================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
September 30, 2001 0-16397
APPLIED SPECTRUM TECHNOLOGIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-14194547
--------- -----------
(State of Incorporation) (IRS Employer
Identification Number)
c/o Norwood Venture Corp.
65 Norwood Avenue
Upper Montclair, NJ 07043
Registrant's Telephone Number
Including Area Code
(973) 783-1117
Securities Registered Pursuant to 12(b) of the Act: None
Securities Registered Pursuant to 12(g) of the Act:
Common Stock -$.01 par value
Common Stock Purchase Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of February 28, 2002, 2,953,941 shares of Common Stock of the Registrant were
outstanding, and the aggregate market value of the Common Stock of the
Registrant as of that date excluding shares owned beneficially by officers and
directors, is estimated to be $10,245.
================================================================================
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
During fiscal 1994 Applied Spectrum Technologies, Inc. began
implementing a plan of voluntary dissolution pursuant to Minn. Statute #302A.721
that was approved by its shareholders at a Special Shareholders' Meeting held on
November 30, 1993. Under the Company's Plan of Dissolution most of its assets
were sold during 1994 with some payments deferred into 1995 and beyond. The
recovery period ran through 1997. During fiscal 1995 most of the tangible asset
sales were collected and only technology licenses remained to be collected.
During fiscal 1996 the Company continued to collect license fees and payments on
one equipment lease. The results of the plan of dissolution were successful and
all liabilities and expenses were either paid or are covered in reserves. On
November 17, 2000 a Special Meeting of the shareholders of AST was held at which
time the Plan of Dissolution was revoked. Pursuant to the proposal for
revocation, a liquidating dividend of approximately $204,000 was paid pro-rata
to shareholders in August, 2001.
Prior to implementation of the Dissolution Plan, AST was engaged in the
development, manufacture, marketing and sale of digital business communication
systems. In its final years of operation, the Company allocated most of its
available resources to the marketing and sale of its T-l Multiplexer product
which was a communication system that allowed many individual telephone and data
services to be transmitted and received over one high speed digital transmission
line. The CENTRA Series of T-1 systems included channel banks and T-1
Multiplexers which supported voice, data and video communications for point to
point interoffice requirements, as well as digital access to long distance
carrier networks.
The Company was organized as a Minnesota corporation on February 17,
1982. The Company's principal executive office located at 65 Norwood Avenue,
Upper Montclair, NJ 07034, and its telephone number is (973) 783-1117.
(b) Financial Information About Industry Segments.
Since its inception, the Company has operated in one industry segment -
the development, manufacture, marketing and sales of communications products and
networks some of which transmit digital data over existing local telephone wires
simultaneously with normal voice communications.
(c) Narrative Description of Business.
2
BACKGROUND
The technology on which the Company's original products were based,
including Spread Spectrum Technology, permit data and telemetry to be
transmitted simultaneously over telephone wire without interfering with normal
voice service. The Company's products were known as data/voice multiplexing
("DVM") equipment and were aimed at operating telephone companies (Telco
market).
The Company's Alarm and DVM-400 products were introduced to a Telco
marketplace which was slow to develop. Consistent with a strategy begun in 1988,
the Company redirected its efforts towards the commercial marketplace, with
emphasis on the T-1 Multiplexer market.
During 1989 and early 1990 the Company worked on the development of the
T-1 product which was introduced to the market in 1990 and became the Company's
primary product.
The Company's lack of financial resources caused the Company to pursue
a plan of dissolution as approved by the Board of Directors and approved by the
shareholders on November 30, 1993. For more information see Item 7 - Management
Discussion and Analysis of Financial Condition.
PRODUCTS
After AST ceased operations in 1993, as part of the implementation of
the Dissolution Plan, the Company's products were eliminated through the
dissolution process.
MARKETS
During the Dissolution Plan, the Company ceased to pursue any of its
former markets.
