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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number
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Objective Communications, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1707962
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
14100 Park Meadow Drive
Chantilly, Virginia 20151
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(Address of Principal Executive Offices)
(703) 227-3000
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(Issuer's Telephone Number, Including Area Code)
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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APPLICATION ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,631,844
Transitional Small Business Disclosure Format (check one):
Yes No X
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Part I - Financial Information
Item 1. Financial Statements
OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(UNAUDITED)
---------
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,019,061 $ 623,241
Accounts receivable 35,723 84,855
Inventory 93,714 366,099
Other current assets 75,204 178,376
------------ ------------
Total current assets 5,223,702 1,252,571
Property and equipment, net 847,747 182,072
Debt issue costs, net - 214,066
Trademarks and patents 95,888 32,869
Other assets 98,000 -
------------ ------------
$ 6,265,337 $ 1,681,578
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable, net of unamortized discounts $ - $ 1,714,000
Notes payable, related parties - 199,000
Accounts payable 98,484 390,438
Accrued liabilities 139,130 263,376
Obligations under capital lease, current portion 22,889 15,543
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Total current liabilities 260,503 2,582,357
Obligations under capital lease 35,416 25,610
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Total liabilities 295,919 2,607,967
Redeemable Series A Convertible Preferred Stock, par value $.01,
500,000 shares authorized, 0 and 250,000 issued and outstanding
at June 30, 1997 and December 31, 1996, respectively - 848,440
Stockholders' equity (deficit):
Preferred Stock, par value $.01, 2,500,000 shares authorized,
0 issued and outstanding at June 30, 1997 and December 31, 1996 - -
Common stock, par value $.01, 10,000,000 shares authorized;
4,631,844 and 1,896,577 issued and outstanding at June 30, 1997
and December 31, 1996, respectively 46,318 18,966
Additional paid-in capital 15,039,553 3,371,115
Deficit accumulated during the development stage (9,116,453) (5,164,910)
------------ ------------
Total stockholders' equity (deficit) 5,969,418 (1,774,829)
------------ ------------
$ 6,265,337 $ 1,681,578
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
---------
<TABLE>
<CAPTION>
For the period
October 5, 1993
Three months ended June 30, Six months ended June 30, (date of inception)
------------------------------- --------------------------- to June 30, 1997
1997 1996 1997 1996
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Merchandise revenue $ - $ - $ - $ - $ 175,301
Service revenue - 13,853 - 20,182 320,359
------------ ------------ ------------ ------------ ------------
Total revenues - 13,853 - 20,182 495,660
------------ ------------ ------------ ------------ ------------
Operating expenses:
Cost of merchandise - - - - 169,309
Cost of services - 4,965 - 10,347 80,066
Research and development 870,706 278,093 1,330,640 565,019 3,835,393
Selling, general and administrative 814,020 260,154 1,475,885 519,710 3,729,756
Depreciation and amortization 212,821 22,078 322,679 51,535 545,453
Other - - - - 15,997
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,897,547 565,290 3,129,204 1,146,611 8,375,974
------------ ------------ ------------ ------------ ------------
Loss from operations (1,897,547) (551,437) (3,129,204) (1,126,429) (7,880,314)
Interest expense, net 218,050 1,319 428,437 4,381 829,242
------------ ------------ ------------ ------------ ------------
Net loss $ (2,115,597) $ (552,756) $ (3,557,641) $ (1,130,810) $ (8,709,556)
============ ============ ============ ============ ============
Net loss per common share $ (0.49) $ (0.15) $ (1.11) $ (0.31) $ (1.88)
============ ============ ============ ============ ============
Weighted average common
shares and common share
equivalents outstanding 4,346,569 3,607,634 3,196,822 3,607,634 4,631,844
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
---------
<TABLE>
<CAPTION>
For the period
October 5, 1993
(date of inception)
Six months ended June 30, to June 30, 1997
------------------------------------
1997 1996
------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,557,641) $ (1,130,810) $ (8,709,556)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 111,451 48,462 284,536
Amortization 211,228 3,073 260,917
Interest expense related to issuance of warrants 385,000 - 706,789
Non-cash compensation expense 340,166 - 340,166
Stock issued in exchange for services rendered - - 55,834
Changes in operating assets and liabilities:
