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-As filed with the Securities and Exchange Commission on October , 1999
Registration No. 333-85665
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FASTCOMM COMMUNICATIONS CORPORATION
(Name of Small Business Issuer in its Charter)
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VIRGINIA 54-1289115
(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 and telephone number of principal executive offices)
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MARK H. RAFFERTY COPY TO:
CHIEF FINANCIAL OFFICER THOMAS G. AMON, ESQ.
FASTCOMM COMMUNICATIONS CORPORATION SOKOLOW DUNAUD MERCADIER & CARRERAS
45472 HOLIDAY DRIVE 50 ROCKEFELLER PLAZA, SUITE 928
STERLING, VIRGINIA 20166 NEW YORK, NEW YORK 10020
TELEPHONE: (703) 318-7750 TELEPHONE: (212) 315-0175
(Name, address and telephone number (Counsel for Registrant)
of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to a dividend or interest reinvestment plans, please check the following box.[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum Amount of
Title of each class of securities to be registered Amount to be offering price per aggregated offering price registration fee
registered share(1) (2)
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Common Shares, par value $.01 per share ......... 3,080,399 $.93 $2,864,771 $859.00
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(1) Based on the average of the high and low prices of the Common Stock on
the OTC Bulletin Board on August 13, 1999
(2) Estimated solely for the purpose of calculating the amount of the
registration fee and based, pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
FastComm Communications Corporation
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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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1. Forepart of the Registration Statement and Outside Front Cover Forepart of the Registration Statement
Page of Prospectus Outside Front Cover Page of Prospectus
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2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover Page
of Prospectus
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3. Summary Information and Risk 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 Securityholders
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8. Plan of Distribution Outside Front Cover Page of Prospectus;
Plan of Distribution
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9. Description of Securities to be Registered Description of Securities
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10. Interests of Named Experts and Counsel Experts
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11. Material Change Not Applicable
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12. Incorporation of Certain Information by Reference Where you can find more information
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13. Disclosure of Commission Position Not Applicable
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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.
SUBJECT TO COMPLETION, DATED OCTOBER ____, 1999
PRELIMINARY PROSPECTUS
3,080,399 SHARES
FASTCOMM COMMUNICATIONS CORPORATION
COMMON STOCK
This Prospectus relates to 3,080,399 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 have been issued to (i) Dr. Kenneth Bloom in connection with the
acquisition of KG Data Systems on March 31, 1999 and (ii) to a group of private
investors in a private placement in July 1999. See "Selling Securityholders."
The Company will not receive any proceeds from the sale of Shares by the
Selling Securityholders, but 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.
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
Securityholders to underwriters, dealers, brokers or agents and legal fees of
counsel to the Selling Securityholders, 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 Securityholders in the open market, on the 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 Securityholders 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
Securityholders 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 Securityholders" and "Plan of
Distribution."
Our Common Stock is currently traded on the NASDAQ-OTC Bulletin Board under
the Trading Symbol FSCX. On August 13 , 1999 the last sales price of the common
stock on that market was $.93 per share.
Investing in these securities involves a high degree of RISK. See "CERTAIN
RISK FACTORS" at page 4 of this Prospectus.
YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE NOT,
AND THE SELLING SECURITYHOLDERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE SELLING
SECURITYHOLDERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE
FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAE CHANGED SINCE THAT DATE.
The date of this Prospectus is October , 1999
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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 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
incorporated 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 Report on Form 10-Q for the fiscal quarter ended July 31,
1999, 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.
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
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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.
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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 for the
first 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 are 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.
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, 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. 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.
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
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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 are 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.
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. On June 2, 1998, the Company filed a voluntary petition
for reorganization under Chapter 11 of the Federal bankruptcy laws in the United
States Bankruptcy Court for the Eastern District of Virginia. As a direct result
of this filing, the Company has suffered the loss of certain key employees. To
date, the Company has been able to refill some of these positions. At this time,
the Company is unable to predict the long-term effect this filing will have on
its ability to attract and retain key employees.
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.
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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 networks 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.
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.
8
<PAGE> 9
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 August 13, 1999, there were issued and outstanding a total of 17,555,160
shares of Common Stock. If all convertible debentures , warrants and stock
options which the Company has issued were deemed converted and exercised, as the
case may be, as of August 13, 1999, there would be issuable approximately
7,038,289 shares of Common Stock. Upon such conversion and exercise, there would
be outstanding 24,593,449 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.
