purchasers of the Offered Shares for whom such
broker-dealers may act as agent, or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary concessions). The Selling Shareholders and any broker-dealers who act
in connection with the sale of Offered Shares hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and proceeds of any resale of the Offered Shares may be deemed
to be underwriting discounts and commissions under the Securities Act, See
"Selling Shareholders" and "Plan of Distribution."
The Common Stock of the Company is listed on the NASDAQ-OTC Bulletin
Board under the Trading Symbol FSCX). On December 16, 1999 the last sales price
of the common stock was $2.375 per share. The Shares offered hereby involve a
high degree of RISK. See "CERTAIN RISK FACTORS" at page 3 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 21, 1999
<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934. As required by the Securities Exchange Act, we file
reports, proxy statements and other information with the SEC. The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at regional offices of the SEC at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661 and at Seven
World Trade Center, 13th Floor, New York, New York 10048. In addition, we are
required to file electronic versions of these documents through the SEC's
Electronic Data Gathering, Analysis and Retrieval System (EDGAR). The SEC
maintains a World Wide Web site at http:www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549. The common stock is
quoted on the Nasdaq OTC Bulletin Board Market. Information regarding the
trading of our common stock on the Nasdaq OTC Bulletin Board Market can be
obtained from Nasdaq, 9801 Washingtonian Boulevard, Gaithersburg, Maryland 20878
(202) 496-2500).
We have filed with the SEC a Post Effective Amendment No. 1 to
Registration Statement on Form S-3 under the Securities Act of 1933 with respect
to the securities being offered by this Prospectus. As permitted by the rules
and regulations of the SEC, this prospectus does not contain all the information
set forth in the Registration Statement. For further information with respect to
us and the offer and sale of the securities, reference is made to the
Registration Statement. Statements contained in this prospectus concerning the
provisions of documents filed with the Registration Statement as exhibits are
necessarily summaries of those documents, and each such statement is qualified
in its entirety by reference to the copy of the applicable document filed with
the SEC. The Registration Statement may be inspected without charge at the
public reference facilities of the SEC at the addresses contained in the
preceding paragraph and copies of all or any part thereof may be obtained form
the SEC at prescribed rates.
Pursuant to the rules of the SEC, we are able to "incorporate by
reference" into this document the information that we have on file with the SEC.
This means that we may disclose important information to you by referring you to
other documents. The information incorporated by reference is considered to be
part of this prospectus. In addition, any later information we file with the SEC
and incorporate by reference will update and supersede the information referred
to or contained in this prospectus. We incorporate by reference the documents
listed below and any future filings we make with the SEC under section 13a, 13c,
14 or 15(d) of the Exchange Act until this offering has been completed:
1. Our Annual Report on Form 10-K for the fiscal year ended April
30, 1999, filed with the Commission pursuant to Section 13(a) of
the 1934 Act; and
2. Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
July 31, 1999, and October 30, 1999 respectively, filed with the
Commission pursuant to Section 13(a) of the 1934 Act.
3. The description of the Company's Common Stock registered under
the 1934 Act contained in the Company's Form 8-A filed with the
Commission on September 8, 1988, including any amendments or
reports filed for the purpose of updating such description.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain information set forth in this Prospectus includes "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. In addition, from time to time, we may publish
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. In addition, from time to time, we may publish
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act or make oral statements that constitute
forward-looking statements. These forward-looking statements may relate to such
matters as anticipated financial performance, future revenues or earnings,
business prospectus, projected ventures, new products, anticipated market
performance and similar matters. The words "budgeted," "anticipate," "project,"
"estimate," "expect," "may," "believe," "potential" and similar statements are
intended to be among the statements that are forward looking statements. Because
these statements reflect the reality of risk and uncertainty that is inherent in
our business, actual results may differ materially from those expressed or
implied by such forward-looking statements. You are cautioned not to place undue
reliance on these forward-looking statements, which are made as of the date
hereof.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, we caution you that a variety of factors could cause our actual
results to differ materially from the anticipated results or other expectations
expressed in our forward-looking statements. These risks and uncertainties, many
of which are beyond our control, include, but are not limited to those set forth
under the caption "Risk Factors" on page 4 and in our filings with the SEC.
We undertake no obligation to release publicly any revisions to the
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect unanticipated events or developments.
<PAGE> 6
We will provide without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the documents
incorporated herein by reference (not including exhibits to the information that
is incorporated by reference unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporated). Requests
should be directed to FastComm Communications Corporation, 45472 Holiday Drive,
Sterling, Virginia 20166, (703) 318-7750, Attention: Investor Relations.
No person has been authorized to give any information or to make any
representation other than those contained in, or incorporated by reference into,
this Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any Selling
Securityholders. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy, nor shall there be any sale of these Shares by
anyone, in any state in which such offer, solicitation, or sale would be
unlawful prior to the registration or qualification under the securities laws of
any state, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the information herein or the affairs of the Company since the date
hereof.
CERTAIN RISK FACTORS
This offering involves a high degree of risk. Before you invest in
the shares offered hereby, you should consider carefully the following factors,
in addition to the other information contained in this Prospectus. Our business
and results of operations could be seriously harmed by any of the following
risks. The trading price of our common stock could decline due to any of these
risks, and you may lose part or all of your investment. In addition, this
Prospectus and the documents incorporated herein by reference contain certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such forward-looking statements, which
are often identified by words such as "believes", "anticipates", "expects",
"estimates", "should", "may", "will", and "similar" expressions, represent the
Company's expectations or beliefs concerning future events. Numerous
assumptions, risks and uncertainties, including the factors set forth below,
could cause actual results to differ materially from the results discussed in
the forward looking statements.
WE HAVE A HISTORY OF LOSSES AND MAY EXPERIENCE FUTURE LOSSES.
We have incurred net losses of $595,000 $9,089,000 and $5,550,000
for the years ended April 30, 1997, 1998 and 1999, respectively, and $777,000
and $1,254,000 for the first and second quarter of our fiscal year 2000. These
losses are primarily attributable to sales levels insufficient to meet the costs
associated with the development and marketing of new products in an emerging
technology and to litigation costs and costs associated with the Chapter 11
Bankruptcy described below. Sales levels have been negatively impacted by delays
in product development, delays on the part of the carriers to offer frame relay
services and once offered, incorrect carrier pricing for frame relay services.
The Company actively participates in industry forums that promote frame relay
and ATM services. Further, the Company upgraded and expanded it sales, marketing
and engineering organizations, while decreasing its general and administrative
overhead. The Company is focused on acquisitions and partnership arrangements
intended to expand its technology base and increase sales. There can be no
assurance that the Company will generate sufficient revenues to meet expenses or
to operate profitably in the future.
WE RECENTLY EMERGED FROM BANKRUPTCY.