SALES AND DISTRIBUTION
After ceasing operations and implementing the Dissolution Plan in 1993,
the Company did not pursue Sales and Distribution efforts.
Between 1991 and 1993, the Company entered into four agreements with
OEM customers which provide for non-exclusive rights to sales, manufacturing and
technology of the T-1 Multiplexer product.
During fiscal 1994, two of these OEM agreements were terminated by the
customer. The other two OEM agreements expired in fiscal 1997.
3
PRODUCT DEVELOPMENT
During fiscal 1995 and 1996, there were no product development
activities because of the implementation of the Plan of Dissolution.
During fiscal 1996, the Company continued to support its OEM Licenses
by use of former employees as consultants.
MANUFACTURING, SERVICE AND SUPPORT
Prior to ceasing operations and implementing the Dissolution Plan, the
Company's manufacturing operations consisted primarily of assembly, test and
quality control of components and subassemblies and final testing of completed
products. Subcontractors assembled printed circuit boards for he Company's
products.
Due to a lack of resources, the Company ceased manufacturing and
service operations at the end of fiscal 1993. The Company entered into
agreements with third parties which protected its customer base from a
manufacturing and service standpoint.
A one-year warranty was given on all historic products, and longer
warranties were sometimes granted on products sold to distributors and OEMs.
During 1992 the Company extended the warranty on its CENTRA T-1 Multiplexer
products from one year to five years. Warranty coverage on the CENTRA T-1
Product has been assigned to a third party. Under the terms of the sale of its
T-1 inventory as part of the Dissolution Plan, the Company granted extended
warranty coverage to the buyer, which expired in 1997.
The Company had a customer service department which provided training,
installation and product support. The customer service department administered
customer warranties and repairs and provided telephone and on-site assistance.
The Company sold its customer service department to a third party in September,
1993.
COMPETITION
The Company implemented its Plan of Dissolution in 1993 and therefore
has not been tracking any competitors the past eight years.
BACKLOG
At September 30, 2001 and 2000, the Company's backlog of orders was
zero.
4
GOVERNMENT REGULATION
Communications equipment is subject to federal regulations which
require that they be tested and then approved or certified by the Federal
Communications Commission (the "FCC") prior to their use, sale, lease or
distribution. When required or appropriate, the Company's products were tested
and approved by the FCC and were authorized for distribution.
EMPLOYEES
As September 30, 2001, the Company had no employees.
PATENTS, TRADEMARKS AND LICENSES
Prior to adopting the Dissolution Plan, the Company had obtained a
number of United States and foreign parts. The 17-year terms of the Company's
United States patents expire from the years 2001 to 2004. The Company believed,
however, that its principal technological advantage, if any, over existing and
prospective competitors was in the ability of its personnel to apply a broad
range of techniques, some of which may have been trade secrets of the Company,
to the resolution of the customer needs. The Company attempted to protect its
trade secrets by requiring each of its employees to execute a confidentiality
agreement and by other measures common to technical industries. There was no
assurance that any of the Company's patents or other proprietary rights of the
Company would be sufficient to prevent effective competition with its products.
The Company's product names "DWV-200" and "SPECTRA" were registered as
trademarks in the United States. The Company also claimed common law trademark
rights with respect to the name "DVM-400".
During 1994, the Company stopped paying for any further patent or
trademark applications or renewals. The Company believes that it has exhausted
all efforts of future value for its technologies.
(d) Financial Information About Foreign and Domestic Operation and Export
Sales.
Substantially all of the Company's revenue, operating profit and
identifiable assets have been attributable to the United States.
ITEM 2. PROPERTY
On September 16, 1993, the company vacated its former headquarters and
manufacturing facilities located at 450 Industrial Boulevard, Minneapolis,
Minnesota. Since 1993, the Company has conducted business through voice mail, P.