Accounts receivable 49,131 11,159 (35,724)
Other current assets (92,826) 9,172 (173,204)
Inventory (81,919) (126,846) (93,714)
Trademarks and patents (64,848) (11,834) (103,341)
Accounts payable (427,852) 46,241 98,484
Accrued liabilities (44,175) 98,472 139,130
---------------------------------- ---------------
Net cash used in operating activities (3,172,285) (1,052,911) (7,229,683)
---------------------------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (396,380) (16,496) (1,052,682)
---------------------------------- ---------------
Net cash used in investing activities (396,380) (16,496) (1,052,682)
---------------------------------- ---------------
Cash flows from financing activities:
Proceeds from the issuance of Series A preferred stock, net 962,203 - 1,810,643
Proceeds from the issuance of common stock, net 9,510,576 849,377 11,413,318
Proceeds from the issuance of notes payable - 68,205 2,550,000
Repayments of notes payable (2,300,000) - (2,550,000)
Proceeds from the issuance of notes payable to related parties - 104,500 716,223
Repayments of notes payable to related parties (199,000) - (364,000)
Debt issue costs - - (253,459)
Principal payments on capital leases (9,294) - (21,299)
---------------------------------- ---------------
Net cash provided by financing activities 7,964,485 1,022,082 13,301,426
---------------------------------- ---------------
Net increase (decrease) in cash and cash equivalents 4,395,820 (47,325) 5,019,061
Cash and cash equivalents, at beginning of the period 623,241 86,491 -
---------------------------------- ---------------
Cash and cash equivalents, at end of the period $ 5,019,061 $ 39,166 $ 5,019,061
================================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
---------
1. Basis of Presentation
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions to
Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments considered necessary for a
fair presentation of the financial position and the results of
operations for the interim period have been included. The interim
financial statements should be read in conjunction with the audited
financial statements and notes thereto in the Company's Registration
Statement on Form SB-2 (File No. 333-20625), as amended, as filed with
the Securities and Exchange Commission under the Securities Act of
1933, as amended. Certain financial statement items have been
reclassified to the current periods' format.
2. Capital Stock
Common Stock
During April 1997, the Company issued 2,070,000 shares of
common stock, par value $.01 (the "Common Stock") for approximately
$9.5 million in proceeds, net of underwriting discounts and commissions
and certain other expenses of the offering. The issuance of these
shares was pursuant to an initial public offering at a price of $5.50
per share. The net proceeds of the initial public offering were used
primarily to repay certain outstanding notes payable and to fund the
continued research and development and the working capital deficiencies
of the Company. In connection with the initial public offering, all of
the issued and outstanding shares of Series A Convertible Preferred
Stock were converted into Common Stock on a one-for-one basis.
During January 1997, the Company executed a warrant exchange
agreement with investors who purchased Common Stock and received
warrants through the Company's financial advisory firm during 1995 and
1996. The purpose of the warrant exchange was to induce such investors
to enter into lock-up arrangements with the underwriter of the
Company's initial public offering (the "Underwriter") and into
agreements consolidating such investors' registration rights with those
granted by the Company to other investors, and to provide those
investors with the opportunity to invest in the Company upon terms and
conditions that more closely reflect the terms and conditions upon
which the other investors invested in the Company during a comparable
time period. As a result of the warrant exchange, the Company issued
165,267 shares of Common Stock. The fair market value of such shares
was reflected in the first quarter of 1997 in a non-cash compensation
expense of $340,166 and a direct charge to equity of $320,902 as a cost
of equity financing.
5
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OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
---------
Additionally, the Company issued warrants for the purchase of 165,269
shares of Common Stock with an exercise price of $4.00 per share and
retired warrants for the purchase of 330,536 shares of Common Stock.
Warrants
In April 1997, in connection with the initial public offering,
certain holders of warrants issued in connection with the bridge
financings in October and November 1996 surrendered such warrants to
acquire an aggregate of 150,000 shares of Common Stock. The surrender
and cancellation of such warrants did not have any other effect on the
bridge financings, nor did the Company pay any consideration in
connection with such surrender.