On June 2, 1998, the Company filed a voluntary petition for
reorganization under Chapter 11 of the federal bankruptcy laws in the United
States Bankruptcy Court for the Eastern District of Virginia. This filing was a
direct result of enforcement activities by a judgment creditor. All litigation
related to this matter has now been settled. On March 30, 1999, the Company's
Plan of Reorganization was approved by the Bankruptcy Court and the Company
emerged from Chapter 11. The Plan of Reorganization became effective on April
12, 1999. The Plan provides for cash and debenture payments equal to 100% of
each allowed claim plus interest. The positions of all common Shareholders was
preserved. The Chapter 11 Bankruptcy filing had a negative impact on the
Company's sales, its relationships with vendors and ability to hire and retain
qualified employees, among other areas. On November 18, 1999 a motion for final
decree was granted and the case was closed.
WE RECENTLY SETTLED AN INVESTIGATION BY THE SEC.
On September 28, 1999, the Company, its CEO and Chairman of the Board, Peter C.
Madsen, and its CFO, Mark H. Rafferty, agreed to a settlement with the
Securities and Exchange Commission (SEC) arising out of the five-year old
investigation of the Company by the SEC. Without admitting or denying the
allegations in the Complaints filed by the SEC, the Company consented to the
entry of a final Judgment which enjoins it from violations of Sections 10(b),
13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934.
Without admitting or denying the allegations, Messrs Madsen and Rafferty each
agreed to consent to the entry of an Order to cease and desist committing or
causing any violations or any future violations of Sections 13(a), 13(b)(2)(A)
and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 promulgated
thereunder. Mr. Rafferty also agreed to cease and desist from committing or
causing any violations or any future violations of Rule 13a-1 promulgated under
the Exchange Act.
<PAGE> 7
WE ARE SUBJECT TO POTENTIAL FLUCTUATION IN OPERATING RESULTS AND MUST MANAGE OUR
INVENTORY AND SOURCE OF SUPPLY.
A significant portion of the Company's sales are derived from
products shipped against firm purchase orders released in the fiscal quarter.
Unforeseen delays in product deliveries or the closing of sales, introduction of
new products by the Company or its competitors, fluctuations in customer capital
expenditures or other conditions affecting the networking industry or the
economy during any fiscal quarter could cause quarterly revenue and net earnings
to vary greatly. Further, the Company schedules some production of its products
and budgets expenses based on forecasts of sales, which are difficult to
predict. The Company's manufacturing procedures are designed to assure rapid
response to customer demand, but may, in certain circumstances, create risk of
excess or inadequate inventory if orders do not match forecast. Moreover,
shortages or delays in the supply of manufacturing components at shipments at
acceptable prices could adversely affect the Company's ability to meet scheduled
product shipments in any particular quarter, which could materially affect the
Company's operating results. Because a substantial portion of customer orders
are filled within the fiscal quarter of receipt, and because of the ability of
customers to revise or cancel orders and change delivery schedules without
significant penalty, quarter to quarter revenues and, to a greater degree, net
earnings, may be subject to greater variability and less predictability. From
time to time, the Company has experienced significant increases in its levels of
inventory in order to meet production requirements of existing or anticipated
orders or as the result of delays in receiving certain components, such as
critical chipsets, from suppliers and the concurrent accumulation of other
inventory. Increased levels of inventory could adversely affect the Company's
liquidity, increase the risk of inventory obsolescence (from cancellation of
orders, failure to receive anticipated orders or otherwise), or increase the
risk of a decline in market value of such inventory or losses from theft, fire
or other similar occurrences. The failure of the Company to effectively manage
its inventory levels could have a material adverse affect on the Company's
financial condition and results of operations.
OUR INDUSTRY IS CHARACTERIZED BY RAPID CHANGES IN TECHNOLOGY AND SERVICES.
The markets for the Company's products are characterized by
continuous technological change, evolving industry standards and frequent
product introductions. Such changes in the market may adversely affect the
Company's ability to sell its products. The Company's ability to anticipate
changes in technology, industry standards and to develop and introduce new and
enhanced products on a timely basis that are successful in the market, will be
significant factors in the Company's competitive position and its prospects for
growth. Moreover, if technologies or standards supported by the Company's
products or carrier service offerings based on the Company's products become
obsolete or fail to gain widespread commercial acceptance, the Company's
business may be adversely affected. As a result, Management believes that
significant expenditures for research and development will be required in the
future. Research and development project schedules for high technology products
are inherently difficult to predict, and there can be no assurance that the
Company will achieve its expected initial shipment dates for products in
development. Because timely availability of new and enhanced products is
critical to the success of the Company, delays in availability of these
products, or lack of market acceptance of such products, could adversely affect
the Company.
WE ARE ENGAGED IN A HIGHLY COMPETITIVE BUSINESS.
The market for networking systems is extremely competitive. In most
of the markets in which we compete our competitors are more established, benefit
from greater market recognition and have greater financial, technological,
production and marketing resources than we do. Competition could become even
more intense if new companies enter the market or if our existing competitors
expand their product lines. We compete on the basis of product features and
capabilities, performance and price. An increase in competition could have an
adverse effect on our operating results, both in terms of lost market share and
revenues and required investments in research and development and sales and
marketing in order to remain competitive. There can be no assurance that we will
be able to make technological advances or that we will have sufficient resources
to fund the necessary research and development, marketing and sales efforts that
will enable us to profitably compete in our markets. On June 2, 1998, the
Company filed a voluntary petition for reorganization under Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court for the Eastern
District of Virginia. This filing was a direct result of enforcement activities
by a judgment creditor. All litigation related to this matter has been settled.
On March 30, 1999, the Company's Plan of Reorganization was approved by the
Bankruptcy Court and the Company emerged from Chapter 11 on April 12, 1999. The
Plan provides for cash and debenture payments equal to 100% of each allowed
claim plus interest. The positions of all common shareholders was preserved.
This filing had a negative impact on sales during the 1999 fiscal year and, at
this time, the Company is unable to predict the effect this filing and the
subsequent reorganization will have on its ability to compete in its
marketplace. On November 18, 1999 a motion for final decree was granted and the
case was closed.
WE RELY ON A LIMITED NUMBER OF KEY EMPLOYEES.
Our success depends to a significant degree upon the continued
contributions of our management, marketing, engineering and technical personnel,
many of whom would be difficult to replace. In addition, as we continue to
develop the ChanlComm product line, we will need to attract and retain
additional qualified personnel. There is intense competition for qualified
personnel in our industry, and there can be no assurance that we will be able to
attract and retain the qualified personnel necessary for the development of our
business. Loss of the services of any of our key employees would be detrimental
to our development. We do not have "key man" life insurance on any of our
officers or directors.