O. box and facsimile machines. From 1993 to 1997 the Company obtained
approximately 300
5
square feet space for storage of its assets at reasonable monthly rental
amounts. In November 1997, the Company vacated its storage space and transferred
all of its important records to a storage site in New York.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or to which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 17, 2000 a special meeting of the shareholders was held, at
which the Plan of Dissolution was revoked.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Year First
Elected or
Name Age Appointed Position Currently Held
---- --- --------- -----------------------
Mark R. Littell 50 1998 Chief Executive Officer
Mr. Littell has been Chief Executive Office of the Company since
January, 1998. Mr. Littell has been President of Norwood Venture Corp. since May
1, 1988.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATD SHAREHOLDER MATTERS
AST's common stock was traded on the national, over-the-counter market under the
symbol ASTI after its initial public offering in January, 1988. However the
Company was notified by NASD that, due to low trading volume, it would not
report transactions in the Company's stock after October 13, 1989.
As of October 1, 2001, there were approximately 792 holders of record of the
Company's common stock.
Other than the liquidating dividend paid in August, 2001, the Company has never
declared or paid cash dividends on its common stock.
6
ITEM 6. SELECTED FINANCIAL DATA
APPLIED SPECTRUM TECHNOLOGIES, INC.
SUMMARY FINANCIAL INFORMATION
(THOUSANDS)
FOR THE FIVE YEARS ENDED SEPTEMBER 30,
----------------------------------------------
Statements of Operations Data: 2001 2000 1999 1998 1997
- ----------------------------- ------ ------ ------ ------ ------
Net Sales $ -- $ -- $ -- $ -- $ 4
Sublicensing revenues -- -- -- -- 8
------ ------ ------ ------ ------
Total Revenues $ -- $ -- $ -- $ -- $ 12
Operating profit (loss) $ (16) $ -- $ (4) $ -- $ (22)
Other income (expense) 11 14 11 12 75
------ ------ ------ ------ ------
Net Profit loss (5) 14 7 12 53
Net Profit (loss) per share $ -- $ -- $ -- $ -- $ 0.02
Weighted average number of
shares outstanding 2,954 2,954 2,954 2,954 2,954
Balance Sheets Data:
Cash and short-term investments $ 37 $ 262 $ 255 $ 248 $ 324
Working capital $ 10 $ 245 $ 227 $ 220 $ 208
Total Assets $ 37 $ 262 $ 255 $ 248 $ 324
Long-term liabilities -- -- -- -- --
Shareholders' equity $ 10 $ 245 $ 227 $ 220 $ 208
ITEM 7. MANAGEMENT'S DISCUSSION AND ALALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All amounts in the following discussion have been rounded to the nearest $1,000.
GENERAL
- -------
In its latest audited financial statement, September 30, 1992, the Company's
auditors issued a qualified opinion regarding the Company's ability to continue
as a going concern. Revenues had been insufficient to generate cash flows
sufficient to support operations and pay liabilities. The Company was declared
to be in default on its secured credit line in May 1993. A reduction in staffing
and departure of key employees such as the President and CEO, Director of
Operations and Service Department Manager also negatively impacted the Company's
operations.
7
The Company disclosed in its 10-K for the year ended September 30, 1992, that
its liquidity was dependent on its ability to generate additional revenues and
make use of the credit line of Norwood. The Company was unsuccessful in its
attempts to raise additional equity financing or find a strategic partner.
During the second fiscal quarter of 1993, the Company's secured lender Norwood
Venture Corp. acquired all of the Company's stock and became the majority
(77.3%) owner of the Company.
During March, 1993 the Company reduced its work force from 20 employees to 13
employees and placed its engineering development plans on hold as a means of
matching fixed costs to revenues. The Company's President and CEO, James J.
Szeliga, resigned as an officer of the Company on May 7, 1993.
For the first nine months of fiscal year 1993 revenues decreased $276,000. Cash
decreased $31,000 to $3,000, net working capital excluding cash and credit line
borrowing decreased $48,000 to $99,000 and the Company borrowed an additional
$88,000 under its Norwood Credit Line. At June 30, 1993 the balance owing on the
Norwood Credit Line was $195,000.