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.
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<PAGE> 10
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 Securityholders are preserved.
Pursuant to the Plan, Class 1 creditors representing existing holders of
convertible debentures, are required to convert their debt to equity on or
before October 12, 1999. The remaining outstanding Class 1 claims total
approximately $200,000. Such conversion shall be at the current market price,
i.e. the average of the prior 10 days closing bid price. In addition, all
penalties will be waived. Upon conversion the Company will also issue 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 nonpriority 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.
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
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<PAGE> 11
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 PC's, 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 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
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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, PBX's, 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.
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.
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<PAGE> 13
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
We will not receive any proceeds form the sale of the Offered Shares by the
Selling Securityholders. If Warrants held by certain of the Selling
Securityholders are exercised, we will receive up to $7,377,000, reflecting the
total exercise price of the Warrants. Such proceeds will be used for general
corporate purposes and working capital.
SELLING SECURITYHOLDERS
This prospectus relates to the resale of up to 3,080,399 shares of common
stock. The following table sets forth information with respect to this resale.
The following table sets forth, to our knowledge, (i) the number of shares of
common stock beneficially owned by each selling Securityholder, (ii) the number
of shares of common stock to be offered and sold by such selling Securityholder
and (iii) the number of shares of common stock and percentage of outstanding
shares of common stock to be beneficially owned by such selling Securityholder
after such offering and sale, assuming that all the shares offered by such
selling Securityholder are in fact sold. Unless otherwise indicated, to our
knowledge, each person has sole investment and voting power, if applicable (or
shares such powers with his or her spouse), with respect to the securities set
forth in the following table. As of August 13, 1999 we had 17,555,160 shares of
common stock issued and outstanding.
<TABLE>
<CAPTION>
==================================================================================================================================
Common Shares
Number of Shares Beneficially Owned After Offering(4)
Owned(1) Common Shares Percentage of
Name and Address of Selling Securityholder Prior to Offering Offered Hereby Number Outstanding
- ------------------------------------------- ------------------ -------------- ------ -----------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr Kenneth Bloom
KG Data Systems, Inc. 719,149(2) 719,149 - 0 - - 0 -
28 Knight Street
Norwalk, CT 06851
- ----------------------------------------------------------------------------------------------------------------------------------
John P. Kneafsey
Pathfinder Investment Advisors 250,000(3) 250,000 - 0 - - 0 -
9515 Deerco Road
Suite 903
Timonium, MD 21093
</TABLE>
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<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William L. Schrader
PSINet 250,000(3) 250,000 - 0 - - 0 -
510 Huntmar Park Drive
Herndon, VA 20170
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas Taylor
Chesapeake Securities Research Corporation 161,250(3) 161,250 - 0 - - 0 -
West Chesapeake Avenue
Towson, Maryland 21204
- ----------------------------------------------------------------------------------------------------------------------------------
Andrew Shultz
117 Kirwins Landing 500,000(3) 500,000 - 0 - - 0 -
Chester, Maryland 21619
- ----------------------------------------------------------------------------------------------------------------------------------
Harland McWilliams
25726 Eastwind Drive 125,000(3) 125,000 - 0 - - 0 -
Dana Point, CA 92629
- ----------------------------------------------------------------------------------------------------------------------------------
Eugene Kreuger
6802 Mallow Court 125,000(3) 125,000 - 0 - - 0 -
Springfield, VA 22152
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Pearson
13722 Beckenham Drive 187,500(3) 187,500 - 0 - - 0 -
Little Rock, AK 72212
- ----------------------------------------------------------------------------------------------------------------------------------
Edward A. Rayder
610 Main Street 250,000(3) 250,000 - 0 - - 0 -
Corinth, NY 12822
- ----------------------------------------------------------------------------------------------------------------------------------
Matthew Toth
1710 Park Ave 125,000(3) 125,000 - 0 - - 0 -
Baltimore, MD 21217
- ----------------------------------------------------------------------------------------------------------------------------------
Helen Toth
1710 Park Ave 125,000(3) 125,000 - 0 - - 0 -
Baltimore, MD 21217
- ----------------------------------------------------------------------------------------------------------------------------------
C. Richard Lehnert
7 Old Belfort Road 250,000(3) 250,000 - 0 - - 0 -
Sparks, MD 21152
- ----------------------------------------------------------------------------------------------------------------------------------
Mathias Duys
c/o FastComm Communications 12,500(3) 12,500 - 0 - - 0 -
45472 Holiday Drive
Sterling, VA 20166
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 3,080,399 3,080,399 - 0 - - 0 -
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes consideration of voting or
investment power with respect to the securities at issue. Information with
respect to beneficial ownership is based upon information as of August 13, 1999,
and assumes that there is outstanding an aggregate of 17,555,160 shares of
common stock, not including treasury shares. Except as otherwise indicated in
the footnotes below, and subject to community property laws where applicable, we
believe, based upon information furnished by selling Securityholders, that the
persons named in this table have sole voting and investment power with respect
to all shares of common stock shown as beneficially owned by them.