<PAGE> 8
THE PRICE OF OUR SHARES IS SUBJECT TO PRICE VOLATILITY.
The Company's common shares have been subject to substantial market
price volatility, some of which has occurred when there have been variations
between the company's actual or anticipated financial results and the
expectations of that of the financial community and in the aftermath of public
announcements by the Company and its competitors. Further, the stock market has
experienced extreme price and volume fluctuations from time to time which have
affected the market price of many technology companies in particular and which
have often been unrelated to the operating performance of these companies. These
broad market fluctuations, as well as general economic conditions, may adversely
affect the market price of the Company's common shares in the future. On June 9,
1998 the Company's shares were delisted from the NASDAQ National Market System.
The shares are currently quoted on the NASDAQ OTC Bulletin Board.
WE MUST BE ABLE TO ADAPT TO CHANGES IN PROTOCOL AND OTHER TECHNOLOGY.
New Data Protocols may be developed that could displace the
protocols currently supported in Company products, requiring additional software
development to sustain the viability of those products. An announcement of such
new protocols could have a negative effect on sales of older designs, as users
hesitate to install equipment based on existing designs until they have
evaluated the new ones. There can be no assurance that the Company would have
the necessary resources, particularly the knowledgeable employees, to implement
new protocols in a timely manner. Such failure to develop adequate products in
response to new technology could adversely affect the Company's profitability.
Asynchronous Transfer Mode (ATM) is a new technology for transmitting digital
information, including voice and data, over a public or private network.
Telephone companies and other operators of public network are deploying ATM in
their backbone segments. If the ATM technology becomes much less expensive, ATM
services could become economically more attractive than frame relay services
that currently are involved in the bulk of the Company's business. If ATM were
to become more popular than frame replay, the Company would need to develop new
products, retrain its employees, and educate its sales and distribution channel
partners. There can be no assurance that the Company will have the resources
necessary to develop appropriate products in a timely manner.
WE MUST INTRODUCE NEW PRODUCTS TO COMPETE
The Company's future revenue is dependent on its ability to
successfully develop, manufacture and market products. In this regard, future
growth is dependent on the Company's ability to timely and successfully develop
and introduce new products, establish new distribution channels, develop
affiliations with leading market participants which facilitate product
development and distribution, and market existing and new products with service
providers, resellers, channel partners, and others. The introduction of new or
enhanced products requires the Company to manage the transition from older
products in order to minimize disruption in customer ordering patterns, avoid
excessive levels of older product inventories and ensure that adequate supplies
of new products can be delivered to meet customer demand. In addition, as the
technical complexity of new products increases, it may become increasingly
difficult to introduce new products quickly and according to schedule. There can
be no assurance that the Company will successfully manage the transition to new
products or that the Company's research and development efforts will result in
commercially successful new technology and products in the future.
WE MAY NEED TO SEEK ADDITIONAL CAPITAL TO FULFILL OUR BUSINESS PLAN
The Company's ability to make future capital expenditures and fund
the development and launch of new products, are dependent on existing cash and
some or all of the following: demands on cash to support inventory for the frame
relay products and the Company's return to profitability. The timing and amount
of the Company's future capital requirements can not be accurately predicted,
nor can there be any assurance that debt or equity financing, if required, can
be obtained on acceptable terms. There can be no assurance that the company will
have cash available in the amounts and at the times needed.
SOME COMPONENTS OF OUR PRODUCTS ARE AVAILABLE TO US ONLY FROM A LIMITED NUMBER
OF SUPPLIERS
Certain components used in our products are currently available from
only one source and other of the components are available from only a limited
number of suppliers. Although we have generally been able to obtain adequate
supplies of components to date, our inability to develop alternative sources if
and as required in the future, or to obtain sufficient sole source or limited
source components as required, could result in delays or reductions in product
shipments. Certain products that are or may in the future be marketed with or
incorporated into our products are supplied by or under development by third
parties. These third parties may be the sole suppliers of such products. While
the Company believes there are a number of suitable manufacturers, there can be
no assurance that current or alternative sources will be able to supply all of
our demands on a timely basis. Also, an unanticipated interruption in supply
could have a short-term effect on our business. It will not be economically
practical for the Company to develop its own manufacturing capacity in the
foreseeable future.
<PAGE> 9
WE ARE DEPENDENT ON PATENTS AND PROPERTY RIGHTS TO PROTECT OUR POSITION IN THE
INDUSTRY
The Company's success depends in part upon its technological
expertise and proprietary product designs. The Company relies upon its trade
secret protection efforts and, to a lesser extent, upon patents and copyrights
to protect its proprietary technologies. There can be no assurance that these
steps will be adequate to deter misappropriation or infringement of its
proprietary technologies or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to the same extent as do the laws
of the United States. Further, given the rapid evolution of technology and
uncertainties in intellectual property law, there can be no assurance that the
Company's current or future products will not be determined to infringe
proprietary rights of others. Should the Company be sued for patent
infringement, there can be no assurance that the Company will prevail, or, if
required by such litigation, that it will be able to obtain the requisite
licenses or rights to use such technology on commercially reasonable terms. In
addition, any litigation, regardless of the outcome, could result in substantial
costs to the Company.
WE COULD BE AFFECTED BY GOVERNMENTAL RESTRAINTS OR CHANGES IN GOVERNMENTAL
POLICY
The Company's products are subject to regulation by the Federal
Communications Commission (the "FCC"), and each of the Company's products must
typically be tested before it can be introduced into the market. Any inability
of the Company's products to conform to FCC regulations or any failure of the
Company's products to meet FCC testing requirements could delay the introduction
of the Company's products into the market, impact the Company's relationships
with its OEMs and otherwise adversely affect the Company. Foreign authorities
often establish telecommunications standards different from those in the United
States, making it difficult and more time-consuming to obtain the required
regulatory approvals. Any significant delay in obtaining such regulatory
approvals could have an adverse effect on the Company's operating results.
Furthermore, changes in such laws, regulations, policies or requirements could
affect the demand for the Company's products or result in the need to modify
products, which may involve substantial costs or delays in sales and could have
an adverse effect on the Company's future operating results.
OUR OUTSTANDING SHARES MAY BE DILUTED
A substantial number of shares of Common Stock are or will be
issuable by the Company upon the exercise of warrants and options which the
Company has issued, which could result in dilution to a shareholder's percentage
ownership interest in the Company and could adversely affect the market price of
the Common Stock.
On December 1, 1999, there were issued and outstanding a total of
17,999,271 shares of Common Stock. If all warrants and stock options which the
Company has issued were deemed converted and exercised, as the case may be, as
of December 1, 1999, there would be issuable approximately 5,983,000 shares of
Common Stock. Upon such conversion and exercise, there would be outstanding
26,543,689 shares of Common Stock. The sale or availability for sale of a
significant number of shares of Common Stock in the public market could
adversely affect the market price of the Common Stock. The availability to the
Company of additional equity financing, and the terms of any such financing, may
also be adversely affected by the foregoing.