3. Net Loss Per Share
Net loss per share is based on the weighted average number of
common shares and dilutive common share equivalents outstanding during
the periods presented. Pursuant to Securities and Exchange Commission
requirements, Common Stock issued and options and warrants to purchase
shares of Common Stock granted by the Company during the twelve months
preceding the initial filing date of the Registration Statement have
been included in the calculation of weighted average common shares and
common share equivalents outstanding for the three months and six
months ended June 30, 1996. Options and warrants issued by the Company
prior to the aforementioned twelve-month period have not been included
in the calculation for any of the periods presented because the effects
of such items were anti-dilutive. Options and warrants outstanding
have not been included in the calculation of weighted average common
shares and common share equivalents outstanding for the three months
and six months ended June 30, 1997, because the effects of these items
were anti-dilutive.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (FAS 128). FAS 128 simplifies the existing earnings per
share (EPS) computations under Accounting Principles Board Opinion No.
15, "Earnings Per Share" (APB 15), revises disclosure requirements, and
increases the comparability of EPS data on an international basis. In
simplifying the EPS computations, the presentation of primary EPS is
replaced with basic EPS, with the principal difference being that
common stock equivalents are not considered in computing basic EPS. In
addition, FAS 128 requires dual presentation of basic and diluted EPS.
FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997.
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OBJECTIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
---------
The Company does not expect the EPS amounts calculated under FAS 128 to
be materially different from the amounts presented in the financial
statements under APB 15.
4. Income taxes
The Company has not recorded a provision for income taxes for
the three months and six months ended June 30, 1997 and 1996 based on
the fact that the Company has generated net operating losses during
each of those periods. The Company has recorded a full valuation
allowance against the net deferred tax asset generated primarily from
its net operating loss carryforwards.
5. Accounting Standards
The Financial Accounting Standard Board recently issued
Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income." This Statement requires that changes in
comprehensive income be shown in a financial statement that is
displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after
December 15, 1997. The Company will adopt the new standard beginning
in the first quarter of the fiscal year ending December 31, 1998.
In June 1997, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131).
SFAS No. 131 specifies new guidelines for determining a company's
operating segments and related requirements for disclosure. The
Company is in the process of evaluating the impact of the new standard
on the presentation of the financial statements and the disclosures
therein. The Statement will become effective for fiscal years
beginning after December 15, 1997. The Company will adopt the new
standard for the fiscal year ending December 31, 1998.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Certain statements contained in this Quarterly Report on Form
10-QSB, other than historical financial information, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties or other
factors which may cause actual results, performance or achievement of
the Company to be materially different from any future results,
performance or achievement expressed or implied by such forward-looking
statements. Factors that might cause such a difference include risks
and uncertainties related to the Company's dependence on the emerging
market for video broadcast, retrieval and conferencing, development of
additional products, protection of its intellectual property, limited
marketing experience, limited number of customers, and need for
additional personnel, as well as risks and uncertainties associated
with the Company's growth strategy, technological changes affecting the
Company and competitive factors affecting the Company.
The following discussion should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Quarterly Report on Form 10-QSB.
Overview
The Company was incorporated in October 1993 to develop and
produce products and systems to support new communications devices that
make extensive use of broadband networks and transmit high-quality
video and audio and high-speed data. The Company's operations to date
have related primarily to organizational activities, including research
and development for its initial products, including the VidPhone(R)
system, recruiting management and technical personnel and raising
capital. Currently, the Company expects to complete development of the
VidPhone(R) system and begin commercial production and installation of
the first units in late 1997.
To date, the Company has not generated substantial revenues
from the sale of its products and services. As of June 30, 1997, the
Company had cumulative losses of $8.7 million. The Company expects to
incur additional operating losses for the foreseeable future. Through
June 30, 1997, the Company's operations have been funded primarily
through public and private sales of debt and equity securities.
In April 1997, the Company received net proceeds of
approximately $9.5 million, including the exercise in full of the
over-allotment option granted to the underwriter (net of underwriting
discounts and commissions and other expenses) from the issuance of 2.07
million shares of Common Stock at $5.50 per share, from the Company's
initial public offering ("Initial Offering"). Approximately $2.1
million of the gross proceeds of the Initial Offering were used to
retire outstanding indebtedness under the promissory notes issued in the
private placement of warrants and debt during October and November 1996
(the "Bridge Financing"). The remainder of the net proceeds of the
Initial Offering have been used to fund the Company's sales and
marketing and product development efforts, for working capital and for
general corporate purposes.