(2) Does not include shares underlying 120,000 Options held by Dr. Bloom which
are not being registered hereby.
(3) Includes shares of common stock underlying A&B warrants which were issued to
these individuals and which are immediately exercisable.
(4) Assumes the sale of all Offered Shares.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common stock,
$.01 par value per share, of which 17,555,160 shares were outstanding at August
13, 1999, fully paid and non-assessable prior to this offering. There are
currently 2,292,381 options outstanding under the Company's stock Option Plan.
COMMON STOCK
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<PAGE> 15
The holders of common stock are entitled to one vote for each share held of
record in the election of directors and with respect to all other matters to be
voted on by stockholders. Holders of shares of common stock do not have
cumulative voting rights. Therefore, the holders of more than 50 percent of such
shares voting for the election of directors can elect all of the directors. The
holders of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of legally available funds. In the event
of liquidation, dissolution or winding up of FastComm Communications
Corporation, the holders of common stock of liquidation, dissolution or winding
up of FastComm Communications, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the common stock. Holders of shares of common stock, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the common stock. The rights of the
holders of common stock are subject to any rights that may be fixed for holders
of preferred stock, when and if any preferred stock is issued. All of the shares
of common stock currently outstanding are duly authorized, validly issued, fully
paid and non-assessable.
WARRANTS AND DEBENTURES
There are currently outstanding 4,745,908 warrants to purchase common
stock. Each warrant entitles the registered holder to purchase one share of our
common stock, $.01 par value, at exercise prices ranging from $0.63 to $6.77 per
share, exercisable at various times until January, 2004. In connection with its
reorganization, the Company issued debentures, totaling $2,490,357 issued to the
unsecured creditors. 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 anytime, 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Continental
Transfer & Trust Company, whose address is 2 Broadway, New York, New York,
10004, telephone number (212) 509-4000.
PLAN OF DISTRIBUTION
The Shares are being offered on behalf of the Selling Securityholders, and,
except for the exercise price of the Warrants, the Company will not receive any
proceeds from the Offering. The Shares may be offered and sold from time to time
by the Selling Securityholders, or by pledges, donees or transferees of, or
other successors in interest to, the Selling Securityholders, 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 Bulletin Board; (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 Securityholders 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 Securityholders. The Selling Securityholders 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 Securityholders 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 Securityholders 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 Securityholder can presently estimate the amount of such
compensation. The Company knows of no existing arrangements between any Selling
Securityholder any other Securityholder, broker, dealer, underwriter or agent
relating to the sale of distribution of the Offered Shares.
We have agreed to indemnify the selling security holders and the selling
security holders have agreed to indemnify us, our officers, directors,
employees, agents and controlling persons from certain damages or liabilities
arising out of or based upon any untrue statement or alleged untrue statement of
any material fact contained in or material omission or alleged omission from the
Registration Statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, to the extent such untrue
statement or omission was made in the Registration Statement or other document
in reliance upon information furnished by the indemnifying party.
15
<PAGE> 16
The legal, accounting and other fees and expenses related to the offer and
sale of the common stock contemplated hereby are estimated to be $25,000 and
will be paid by us. We will pay all expenses incurred in connection with this
offering, excluding commissions charged by any broker or dealer acting on behalf
of a selling security holder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon by Sokolow, Dunaud, Mercadier & Carreras, New York New York, and Paris
France, counsel to the Company.