THE COMPANY
INTRODUCTION
FastComm Communications Corporation (the "Company" or "FastComm"), designs,
develops, and manufactures network routing and switching equipment, controllers
and processors for Internet and frame relay networks, mainframe communications
controllers for IBM mainframe environments, multi-protocol access controllers
for Unisys users and an advanced voice/fax/video/data convergence routers for
enterprise and carrier users. The Company provides optimal migration paths for
legacy networks moving toward newer IP (Internet Protocol) routing technologies.
FastComm provides customers with modern networking technology as a
cost-efficient means of bridging old networks to new networks. FastComm prides
itself on its ability to customize private networks to attain the specific needs
of their customers. Its customer base includes state and federal agencies,
telephone companies and domestic and multi-national corporations.
The Company's strategy is to produce high quality value-added network routing
and switching equipment - that are the easiest to install, use and maintain -
for several market segments: Legacy-to-LAN transition, Internet/Intranet access,
and Voice/Fax and Data integration. The Company targets business customers
primarily, and designs its products for volume sales through third party
resellers such as network product and service dealers, systems integrators,
telephone carriers, PTT's, and original equipment manufacturers ("OEM's"). These
resellers form a primary distribution channel for the Company and also provide
installation and maintenance services in the United States and internationally.
The Company was incorporated as MicroTel, Inc. under the laws of the
Commonwealth of Virginia in May 1983. The Company changed its name to Data Safe
Incorporated in February 1984; to electronic Vaults, Inc., in August 1984; and
to FastComm Communications Corporation, in October 1987.
During the fiscal year ended April 30, 1997, the Company acquired Comstat
Datacomm Corporation, ("CDC or Comstat"), a Georgia corporation engaged in the
data communications business.
<PAGE> 10
In May 1998, FastComm obtained an exclusive license from KG Data Systems, Inc.,
("KG Data") to manufacture, market and sell that firm's ChalComm product line, a
replacement for channel attached front end processors in IBM based mainframe
networks. Effective March 31, 1999, FastComm acquired all of the assets and
assumed certain liabilities of KG Data. This business is now internally
identified as the Mainframe Communications Division.
Prior to June 9, 1998, FastComm shares were traded publicly on the NASDAQ
National Market under the symbol FSCX. On June 9, 1998, the Company's shares
were delisted from the National Market System. Effective June 16, 1998, the
Company's shares have been quoted on the OTC Bulletin Board under the same
symbol.
PETITION FOR REORGANIZATION UNDER CHAPTER 11 OF THE FEDERAL BANKRUPTCY LAWS
On June 2, 1998, the Company filed a voluntary petition for reorganization under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Eastern District of Virginia. This filing was a direct result of
enforcement activities by a judgment creditor. All litigation related to this
matter has been settled. On March 30, 1999, the Company's Plan of Reorganization
was approved by the Bankruptcy Court and the Company emerged from Chapter 11.
The Plan of Reorganization became effective on April 12, 1999. The Plan provides
for cash and debenture payments equal to 100% of each allowed claim. The
positions of all common Shareholders were preserved.
Pursuant to the Plan, Class 1 creditors representing existing holders of
convertible debentures, were required to convert their debt to equity on or
before October 12, 1999. The remaining outstanding Class 1 claims totaled
approximately $200,000. Such conversion was at the current market price, i.e.
the average of the prior 10 days closing bid price. In addition, all penalties
were waived. Upon conversion the Company issued warrants at 125% of the closing
price on the day of conversion. Claims of unsecured creditors, below $1,000,
were repaid in cash on or before April 30, 1999. Claims of unsecured creditors
greater than $1,000 were satisfied by two cash payments totaling 25% of the
allowed claim. The Company issued debentures to these unsecured creditors for
the remaining 75% of their allowed claims. The claim of Gary Davison related to
the judgment of $1,195,560 obtained against the Company was reduced to $900,000
and allowed as an unsecured no priority claim. The Company then dismissed its
appeal of the state court verdict underlying the Davison claim and Davison
withdrew a second claim of $2,350,000 related to a pending trial on another
matter associated with his dismissal from the Company. Prior to confirmation of
the Plan, the Company's president assumed the allowed claim, the effect of which
is the amount due Davison will now be paid to him.
In funding its Plan, the Company raised $1,000,000 by selling common stock in a
private offering. The debentures, totaling $2,490,357 issued to the unsecured
creditors, including the President in connection with purchase of the Davison
claim, mature in April 2003. The debentures will be convertible into common
stock of the Company between the first and fourth anniversary of the effective
date of the Plan. The debentures are convertible at the average of the closing
price of the Company's common stock for the ten consecutive trading days ending
on the trading day immediately prior to conversion. The debentures bear interest
at 7.5%, payable in common stock of the Company. If not converted sooner, all
debentures must be converted to common stock by April 2003. The Company has the
right, at any time, to redeem for cash at par value all of the outstanding
debentures plus any accrued interest. Each debenture holder has the additional
right to surrender the entire debenture to the Company on April 12, 2000 and
receive cash equal to 15% of the holder's original allowed claim plus interest.
The Company plans to introduce several new products to its customers in fiscal
2000, some of which will be the ChanlComm products formerly manufactured by KG
Data Systems, Inc. Also, the Company is increasing its marketing efforts in
Latin America, Korea and China in hopes of generating additional revenue. In
addition, the Company expects to reduce administrative expenses in fiscal 2000
due to the elimination of legal fees related to the Davison litigation and the
bankruptcy filing.
While the Company is optimistic that it can execute its revised business plan,
there can be no assurance that the increased sales necessary to return to
profitability will materialize or if they do, that the Company will be able to
raise sufficient cash to fund the additional working capital requirements.
DESCRIPTION OF BUSINESS
NETWORKING INDUSTRY
The networking industry encompasses a broad range of communications services and
equipment. Communications in the form of voice, fax, data - Internet traffic,
electronic mail, on-line transaction processing, imaging, video
teleconferencing, are transmitted across wide-area communication networks. As
demand for these information services grows, communication networks expand in
terms of the number of sites and users, the number of formats and types of
information, and the volume and speed of information to be communicated by each
user.
The network products industry categories that FastComm addresses divides itself
into three major areas:
1. BACKBONE COMPONENTS AND SYSTEMS, consisting of large switches and
multiplexers that manage wide area network (WAN) transmission lines that provide
connectivity for these devices. Public network service providers purchase
backbone components for their central offices, often identified as Point of
Presence (POP). Private networks install them at headquarters, major regional
centers, and the largest branch locations.