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<PAGE> 9
Based on its needs to rapidly expand its technical and
administrative staff and the difficulty in finding qualified technical
staff in northern Virginia, the Company began to implement a plan to
relocate the Company's headquarters, research and development,
engineering and manufacturing facilities to a new location in
Portsmouth, New Hampshire. The Company intends to retain a sales
office in the Washington, D.C. metropolitan area and to hire
additional sales personnel for the New Hampshire facility. The Company
anticipates that the move will be completed during fourth quarter 1997.
In July 1997, the Company and Sprint Communications
Corporation, L.P. ("Sprint") entered into a one-year agreement whereby
Sprint will use its best efforts to resell the Company's video
networking products worldwide. The Company does not anticipate that it
will generate revenues from this agreement until first quarter 1998.
In August 1997, the Company formally introduced EVS-50(TM),
its integrated video communications network server, at a product
launch in New York. The Company also held other product launches for
the EVS-50(TM) in San Francisco, Boston and Washington, D.C. during
July and August 1997.
The Company expects to continue to incur substantial operating
expenses in the future to support its research and development costs,
expand its sales and marketing capabilities and organization, expand
its work force and for other general and administrative expenses. The
Company's results of operations may vary significantly from quarter to
quarter during this period.
Results of Operations
Comparison of the Three Months Ended June 30, 1997 and June 30, 1996
The Company had no revenues in the three months ended June 30,
1997 compared to revenues of approximately $14,000 in the same period
in 1996. The revenues recorded in 1996 were generated from consulting
arrangements, not from the Company's primary business. In 1997, the
Company devoted all of its resources to the development, production,
and sale of the VidPhone(R) system and related software products.
Selling, general and administrative expenses increased by
approximately $554,000, or 213%, in the three months ended June 30,
1997 to approximately $814,000 from $260,000 in the three months ended
June 30, 1996. Sales and marketing costs have increased in preparation
for the introduction of the Company's products to the marketplace,
primarily increased travel and sales materials expenses. Legal,
accounting, personnel and insurance expenses have increased as a result
of the Company becoming a publicly-traded company.
Research and development expenses increased by approximately
$593,000, or 213%, for the three months ended June 30, 1997, to
approximately $871,000 as compared to $278,000 for the three months
ended June 30, 1996. The increase was due primarily to the hiring of
additional technical staff and increased use of subcontractors in the
development of components of the Company's VidPhone(R) system.
Research and development
9
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expenses include the costs associated with all personnel, materials and
contract personnel engaged in research and development for the Company,
as well as an allocated portion of overhead expenses, such as rent,
telephone and office supplies.
The Company intends to accelerate and expand research and
development by hiring additional technical staff and purchasing
additional research and development related material. As the Company
continues testing and demonstrating its product line, the Company
expects research and development expenses to increase.
Depreciation and amortization increased approximately $191,000
to $213,000 in the three months ended June 30, 1997 from $22,000 in the
three months ended June 30, 1996. During the period the Company
charged to amortization expense $145,000 of capitalized debt issuance
costs upon the repayment of the debt from the proceeds of the Initial
Offering. To a lesser extent, depreciation on increased levels of
fixed assets owned by the Company also contributed to the increase.
Net interest expense increased by approximately $217,000 to
approximately $218,000 in the three months ended June 30, 1997 from
approximately $1,000 in the three months ended June 30, 1996. Net
interest expense for the period consisted of approximately $244,000 of
interest expense offset by approximately $27,000 in interest income.
Interest expense included a write-off of approximately $190,000 of
unamortized debt discount representing the fair value of warrants
issued to holders of bridge notes issued in connection with the Bridge
Financing. Interest income was earned during the period ended June 30,
1997 primarily on the invested proceeds of the Company's Initial
Offering completed in early April 1997.
As a result of the foregoing factors, the net loss increased
by approximately $1.6 million, or 283%, to approximately $2.1 million
for the three months ended June 30, 1997 from approximately $553,000
during the three months ended June 30, 1996.
Comparison of the Six Months Ended June 30, 1997 and June 30, 1996
The Company had no revenues in the six months ended June 30,
1997 compared to revenues of approximately $20,000 in the same period
in 1996. The revenues recorded in l996 were generated from consulting
arrangements, not from the Company's primary business. In 1997, the
Company devoted all of its resources to the development, production,
and sale of the VidPhone(R) system and related software products.