EXPERTS
The audited financial statements and supplemental schedules of the Company
have been audited by BDO Seidman LLP, certified public 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
<TABLE>
<S> <C>
NO DEALER, SALES PERSON OR OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY OF THE SECURITIES FASTCOMM COMMUNICATIONS CORPORATION
OFFERED HEREBY IN ANY FASTCOMM COMMUNICATIONS
CORPORATION JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN 3,080,399
SUCH JURISDICTION. NEITHER THE DELIVERY Shares of
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER Common Stock
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
SHARES OF IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS COMMON STOCK OF SHARES
OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION COMMON STOCK CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. --------------------------
---------------------
PROSPECTUS
--------------
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Where to Find Additional information.......................... October ___, 1999
Special Note Regarding Forward Looking Statements.............
Certain Risk Factors..........................................
FastComm Communications Corporation...........................
Use of Proceeds...............................................
Selling Security Holders......................................
Description of the Securities.................................
Plan of Distribution..........................................
Legal Matters.................................................
Experts.......................................................
</TABLE>
<PAGE> 18
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......................................................... $ 920.00
- -----------------------------------------------------------------------------
Blue Sky fees and expenses (including legal
fees)....................................................... $ 1,000.00*
- -----------------------------------------------------------------------------
Legal fees and
expenses.................................................... $ 15,000.00*
- -----------------------------------------------------------------------------
Accounting fees and
expenses.................................................... $ 2,500.00*
- -----------------------------------------------------------------------------
Printing
expenses.................................................... $ 1,000.00*
- -----------------------------------------------------------------------------
Miscellaneous............................................... $ 4,580.00*
- -----------------------------------------------------------------------------
Total....................................................... $ 25,000
=============================================================================
</TABLE>
* Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Six of the Company's By-Laws, as amended, empowers the Company to
indemnify current or former directors, officers, employees or agents of the
Company or persons serving by request of the Company in such capacities in any
other enterprise or persons who have served by the request of the Company in
such capacities in any other enterprise to the full extent permitted by the laws
of the State of Virginia.
Article Tenth of the Virginia Stock Corporation Act (the "Act") contains
provisions authorizing indemnification by the Company of directors, officers,
employees or agents against certain liabilities and expenses which they may
incur as directors, officers, employees or agents of the Company or of certain
other entities. Section 13.1 - 699 of the Act also provides that such
indemnification may include payment by the Company of expenses incurred in
defending a civil or criminal action or proceeding in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by the
person indemnified to repay such payment if he shall be ultimately found not to
be entitled to indemnification under the Section. Indemnification may be
provided even though the person to be indemnified is no longer a director,
officer, employee or agent of the Company or such other entities. Section 13.1 -
703 of the Act also contains provisions authorizing the Company to obtain
insurance on behalf of any such director, officer employee or agent against
liabilities, whether or not the Company would have the power to indemnify such
person against such liabilities under the provisions of the Section. The Company
currently maintains a policy of insurance under which the directors and officers
of the Company are insured, within the limits and subject to the exclusions and
limitations of the policy, against certain expenses in connection with the
defense of actions, suits or proceedings, to which they are parties by reason of
being or having been such directors or officers.
The indemnification and advancement of expenses provided pursuant to
Section 13.1 - 699 are not exclusive, and subject to certain conditions, the
Company may make other or further indemnification or advancement of expenses of
any of its directors, officers, employees or agents. Because the Articles of
Incorporation, as amended, of the Company do not otherwise provide,
notwithstanding the failure of the Company to provide indemnification and
despite a contrary determination by the Board of Directors or its
Securityholders 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 13.1-692.1 of the Act provides that the damages assessed against
any officer or director arising out of a single transaction, occurrence or
course of conduct shall not exceed the lesser of (1) the monetary amount
specified in the Articles of Incorporation; or (2) the greater of (i) $100,000
or the amount of cash
II-1
<PAGE> 19
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 Securityholders provides
that the Selling Securityholders 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
Securityholders or such underwriters, as the case may be, for inclusion therein.
Item 16. EXHIBITS
<TABLE>
<S> <C>
The Exhibits listed below have been filed as part of this Registration Statement
4.1 Restated Articles of Incorporation of the Company (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.2 Restated By-Laws of the Company, as amended (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.3 Specimen Certificate of Common Stock of the Registrant (Previously filed as Exhibit to Form S-18, Reg. No 33-19785)
4.4 Employment Agreement with Dr. Kenneth Bloom (Incorporated herein by reference to Exhibit 10.2 to Form 8-K Filed April
21, 1999)
4.5 Form of Warrant Agreement with Selling Securityholders.*
5.1 Opinion on Legality *
23.1 Consent of BDO Seidman LLP, certified public accountants*
23.2 Consent of Sokolow, Dunaud, Mercadier & Carreras (contained in Exhibit 5.1)*
24.1 Power of Attorney (included within Signature Page)
</TABLE>
- ----------
* Filed Herewith
Item 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement;
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement; 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 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.