2. REMOTE ACCESS DEVICES, typically smaller equipment located in branch and
remote offices, attached to the backbone network through a single digital
telephone line. An access device may be part of a local area network (LAN)
within a building or directly connect to a telephone line for outside access.
3. MAINFRAME COMMUNICATION CONTROLLERS, are devices that interface to IBM
mainframe computers through very high-speed channels. These controllers have the
same channel connections as tape drives, disk drives and high speed printers and
typically are located in environmentally controlled rooms designed for large
mission-critical data processing operations. For more than 25 years, IBM has
been the custodian of its System Network Architecture (SNA) and corresponding
Network Control Program (NCP) products and services. These controllers are
designed to communicate at various speeds to remote locations only.
<PAGE> 11
FASTCOMM'S PRODUCTS
The Company's products address all three areas of the network products industry.
Its frame relay access devices, WEBrouter, Quick and MetroLAN serve as remote
access devices. The GlobalStack provides a backbone system solution. The
ChanlComm serves the mainframe communications controller marketplace.
MULTIPORT/MULTIPROTOCOL FRAME RELAY ACCESS DEVICES
The majority of the Company's revenue comes from the sale of frame relay access
devices (FRAD's) and multiprotocol access routers. FastComm FRADs provide cost
effective access to Frame Relay networks with support for a variety of LAN and
LEGACY protocols including TCP/IF, SLIP, PPP, IPX HDLC (Bit Sync), SNA RFC-1490,
BISYNC, Burroughs Poll/Select, Telnet Client & Sever, X.25 Switching, XXX PAD,
Annex-G, Frame Relay Switching, Apple Talk, ALC and Async. All FRADs include an
integral CSU/DSU or high speed serial network interface, support remote
configuration and management via Telnet and SNMP, and comply with industry
standard RFC1490 for internetworking with routers. The FastConnect feature
allows a FastComm FRAD to automatically learn the network management protocol,
DLCIs and its IP address for management. This allows a network manager to ship
an unopened FRAD to a remote site, have a non-technical person plug it in, and
from the central site, access the FRAD via Telnet to complete the configuration.
Frame relay is a simple way to transfer (relay) blocks of date (frames) on a
"best effort" basis (without error correction) across a public or private
network. Frame relay take advantage of the high-quality (low error rate) of
digital and optical fiber transmission lines to simplify communications by not
correcting errors. Error correction is performed by computers and terminals
attached to the network, not the network itself. Frame relay standards define
the format for the date blocks sent to the network. The Company's frame relay
access devices and routers adapt terminals, computers, telephone equipment, and
facsimile machines to the industry standard frame relay format. FRAD market
studies from major consultants such as the Yankee Group and Vertical Systems
indicate that frame relay service revenues and unit counts are expected to grow
at a rate of 30% or more annually past the year 2000.
The Company's FRADs, which also function as routers, connect pcs, workstations,
local area networks ("LAN"), and host computers to a frame relay service. Data
formats on FastComm FRADs are compatible with standard routers for the most
important LAN protocols: IP, IPX and AppleTalk. A solution comprised of mixing
FRADs at some sites with routers at others is less expensive than deploying
routers everywhere. Certain Internet service providers (ISPs) offer FastComm
routers as part of their product package, with frame relay service between the
ISP site and those customers who require full time Internet access or to
maintain a site on the World Wide Web.
In addition to standards compatibility, FastComm relies on additional
proprietary features to add value and distinguish its products. To the best of
the Company's knowledge, no competitor currently offers, in a single product
line, all the features listed below:
1. Automatic installation has been a key advantage, in the form of three
specific features that make FastComm products easier to install than those of
its competition.
* FastConnect allows a FastComm FRAD to learn how the frame relay
network switch is configured.
* FastConfig allows an EtherFRAD, RingFRAD or WEB.router to learn its IP
addressing.
* Save and restore configurations between the FRAD or WEB.router and a
management station
2. MaximumPRIORITY and FastRATE features provide sophisticated, multiprotocol
prioritization and congestion control, a feature typically found only in
transmission switches. These features enable the Company's FRAD and router
products to combine multiple "mission critical" applications over a single
network connection while offering a superior quality of service. When used in
conjunction with a wide are network or service that also offers prioritization
of applications (virtual circuits), the Company's products can be used to offer
end-to-end prioritization, a highly distinguishing feature.
3. A menu system on a dedicated port, for management and configuration, guides a
user to select and set options for the installation process or to perform
maintenance procedures. It also offers easy access to management information and
statistics. Many competitors, in contrast, typically offer only a command line,
which requires the user to learn and manually enter exact commands in the
proper format and order. This is a slow, error prone and costly process.
A distinguishing feature of FastComm FRADs is their ability to handle terminal
protocols with intelligence. An example of this intelligence is seen when
dealing with polled protocols like IBM's SDLC (synchronous data link control)
where more than half the data on a line may be overhead, not information.
FastComm FRADs can eliminate this polling overhead and pass only user
information. The Company's equipment emulates multidrop lines, the most common
type found in over 50,000 IBM SNA (system network architecture) networks.
FastComm FRADs save bandwidth, improve response times and simplify network
topologies.
Recent versions of the front end processor for IBM mainframe computers and the
midrange AS/400 are compatible with direct connections to frame relay networks.
FastComm FRADs support the protocol conversion necessary for SDLC devices to
interoperate directly with a front end process or AS/400. As with router
networks, FRADs at remote sites with terminal cluster controllers can reduce the
overall cost of a network.
Additional customer interest has been expressed in the direct Ethernet LAN port
on the EtherFRAD models, the Token Ring port in RingFRAD models. The Company
also offers a Basic Rate interface (BRI) module to attach to the ISDN
(integrated Services Digital network), a digital telephone service. This module
becomes part of an EtherFRAD.
Voice over frame relay became popular during fiscal 1997. In response, the
Company introduced the VoiceFRAD a multiport/multiprotocol voice over frame
relay
<PAGE> 12
access device. FastComm VoiceFRADs provide cost effective data and voice access
over frame relay networks and support a variety of standard voice interfaces.
Voice is digitized and compressed using a CELP algorithm that produces high
voice quality at compression ratios of 8:1 and more. In response to a request
from its then largest customer, the Company had been reselling a voice product
manufactured by another vendor. Typically, arrangements such as this produce
minimal gross margins. In order to rectify this situation, the Company is
developing its own integrated voice/data product for sale in the current fiscal
year. These products, the GlobalStack and metroLAN, are expected to generate
gross margins significantly greater than those generated by the Company's
previous voice based offerings.
WEB.ROUTER
The WEB.router product, a low cost Internet access router, provides the
Company's solution for Internet access over frame relay. The Internet and its
World Wide Web are usually accessed over a dialed up connection or a leased line
carrying the Internet protocol (IP) in a format called Point to Point Protocol
(PPP). With the large number of new Internet users, service providers are
finding frame relay an efficient way to offer connections to many customers over
a single data line at the ISP's site. WEB.router devices were designed for
Intranet applications of World Wide Web technology (within companies) as well as
general Internet access.