Selling, general and administrative expenses increased by
approximately $956,000, or 184%, in the six months ended June 30, 1997
to approximately $1.5 million from $520,000 in the six months ended
June 30, 1996. Included in administrative expenses for the six month
period is approximately $340,000 in non-recurring compensation expense
associated with a warrant exchange conducted in January 1997. The
remaining increase is mainly attributable to increased sales and
marketing expenses as the Company prepares to commercially market its
VidPhone(R) products and in increased administrative expenses
associated with becoming a public company in the second quarter of
1997.
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Research and development expenses increased by approximately
$766,000, or 136%, for the six months ended June 30, 1997, to
approximately $1.3 million as compared to $565,000 for the period ended
June 30, 1996. The increase was due primarily to the hiring of
additional technical staff and increased use of subcontractors in the
development of components of the Company's Vidphone(R) system.
Research and development expenses include the costs associated with all
personnel, materials and contract personnel engaged in research and
development for the Company, as well as an allocated portion of
overhead expenses, such as rent, telephone and office supplies.
The Company intends to accelerate and expand research and
development by hiring additional technical staff and purchasing
additional research and development related material. As the Company
continues testing and demonstrating its product line, the Company
expects research and development expenses to increase.
Depreciation and amortization increased approximately $271,000
to $323,000 in the six months ended June 30, 1997 from $52,000 in the
six months ended June 30, 1996. During the period the Company charged
to amortization expense $209,000 of capitalized debt issuance costs
upon the repayment of the debt from the proceeds of the Initial
Offering. To a lesser extent, depreciation on increased levels of
fixed assets owned by the Company also contributed to the increase.
Net interest expense increased by approximately $424,000 to
approximately $428,000 in the six months ended June 30, 1997 from
approximately $4,000 in the six months ended June 30, 1996. Net
interest expense for the period consisted of approximately $455,000 of
interest expense offset by nearly $27,000 in interest income. Interest
expense included a write-off of approximately $385,000 of unamortized
debt discount representing the fair value of warrants issued to holders
of bridge notes in connection with the Bridge Financing. Offsetting
this expense was interest income earned during the period ended June
30, 1997 on the invested proceeds of the Initial Offering.
As a result of the foregoing factors, the net loss increased
by approximately $2.5 million, or 215%, from approximately $1.1 million
to $3.6 million for the six months ended June 30, 1997 as compared to
the six months ended June 30, 1996.
Liquidity and Capital Resources
The Company has incurred cumulative losses aggregating
approximately $8.7 million from inception through June 30, 1997. The
Company expects to incur additional operating losses for the
foreseeable future, principally as a result of expenses associated with
the Company's product development efforts and anticipated sales,
marketing and general and administrative expenses. During the six
months ended June 30, 1997, the Company satisfied its cash requirements
principally from the proceeds of the Initial Offering and, prior to the
Initial Offering, from private sales of equity and debt securities.
The primary uses of cash have been to fund research and development and
sales, general and administrative expenses.
11
<PAGE> 12
At June 30,1997, the Company had cash of approximately $5.0
million and a working capital surplus of approximately $5.0 million.
In April, the Company received net proceeds of approximately $9.5
million from the Initial Offering (including proceeds received from the
exercise in full of the over-allotment option). Approximately $2.1
million of the gross proceeds were used to repay the promissory notes
issued in the Bridge Financing and approximately $600,000 were used to
repay related expenses.
Net cash used in operating activities for the six months ended
June 30, 1997 totaled approximately $3.2 million. Net cash used in
investing activities for the six months ended June 30, 1997 totaled
approximately $396,000. Net cash provided by financing activities for
the six months ended June 30, 1997 totaled approximately $8.0 million.
Based on the Company's operating plan, the Company believes
that the proceeds of the Initial Offering, together with the
anticipated revenues from future operations, will be sufficient to
satisfy its capital requirements and finance its operations for the
foreseeable future. Such belief is based on certain assumptions and
there can be no assurance that such assumptions are correct. However,
in order to accommodate potential future growth and expansion of the
Company's operations, the Company may seek to raise substantial
additional capital in the near future. In addition, contingencies may
arise which may require the Company to obtain additional capital.