II-2
<PAGE> 20
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.
II-3
<PAGE> 21
SIGNATURES
In accordance with 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, State of Virginia on October 8, 1999.
FASTCOMM COMMUNICATIONS CORPORATION
By: /s/ Peter C. Madsen
--------------------------------------------
Peter C. Madsen, President, CEO and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below hereby constitutes and appoints Peter C. Madsen , Mark H. Rafferty
and Thomas G. Amon, and each of them, his true and lawful agent, proxy and
attorney-in-fact, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all amendments
(including post-effective amendments) to this Registration Statement together
with all schedules and exhibits thereto, (ii) act on, sign and file such
certificates, instruments, agreements and other documents as may be necessary or
appropriate in connection therewith, (iii) act on and file any supplement to any
prospectus included in this Registration Statement or any such amendment, and
(iv) take any and all actions which may be necessary or appropriate in
connection therewith, granting unto such agents, proxies and attorneys-in-fact,
and each of them, full power and authority to do and perform each and every act
and thing necessary or appropriate to be done, as fully for all intents and
purposes as he might or could do in person, hereby approving, ratifying and
confirming all that such agents, proxies and attorneys-in-fact, any of them or
any of his or their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/S/ PETER C. MADSEN CHAIRMAN OF THE BOARD; CHIEF EXECUTIVE OFFICER OCTOBER 8 , 1999
- ------------------------------------------- AND DIRECTOR
PETER C. MADSEN
/S/ MARK H. RAFFERTY VICE PRESIDENT; PRINCIPAL FINANCIAL AND ACCOUNTING OCTOBER 8 , 1999
- ------------------------------------------- OFFICER; DIRECTOR
MARK H. RAFFERTY
/S/ EDWARD R. OLSON DIRECTOR OCTOBER 8 , 1999
- -------------------------------------------
EDWARD R. OLSON
/S/THOMAS G. AMON DIRECTOR OCTOBER 8 , 1999
- -------------------------------------------
THOMAS G. AMON
</TABLE>
II-4
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.5 Form of warrant Agreement with Selling Security Holders
5.1 Opinion on Legality.
23.1 Consent of BDO Seidman
23.2 Consent of Sokolow, Dunaud, Mercadier & Carreras, LLP (contained in Exhibit 5.1)
</TABLE>
<PAGE> 1
EXHIBIT 4.5
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON JULY 27, 2002
THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
Right to Purchase _______________ Shares of
Common Stock, par value $.01 per share
Date: July 27, 1999
FASTCOMM COMMUNICATIONS CORPORATION
STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES THAT, for value received,_______________________________
_______________________________is entitled to purchase from FASTCOMM
COMMUNICATIONS CORPORATION, a Virginia corporation (the "COMPANY"), at any time
during the period specified in Section 2 hereof,_______________________________
___________________________________________________ (________________) fully
paid and nonassessable shares of the Company's common stock, par value $.01 per
share (the "COMMON STOCK"), at an exercise price per share (the "EXERCISE
PRICE") of $_______________ per share. The term "WARRANTS" means this Warrant
and the other warrants of the Company issued in connection with the July 27,
1999 financing.
<PAGE> 2
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. Subject
to the provisions hereof, this Warrant may be exercised by the holder
hereof, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "EXERCISE AGREEMENT"),
to the Company during normal business hours on any business day at the
Company's principal executive offices (or such other office or agency of
the Company as it may designate by notice to the holder hereof), and upon
payment to the Company in cash, by certified or official bank check or by
wire transfer for the account of the Company, of the Exercise Price for all
of the Warrant Shares. The Warrant Shares so purchased shall be deemed to
be issued to the holder hereof, as the record owner of such shares, as of
the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered,
and payment shall have been made for such shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding
twenty (20) business days, after this Warrant shall have been so exercised.