ISDN
The Company offers Basic Rate Interface (BRI) module to attach to the ISDN
(Integrated Services Digital network, a digital phone service). This module
becomes part of an EtherFRAD, for example. The BRI is an all-digital method to
access a telephone company central office. A BRI can carry frame relay and voice
at the same time. Software enhancements allow a Company product to use the BRI
as its main connection, or as a way to dial up a replacement connection if for
any reason the original frame relay access line is lost. The BRI option is
offered in different versions for North America and Europe.
GLOBALSTACK
The GlobalStack-EX voice/fax/data/video router combines digital and analog voice
from switches, PBSs, key systems, and remote telephones with LAN/legacy data and
transports it over switched or dedicated digital networks. With digital T1, E1,
ISDN BRI and PRI interfaces, frame relay interfaces for data equipment, an
Ethernet port, and FastComm's routing software, the GlobalStack-EX is the
perfect solution for integrating voice/fax data and multimedia throughout the
enterprise network. The GlobalStack-EX satisfies large regional and central site
office and POP locations where a confluence of communication mediums converge.
The GlobalStack-EX is compliant with FRF.11, supporting voice compression (with
silence suppression) and allows up to 30 voice channels to be transported in
less than 300Kbps. Bandwidth is dynamically allocated between voice/video/data
so that LAN traffic may continually adapt to fill the unused bandwidth.
METROLAN
The MetroLAN router combines analog voice from switches, PBSs, key systems,
telephones, and the PSTN with LAN/legacy data & multimedia and transports it
over switched or dedicated digital networks. MetroLAN satisfies the needs of
small office/branch office that require optimum phone line performance. With
FastComm's routing software, three analog voice ports, two data equipment serial
interfaces and an Ethernet port, the MetroLAN is the perfect solution for
voice/fax/data and video applications.
The MetroLAN is compliant with FRF.11, supporting voice compression (with
silence suppression) which allows up to 3 voice channels to be transported in
less than 30Kbps. Bandwidth is dynamically allocated between voice/video/data so
that LAN traffic may continually adapt to fill the unused bandwidth.
DATA CONTROLLER
Data Controllers are small data PABX's that allow up to seven devices to be
managed with a single telephone line and modem. A management station places one
call to the data controller, then communicates with up to seven attached
devices. A typical example would be a branch office equipped with a CSU,
multiplexer, bridge or router, terminal controller, and voice PABX or key
system. In addition to supporting dial-in access, the Data controller will
accept information from any of the managed devices, then dial out to the central
management station, through the modem, and deliver that information - for
example, an alarm message. This product is sold as the SuperView device.
QUICK PRODUCT LINE
The Quick II targets Unisys A and C-series mainframe customers who have been
using legacy CP2000 equipment. Unisys sells and supports the Quick II to
customers who require cost-effective network solutions for communication between
legacy mainframe, peripheral and LAN applications. FastComm supports over 100
protocol variations which legacy equipment users depend on for seamless
operations. The foundation of the Quick II is based on FastComm's streamline
FRADs and WEB.router, which adds to the ease of support and configuration
management. Sales of Quick II products totaled $1,748,000 during the fiscal year
ended April 30, 1999.
CHANLCOMM MAINFRAME COMMUNICATIONS PROCESSOR
During fiscal 1999, the Company began to market the ChanlComm product family as
a replacement for the front end processor ("FEP") in IBM mainframe computer
networks. The ChanlComm takes its name from being "channel attached" to a main
computer, bypassing the typical front end processor installed to handle
communications lines. This product is now shipping with serial (SDLC) interfaces
for wide area network lines (point to point and multidrop). The product
development plan included the addition of a direct frame relay interface, full
IP routing, along with other capabilities and protocols. The current 16 port
capacity will be expanded to at least 256 ports this fiscal year. In certain
applications, the ChanlComm at the host computer will communicate with FastComm
FRADs or routers at remote sites, creating "pull through" business for the
Company.
<PAGE> 13
NEW PRODUCT DEVELOPMENT
The Company invests heavily in research and development ("R&D") and expects such
investment to continue. Recorded expenses for research and development have been
as follows:
<TABLE>
<S> <C>
FY 1999 $2,388,000 51% of revenue
FY 1998 $2,255,000 25% of revenue
FY 1997 $2,042,000 18% of revenue
</TABLE>
The purchase of KG Data involves continuing product development on the ChanlComm
communications processors. The work plan includes the addition of several
protocol variants, including a frame relay network interface, and expansion of
overall capacity.
Competitive pressure requires aggressive pricing. Product development stresses
low cost, reliable components and ease of assembly. A modular approach allows
many different products to be created from a few basic components. To keep costs
low or to bring a product to market quickly, any design may be done entirely
internally, externally, jointly with another firm, or from licensed technology.
Larger companies, with larger engineering resources and more internal expertise,
may be able to develop a larger portion of their products without outside
technology. Not having to pay licensing fees or royalties could provide them a
cost advantage.
Research and development project schedules for high technology products are
inherently difficult to predict, and there can be no assurance that the Company
will achieve its expected initial shipment dates of products in development. The
timely availability of new and enhanced products is critical to the success of
the Company. Delays in availability of these new products, or lack of market
acceptance of such products, could adversely affect the Company.
The company's ability to anticipate changes in technology, industry standards
and communications service provider offerings, and its ability to develop and
introduce new and enhanced products on a timely basis that are successful in the
market will be a significant factor in the Company's competitive position and in
its prospects for growth.
USE OF PROCEEDS
The Company has not received any proceeds form the sale of shares
sold by the Selling Securityholders pursuant to conversion of their Debentures.
If outstanding Warrants held by certain of the Selling Securityholders are
exercised, we will receive up to $7,534,000 reflecting the total exercise price
of the Warrants. Such proceeds will be used for general corporate purposes and
working capital.
<PAGE> 14
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling
Shareholders, the number of Warrants beneficially owned by such Selling
Shareholder as of December 10, 1999 and the number of Shares underlying these
Warrants which may be offered for sale pursuant to this Prospectus by each such
Selling Shareholder upon exercise of these Warrants. None of the Selling
Shareholders has held any position, offices, or other material relationship with
the Company or any of its affiliates within the past three years other than as a
result of his or its ownership of Common Shares. The Offered Shares may be
offered from time to time by the Selling Shareholders named below. However, such
Selling Shareholders are under no obligation to sell all or any portion of such
Offered Shares, nor are the Selling Shareholders obligated to sell any such
Offered Shares immediately under this Prospectus. All information with respect
to share ownership has been furnished by the Selling Shareholders. Because
Selling Shareholders may sell all or part of their Offered Shares, no estimate
can be given as to the number of Common Shares that will be held by any Selling
Shareholder upon termination of any offering made hereby.