In light of the above, the Company embarked upon an extensive search for
additional equity or debt investment and for a strategic partner with which to
merge, or a purchaser of the Company as a going concern. When neither additional
funding nor a strategic partner were located, liquidation pursuant to Chapter 7
or Reorganization under Chapter 11 of the United States Bankruptcy Code was
considered. However, the Company believed a greater monetary return would be
realized if the Company conducted a controlled dissolution and the assets were
sold pursuant to independently negotiated agreements. The Company also concluded
that attempted reorganization under Chapter 11, given the Company's inability to
generate sufficient revenue to sustain its operations, would only serve to
further erode the value of the Company's existing assets.
As a result, the Board of Directors, as a means of attempting to maximize
recovery to its creditors and shareholders, adopted a plan of dissolution such
that a payment plan to creditors could be implemented and foreclosure by its
secured lender could be avoided. As part of the dissolution plan, the Company
attempted to sell its assets contingent on future payments. Results were
successful and all liabilities and expenses were satisfied. Therefore, funds
were available from which to pay a liquidating dividend to AST's shareholders.
The Board of Directors of the Company did not seek or obtain an independent
report, appraisal or fairness opinion in connection with the proposed
dissolution due to the lack of funds required to obtain such an opinion.
Search for Strategic Partner
- ----------------------------
Between late 1992 and mid-1993, the Company contacted approximately 60 entities,
including HT Communications, Inc. ("HT" or "HT Communications"), seeking equity
or debt investment or a strategic partner with respect to a possible merger.
Such searches were unsuccessful. Contacts were made with OEM customers,
competitors and numerous other companies in the data communications industry
regarding the sale of the
8
Company as an operating concern. The majority of these contacts expressed no
interest and none resulted in a feasible offer that would have paid all of AST's
outstanding liabilities, nor did any of these contacts culminate in a letter of
intent or a definitive agreement.
Shareholder Approval
- --------------------
Shareholder approval of the Dissolution Plan was received at a special
shareholders' meeting held on November 30, 1993.
Transaction with HT Communications, Inc.
- ----------------------------------------
Having received no positive results from its search for a strategic partner, the
Company again contacted a number of these same entities to discuss a possible
licensing arrangement and/or asset sale. HT Communications was the only company
which expressed an interest in pursing further discussions with AST.
In August, 1993, AST entered into a Licensing Agreement with HT Communications
granting HT a non-exclusive, perpetual, world-wide license to manufacture those
T-1 digital Multiplexer products marketed under the name CENTRA Series 4000 and
CENTRA Series 3000. In consideration, HT paid to AST royalties on its sale of
certain AST products for a period of three (3) years. With respect to its
general terms, the License Agreement with HT was negotiated along the lines of
AST's previously existing License Agreements.
In addition to the License Agreement already in place with HT, AST entered into
an agreement in December of 1993 with HT Communications for the acquisition of
the majority of the T-1 assets of AST. The Agreement called for HT to purchase
the fixed assets and inventory at the fair market value and standard cost
respectively in installments over approximately nine (9) months commencing in
December, 1993. In addition, HT agreed to assume obligations associated with
certain AST contracts and to offer some AST employees jobs. Due to HT's cash
flow problems, the payment terms of the Agreement were amended such that AST was
given a secured interest in HT's assets and the payments were extended to
December, 1995 including interest on the unpaid balance at the rate of 12% per
annum, with HT having the right to prepay any balance owing.
FINANCIAL INFORMATION FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1999,
- --------------------------------------------------------------------
2000 AND 2001
- -------------
Revenues
- --------
Revenues in 2001, 2000 and 1999 were $0, as a result of the Dissolution Plan.
Cost of Product Sold
- --------------------
There were no cost of products sold in 2001, 2000 and 1999 because of the
Dissolution Plan.