Accordingly, there can be no assurance that the Company's current
resources will be sufficient to satisfy the Company's capital
requirements. The Company anticipates that any additional financing
required to meet its current plans for expansion may take the form of
the issuance of common or preferred stock or debt securities, or may
involve other secured or unsecured debt financing. Additional equity
financing may involve substantial dilution to the interests of the
Company's then existing stockholders. To the extent that the Company
elects to obtain debt financing, the lender may impose certain
restrictive covenants on the Company and upon any default by the
Company on such debt financing, and in a liquidation of the Company,
the rights of such lender would be superior to the rights of the
holders of Common Stock. There can be no assurance that the Company
will be able to obtain such additional capital on a timely basis, on
favorable terms, or at all. In any of such events, the Company may be
unable to implement its business plan.
Part II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation (Incorporated by
reference to Exhibit No. 3.1 forming a part of the Registrant's
Registration Statement on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended).
3.2 Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2
forming a part of Amendment No. 2 to the Registrant's Registration
Statement on Form SB-2 (File No.
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333-20625) filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.1 Form of Warrant for the Purchase of Shares of Common Stock, issued in
connection with the private placement of $2,000,000 aggregate principal
amount of Bridge Notes (Incorporated by reference to Exhibit 3.4
forming a part of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
4.2 Form of Warrant to Purchase Common Stock of the Registrant, issued in
connection with the private placement of units in June 1995 and August
1996. (Incorporated by reference to Exhibit 3.5 forming a part of the
Registrant's Registration Statement on Form SB-2 (File No. 333-20625)
filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended).
4.3 Warrant to Purchase 43,382 Shares of Common Stock, issued to the
Adelson Investment Company (Incorporated by reference to Exhibit 3.6
forming a part of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
4.4 Form of Warrants for the Purchase of 100,000 Shares of Common Stock,
$.01 par value per share, issued in connection with the private
placement of Series A Convertible Preferred Stock and warrants in
December 1996 and January 1997 (Incorporated by reference to Exhibit
3.7 forming a part of the Registrant's Registration Statement on Form
SB-2 (File No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
4.5 Form of Option for the Purchase of 180,000 shares of Common Stock
issued to Barington Capital Group, L.P. (Incorporated by reference to
Exhibit 3.8 forming a part of the Registrant's Registration Statement
on Form SB-2 (File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended).
4.6 Specimen certificate evidencing shares of Common Stock of the
Registrant (Incorporated by reference to Exhibit 4.2 forming a part of
Amendment No. 2 to the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
10.1 1994 Stock Option Plan (Incorporated by reference to Exhibit 10.1
forming a part of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
10.2 1996 Stock Incentive Plan (Incorporated by reference to Exhibit No.
10.2 forming a part of the Registrant's Registration Statement on Form
SB-2 (File No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
10.3 Employment Agreement between the Registrant and Steven A. Rogers
(Incorporated by reference to Exhibit No. 10.3 forming a part of
Amendment No. 2 to the Registrant's
13
<PAGE> 14
Registration Statement on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended).
10.4 Form of Consulting Agreement by and between the Registrant and
Barington Capital Group, L.P. (Incorporated by reference to Exhibit No.
10.4 forming a part of the Registrant's Registration Statement on Form
SB-2 (File No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
10.5 Letter Agreement, dated October 7, 1996, between Barington Capital
Group and the Registrant (Incorporated by reference to Exhibit No. 10.5
forming a part of Amendment No. 2 to the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended).
10.6 Letter Agreement, dated December 5, 1995, by and among PVR Securities,
Inc., the Registrant, Steven A. Rogers and John B. Torkelsen
(Incorporated by reference to Exhibit No. 10.6 forming a part of
Amendment No. 2 to the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended).
10.7 Voting Agreement, dated December 19, 1996, by and among the Registrant,
Steven A. Rogers, Applewood Associates, L.P. and Acorn Technology
Partners, L.P. (Incorporated by reference to Exhibit No. 10.7 forming a
part of Amendment No. 2 to the Registrant's Registration Statement on
Form SB-2 (File No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
27.1 Financial Data Schedule.
(b) The Registrant did not file any reports on Form 8-K during the quarter
ended June 30, 1997.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Objective Communications, Inc.
By: /s/ STEVEN A. ROGERS
-------------------------------------------
Steven A. Rogers
President and Chief Executive Officer
(duly authorized executive officer)
/s/ ROBERT H. EMERY
-------------------------------------------
Robert H. Emery
Vice President, Administration and Finance
(principal financial officer)
August 14, 1997
15
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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0
0
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