Pursuant to Rule 416 of the Securities Act, Selling Shareholders may
also offer and sell Common Shares issued with respect to the Warrants as a
result of stock splits, stock dividends and anti-dilution provisions.
<PAGE> 15
<TABLE>
<CAPTION>
===========================================================================================
Number of Common Common Shares
Beneficially Owned After Offering(2)
Shares Owned Percentage of
Prior to Common Shares
Name of Selling Shareholder Offering (1) Offered Hereby Number Outstanding
- --------------------------- ------------ -------------- ------ -----------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Ventures
International(3) (4) 936,093 936,093 - 0 - - 0 -
- -------------------------------------------------------------------------------------------
Nelson Partners (3) (4) 253,925 253,925 - 0 - - 0 -
- -------------------------------------------------------------------------------------------
Olympus Securities, Ltd. (3) 253,925 253,925 - 0 - - 0 -
- -------------------------------------------------------------------------------------------
CC Investments, LDC. (3) 95,891 95,491 - 0 - - 0 -
- -------------------------------------------------------------------------------------------
===========================================================================================
</TABLE>
(1) Represents shares underlying warrants which have varying exercise prices.
(2) Assumes the sale of all Offered Shares.
(3) Pursuant to the Securities Purchase Agreement, dated April 9, 1997, among
the Company and Capital Ventures International, Nelson Partners, Olympus
Securities, Ltd., CC Investments, LDC. (collectively, the "Investors"), the
Investors purchased an aggregate of $5,000,000 principal amount of
Debentures. The Debentures were convertible into Shares of Common Stock and
Warrants (the "Warrants") to acquire a number of Shares of Common Stock
equal to up to forty percent (40%) of the number of Common Shares of Common
Stock issuable upon conversion of each Debenture.
(4) Citadel Limited Partnership is the managing general partner of Nelson
partners ("Nelson") and the trading manager of Olympus Securities, Ltd.
("Olympus") and consequently has voting control and investment discretion
over securities held by both Nelson and Olympus. The ownership information
for Nelson does not include the shares owned by Olympus and the Ownership
information for Olympus does not include the shares owned by Nelson.
<PAGE> 16
PLAN OF DISTRIBUTION
The Offered Shares may be offered on behalf of the Selling Shareholders,
and, except for the cash exercise price of the Warrants, the Company will not
receive any proceeds from the Offering. The Offered Shares may be sold or
distributed from time to time by the Selling Shareholders, or by pledges, donees
or transferees of, or other successors in interest to, the Selling Shareholders,
directly to one or more purchasers (including pledges) or through brokers,
dealers or underwriters who may act solely as agents or may acquire Offered
Shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. The distribution of the Offered Shares may be
effected in one or more of the following methods: (i) ordinary brokers'
transactions, which may include long or short sales (ii) transactions involving
cross or block trades or otherwise on the NASDAQ OTC Market; (iii) purchases by
brokers, dealers or underwriters as principal and resale by such purchasers for
their own account pursuant to this Prospectus; (iv) "at the market " to or
through market makers or into an existing market for the Common Shares; (v) in
other ways not involving market makers or established trading markets, including
direct sales to purchasers or sales effected through agents; (vi) through
transactions in options, swaps or other derivatives (whether exchange-listed or
otherwise), or (vii) any combination of the foregoing, or by any other legally
available means. In addition, the Selling Shareholders or their successors in
interest may enter into hedging transaction with broker-dealers who may engage
in short sales of Offered Shares in the course of hedging the positions they
assume with the Selling Shareholders. The Selling Shareholders or their
successors in interest may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the Offered
Shares, which Offered Shares may be resold thereafter pursuant to this
Prospectus.
Brokers, dealers, underwriters or agents participating in the distribution
of the Offered Shares as agents may receive compensation in the form of
commissions, discounts of concessions from the Selling Shareholders and/or
purchasers of the Offered Shares for whom such broker-dealers may act as agent,
or to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions). The Selling Shareholders and any broker-dealers who act in
connection with the sale of Offered Shares hereunder may be deemed to be
"Underwriters" within the meaning of the Securities Act, and any commissions
they receive and proceeds of any sale of Offered Shares may be deemed to be
underwriting discounts and commissions under the Securities Act. Neither the
Company nor any Selling Shareholder can presently estimate the amount of such
compensation. The Company knows of no existing arrangements between any Selling
Shareholder any other shareholder, broker, dealer, underwriter or agent relating
to the sale of distribution of the Offered Shares.
The Company will pay substantially all of the expenses incident to the
registration, offering and sale of the Offered Shares to the public other than
commissions or discounts of underwriters, broker-dealers or agents. The Company
has also agreed to indemnify certain of the Selling Shareholders and certain
related persons against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby was passed
upon by Sokolow, Dunaud, Mercadier & Carreras, New York, New York, counsel to
the Company.
EXPERTS
The financial statements and supplemental schedules of the Company
have been audited by BDO Seidman LLP, Independent Accountants, whose report is
incorporated herein by reference from the Company's Annual Report on Form 10-K.
These financial statements and supplemental schedule are incorporated herein by
reference in reliance upon the reports of such independent certified public
accountants given upon their authority as experts in accounting and auditing.
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
discounts and commissions), which other than the SEC registration fee are
estimates, payable by the Company in connection with the sale and distribution
of the Shares registered hereby.
<TABLE>
<S> <C>
=======================================================
SEC registration
fee................................. $ 1,097
- -------------------------------------------------------
Legal fees and
expenses............................ $ 5,000
- -------------------------------------------------------
Accounting fees and
expenses............................ $ 1,500
- -------------------------------------------------------
Printing
expenses............................ $ 1,000
- -------------------------------------------------------
Miscellaneous....................... $ 1,403
- -------------------------------------------------------
Total............................... $10,000
=======================================================
</TABLE>
- -------------
* Estimated
Item 15. Indemnification of Directors and Officers.
Article Six of the By-Laws, as amended, of the Company empowers the
Company to indemnify current or former directors, officers, employees or agents
of the Company or persons serving by request of the Company in such capacities
in any other enterprise or persons who have served by the request of the Company
in such capacities in any other enterprise to the full extent permitted by the
laws of the Commonwealth of Virginia.