The certificates so delivered shall be in such denominations as may be
requested by the holder hereof and shall be registered in the name of such
holder.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time to
time on or after the date on which this Warrant is issued and before 5:00
p.m. New York City time on the third (3rd) anniversary of the date of
issuance (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and agrees
as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company shall at all
times have authorized, and reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company will secure the listing of the shares of Common Stock
issuable upon exercise of this Warrant upon the automated quotation system,
the OTC Bulletin Board, upon which shares of Common Stock are currently
listed and shall maintain, so long as any other shares of Common Stock
shall be so listed, such listing of all shares of Common Stock issuable
upon the exercise of this Warrant; and the Company shall so list on such
automated
-2-
<PAGE> 3
quotation system and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such
automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets ( a "change in control"). In
the event of a change in control, the surviving entity may call all
outstanding warrants upon thirty (30) days notice.
4. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than the holder of this
Warrant, or any tax due with respect to the resale of any Warrant Shares.
5. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not entitle
the holder hereof to any voting rights or other rights as a shareholder of
the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall
give rise to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
-3-
<PAGE> 4
6. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to the holder
hereof are not transferable, in whole or in part, without the written
consent of the Company, and delivery of the form of transfer attached
hereto duly executed by the registered holder hereof,
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Section 6(e) below, for new
Warrants of like tenor of different denominations representing in the
aggregate the right to purchase the number of shares of Common Stock which
may be purchased hereunder, each of such new Warrants to represent the
right to purchase such number of shares as shall be designated by the
holder hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant
and, in the case of any such loss, theft, or destruction, upon delivery of
an indemnity agreement reasonably satisfactory in form and amount to the
Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in
connection with any transfer, exchange, or replacement as provided in this
Section 6, this Warrant shall be promptly canceled by the Company. The
warrant holder shall pay all taxes (including securities transfer taxes)
and all other expenses (including legal expenses, if any, incurred by the
Holder, the Company or transferees) and charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this
Section 6.
(e) WARRANT REGISTER. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued.
7. REGISTRATION OF WARRANT SHARES.
In connection with the registration of the Warrant Shares, the company and the
holder Agree as follows:
(a) In the event of any registration of any of a Holder's Warrant Shares
pursuant to this Section 7, such Holder will indemnify (or will furnish the
written undertaking of such other person or persons as shall be acceptable
to the Company) and hold harmless the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act,
-4-
<PAGE> 5
against any losses, claims, damages or liabilities, joint or several, to
which the Company or such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement or alleged untrue
statement of any material fact contained (on the effective date thereof) in
any registration statement under which such Warrant Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent and only to
the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in said registration statement, said preliminary
prospectus or said prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such Holder specifically for use in
the preparation thereof and such Holder will reimburse (or will furnish the
written undertaking of such other person or persons as shall be acceptable
to the Company to reimburse) the Company and each such controlling person
for any legal or any other expenses reasonably incurred by the Corporation
or such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action.
(b) The holder's right to require registration of the Warrant Shares under this
Section 7, shall cease and terminate as to any particular Warrant Shares
when such Warrant Shares shall have been effectively registered under the
Securities Act. For purposes of this Warrant Certificate , shares of Common
Stock shall cease to be Warrant Shares when such shares have been sold to
the public pursuant to an exemption from registration thereunder.
(c) The Corporation covenants that it will, so long as any Warrant Shares or
Warrants exercisable for Warrant Shares remain outstanding, file all
reports required to be filed by it under the Securities Act or the
Securities Exchange Act of 1934 and the rules and regulations promulgated
by the Securities and Exchange Commission thereunder (or, if it is not
required to file such reports, it will upon the request of any Holder make
publicly available such information as will enable such Holder to sell such
Warrant Shares without registration within the limitations of the
exemptions provide by (i) Rule 144 promulgated under the Securities Act, as
such rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter promulgated by the Securities Exchange Commission.
8. NOTICES. Any notices required or permitted to be given under the terms of
this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy,
and shall be effective five days after being placed in the mail, if mailed,
or upon receipt or refusal of receipt, if delivered personally or by
courier or
-5-
<PAGE> 6
confirmed telecopy, in each case addressed to a party. The addresses for
such communications shall be:
-6-
<PAGE> 7
If to the Company:
FastComm Communications Corporation
45472 Holiday Drive, Suite Three
Dulles, Virginia 20166
Telecopy: (703) 318-4315
Attn: Chief Financial Officer
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 8. The Company may deem and treat
the registered holder of this certificate as the absolute owner of the Warrant
Certificate for all purposes and shall not be affected by any notice to the
contrary.
9. GOVERNING LAW. This Warrant Certificate shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia applicable to
contracts made and to be performed in the Commonwealth of Virginia.
10. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be amended by an
instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several Sections of
this Warrant are inserted for purposes of reference only, and shall not
affect the meaning or construction of any of the provisions hereof.
(c) FORCE MAJEURE. Neither the Company nor the holder hereof shall be
responsible for any delay or failure to perform any part of this Warrant to
the extent that such delay or failure is solely caused by fire, flood,
earthquake, explosion, war, labor strike, riot, act of governmental, civil
or military authority which imposes a moratorium on the performance of the
specific obligation in question, failure of transfer agent, postal strike
or other comparable extraordinary event beyond the Company's or holder's
control. Notice with full details of any such event shall be given to the
other party as promptly as practicable after its occurrence. The affected
party shall use its best efforts to minimize the effects of or end any such
event so as to facilitate the resumption of full performance hereunder.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by its duly authorized officer.
FASTCOMM COMMUNICATIONS
CORPORATION
By:
-------------------------
Name: Mark H. Rafferty
------------------
Title: Vice President & Chief Financial
Officer
---------------------------------
-8-
<PAGE> 9
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of common stock of FastComm Communications Corporation, a
Virginia corporation (the "COMPANY"), evidenced by the attached Warrant, and
herewith makes payment of the Exercise Price with respect to such shares, in
full, all in accordance with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose of any
Common Stock obtained on exercise of the Warrant, except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
The undersigned requests that stock certificates for such shares be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:___________,_____
-------------------------------------
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE> 10
TRANSFER OF WARRANT CERTIFICATE
For value received___________________________________________________ hereby
sells, assigns and transfers unto __________________________ the rights to
purchase_______ shares of common stock, $.01 par value, of FastComm
Communications Corporation, which rights are represented by the within Warrant
Certificate, and does hereby irrevocably constitute and appoint
__________________________attorney to transfer said rights on the books of the
within named Corporation, with full power of substitution in the premises.
----------------------------------------
Dated:
In the Presence of
Social Security or Other identifying
Number of Assignee: _________________
Address of Assignee: _________________
Street
City, State and Zip Code
Approved by the Company:
By: _______________________________________
================================================================================
-10-
<PAGE> 1
EXHIBIT 5.1
SOKOLOW, DUNAUD, MERCADIER & CARRERAS, LLP
50 Rockefeller Plaza
Suite 928
New York, NY 10020
(212) 315-0175
October 6, 1999
FastComm Communications Corporation
45472 Holiday Drive
Sterling, VA 20166
Ladies and Gentlemen:
We have acted as counsel to FastComm Communications Corporation, a Virginia
corporation (the "Company"), in connection with the registration statement on
Form S-3 (No. 333-85665) (the "Registration Statement") pertaining to the
proposed offering of 3,080,399 shares of common stock, $.01 par value per share
(the "Shares"), as described in the Registration Statement. The Shares were
issued in connection with the acquisition of KG Data Systems, Inc. and in a
private placement to certain accredited investors and are issuable upon the
exercise of certain warrants described in the Registration Statement (the
"Warrants"). As such counsel, you have requested our opinion as to the matters
described herein relating to the Shares. All capitalized terms used but not
defined herein shall have the meanings assigned to them in the Registration
Statement.
We have examined the Company's certificate of incorporation and by-laws, in
each case as amended or restated through the date hereof; the agreements related
to each of the Warrants (the "Warrant Agreements"); minutes of the Company's
corporate proceedings throughout the date hereof, as made available to us by
officers of the Company; an executed copy of the Registration Statement and all
exhibits thereto in the form filed with the Securities and Exchange Commission;
and such matters of law and such documents and other instruments as we have
deemed necessary by us in order to deliver the within opinion. In the course of
our examination, we have assumed the genuineness of all signatures, the
authority of all signatories to sign on behalf of their principals, if any, the
authenticity of all documents submitted to us as original documents and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to certain factual matters, we have relied upon
information furnished to us by officers of the Company.
Based on the foregoing and solely in reliance thereon, it is our opinion
that the Shares have been duly authorized, and when they are issued upon
exercise of the Warrants, against payment of the consideration therefore
contemplated by the Warrant Agreements, as the case may be, the Shares will be
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to it in the prospectus included
therein under the caption "Legal Matters." In giving such consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
SOKOLOW, DUNAUD, MERCADIER & CARRERAS
By: /s/ Thomas G. Amon
A member of the Firm
<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 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.
OCTOBER 6, 1999