Article Tenth of the Virginia Stock Corporation Act contains
provisions authorizing indemnification by the Company of directors, officers,
employees or agents against certain liabilities and expenses which they may
incur as directors, officers, employees or agents of the Company or of certain
other entities. Section 13.1 - 699 also provides that such indemnification may
include payment by the Company of expenses incurred in defending a civil or
criminal action or proceeding in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be ultimately found not to be entitled to
indemnification under the Section. Indemnification may be provided even though
the person to be indemnified is no longer a director, officer, employee or agent
of the Company or such other entities. Section 13.1 - 703 also contains
provisions authorizing the Company to obtain insurance on behalf of any such
director, officer employee or agent against liabilities, whether or not the
Company would have the power to indemnify such person against such liabilities
under the provisions of the Section. The Company currently maintains a policy of
insurance under which the directors and officers of the Company are insured,
within the limits and subject to the exclusions and limitations of the policy,
against certain expenses in connection with the defense of actions, suits or
proceedings, to which they are parties by reason of being or having been such
directors or officers.
The indemnification and advancement of expenses provided pursuant to
Section 13.1 - 699 are not exclusive, and subject to certain conditions, the
Company may make other or further indemnification or advancement of expenses of
any of its directors, officers, employees or agents. Because the Articles of
Incorporation, as amended, of the Company do not otherwise provide,
notwithstanding the failure of the Company to provide indemnification and
despite a contrary determination by the Board of Directors or its shareholders
in a specific case, a director, officer, employee or agent of the Company who is
or was a party to a proceeding may apply to a court of competent jurisdiction
for indemnification or advancement of expenses or both, and the court may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses if it
determines that the petitioner is entitled to mandatory indemnification pursuant
to Section 13.1 - 698 because he has been successful on the merits, or because
the Company has the power to indemnify on a discretionary basis pursuant to
Section 13.1 - 699 or because the court determines that the petitioner is fairly
and reasonably entitled indemnification or advancement of expenses or both in
view of all the relevant circumstances.
Section 13.1692.1 of the Act provides that the damages assessed
against any officer or director arising out of a single transaction, occurrence
or
<PAGE> 18
course of conduct shall not exceed the lesser of (1) the monetary amount
specified in the Articles of Incorporation; or (2) the greater of (i) $100,000
or the amount of cash compensation received by the officer or director from the
corporation for the twelve (12) months immediately proceeding the act or
omission for which liability was imposed. The liability of an officer or
director engaged in willful misconduct or a knowing violation of criminal law or
of any federal or state securities law including without limit of any claim of
unlawful insider trading or manipulation of the market for any security is not
covered by such provision.
The Agreement between the Company and the Selling Stockholders
provides that the Selling Stockholders and, under certain circumstances, persons
participating as underwriters in the offering or sale of the Common Stock being
registered will indemnify and hold harmless the Company and each director,
officer and controlling person of the Company with respect to any statement or
omission in the Registration Statement or the Prospectus based upon written
information furnished to the Company by or on behalf of the Selling Stockholders
or such underwriters, as the case may be, for inclusion therein.
Item 16. Exhibits
(a) Exhibits:
3.1 Restated Articles of Incorporation of the Company (1)
3.2 By-Laws of the Company, as amended (1)
4.1 Form of Securities Purchase Agreement between the Company and Capital
Ventures, International, Nelson Partners, Olympus Securities, Ltd., and
CC Investments, LDC (2)
4.2 Registration Rights Agreement between the Company and Capital Ventures,
International, Nelson Partners Olympus Securities, Ltd., and CC
Investments, LDC.
4.3 Form of Convertible Debenture (2)
4.4 Form of Warrant (2)
4.5 Proposed Form of Certificate of Designations, Preference and Rights (2)
5.1 Opinion of Counsel (2)
23.1 Consent of BDO Seidman LLP, Independent Auditors (*)
23.2 Consent of Counsel (included in Exhibit 5.1) (2)
24.1 Power of Attorney (included in Signature Page)
* Filed herewith
(1) Previously filed as an Exhibit to the Company's Registration Statement
on Form S-18, File no. 33-19785.
(2) Previously filed as an Exhibit to the Company's Registration Statement
on Form S-3, File No. 333-26459.
Item 17. Undertakings.
A. The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs A.(1)(i)
do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section
<PAGE> 19
13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions of otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of express incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against pubic
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Sterling, Commonwealth of Virginia on December 21,
1999.
FASTCOMM COMMUNICATIONS CORPORATION
By: /s/ PETER C. MADSEN
------------------------------------
Peter C. Madsen, President, CEO and
Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this post-effective
amendment to registration statement has been signed by the following persons in
the capacities and on the dates indicated. Each person whose signature to this
Registration Statement appears below has appointed each of Peter C. Madsen and
Mark H. Rafferty as his attorney-in-fact to sign on his behalf individually and
in the capacity stated below and to file all amendments and post-effective
amendments, supplements to this Registration Statement, and any and all
instruments or documents filed as part of or in connection with this
Registration Statement or any amendment or supplement thereto, and any such
attorney-in-fact may make such changes and additions to this Registration
Statement as such attorney-in-fact may deem necessary or appropriate.
<TABLE>
<CAPTION>
============================================= ===================================================== ==============================
NAME TITLE DATE
---- ----- ----
- --------------------------------------------- ----------------------------------------------------- ------------------------------
<S> <C> <C>
- --------------------------------------------- ----------------------------------------------------- ------------------------------
/s/ Peter C. Madsen
- ----------------------------- Chairman of the Board; Chief Executive Officer and
Peter C. Madsen Director December 21, 1999
- --------------------------------------------- ----------------------------------------------------- ------------------------------
/s/ Mark H. Rafferty
- ----------------------------- Vice President; Principal Financial and Accounting
Mark H. Rafferty Officer December 21, 1999
- --------------------------------------------- ----------------------------------------------------- ------------------------------
/s/ Edward R. Olson
- -----------------------------
Edward R. Olson Director December 21, 1999
- --------------------------------------------- ----------------------------------------------------- ------------------------------
/s/ Thomas G. Amon
- -----------------------------
Thomas G. Amon Director December 21, 1999
============================================= ===================================================== ==============================
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
TO THE BOARD OF DIRECTORS
FASTCOMM COMMUNICATIONS CORPORATION
WE HEREBY CONSENT TO THE INCORPORATION BY REFERENCE IN THE PROSPECTUS
CONSTITUTING A PART OF THIS REGISTRATION STATEMENT OF OUR REPORT, WHICH
CONTAINED AN EXPLANATORY PARAGRAPH RELATING TO THE COMPANY'S ABILITY TO CONTINUE
AS A GOING CONCERN, DATED JULY 12, 1999, RELATING TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF FASTCOMM COMMUNICATIONS CORPORATION APPEARING IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED APRIL 30, 1999.
WE ALSO CONSENT TO THE REFERENCE TO OUR FIRM UNDER THE CAPTION "EXPERT" IN THE
PROSPECTUS.
/s/ BDO SEIDMAN, LLP
WASHINGTON, D.C.
DECEMBER 20, 1999