9
Expenses
- --------
General and administrative expenses in 2001, 2000 and 1999 related to the
implementation of the Dissolution Plan and preserving the corporate shell.
Other Income/Expenses
- ---------------------
Other income in 2001, 2000 and 1999 consisted of interest income.
Federal Income Tax Consequences of the Transaction
- --------------------------------------------------
In 1993, the Company was unable to determine with specificity what the income
tax consequences of the proposed dissolution of the Company would be given the
uncertainty as to the actual dollars which would be realized upon liquidation of
the Company's assets as well as questions regarding how the net operating loss
carried forward would be dealt with in light of the changes in control of the
Company. However, the company did make the following estimate in this regard:
(i) The extent of net operating loss available to offset income is unknown
due to changes in ownership and the difficulty in determining fair
market value of the Company;
(ii) The 1993 fiscal year's operating loss will probably offset any gain on
the recapture of depreciation or value from the sale of fixed assets;
(iii) Inventory will be sold at approximately the same value as cost, so
there will be no income tax consequences; and
(iv) Future royalties will be taxable at normal tax rates unless they can
be offset by net operating loss.
The Company has now filed all of its Income Tax Returns and has been able to
offset all income from the dissolution recovery process with net operating loss
carry forwards. The Company's income tax returns have not been audited by the
Internal Revenue Services. The Company believes that the net liquidating
dividend to be paid to shareholders in August, 2001 will be treated as a return
of capital.
Capital Resources and Liquidity
- -------------------------------
Substantially all of the Company's working capital needs have been funded
through proceeds from the sales of common stock and preferred stock, or from
loans from or guaranteed by certain shareholders. During 1987, all three series
of preferred stocks were converted to common stock. In January 1988, the
Company's initial public offering
10
(IPO) was completed. Net proceeds from the IPO were $3,841,000. The funds from
the IPO were used to repay $691,000 of convertible debentures and to fund
activities in product development and sales and market development during 1988,
1989 and the first half of 1990. The Company also pursued some unsuccessful
acquisition strategies during 1989 and 1990.
In the second quarter of fiscal 1990 the Company underwent a restructuring and
recapitalization to concentrate primarily on its new CENTRA T-1 Multiplexer
product line. The restructuring resulted in substantially all resources being
directed towards penetration of the commercial T-1 marketplace. The
recapitalization resulted in a 1 for 100 reverse split of the Company's voting
common stock. Following the reverse split the Company issued 1,268,000 new
shares of voting Common Stock on March 26, 1990 to private investors at $0.50
per share which resulted in $643,000 of equity funding.
In addition to the sale of stock in March 1990, the Company obtained a revolving
credit line of up to $500,000 from Norwood Venture Corp. The credit line which
was secured by all assets was available based on a borrowing formula equal to
90% of eligible receivables. The agreement with Norwood was modified three
times. The most recent modification in March 1992 increased the total line from
$500,000 to $600,000 and increased the borrowing base by including up to
$100,000 of T-1 Multiplexer inventory. As part of these modifications, Norwood
was granted an increase to 1,000,000 shares in its warrants to purchase the
Company's common stock at $0.50 per share. Another condition of the modification
was a provision that reduced Norwood's Warrant price from $.50 per share to
$0.01 per share upon the notice of default by the Company. The company defaulted
on its agreement with Norwood in 1993 and then the warrant price was reduced to
$0.01 per share. As of June 30, 1993, the Company had $195,000 outstanding
against the credit line. During the fourth quarter of 1993, the Company was able
to repay the balance owed to Norwood on its credit line as part of the early
stages of the dissolution process.
Through September 30, 2001, the Company had incurred net cumulative losses of
$16,064,267.
The implementation of the Dissolution Plan has resulted in a reduction of
liabilities of $515,000 between fiscal 1993 and 1999. As of September 30, 2001,
the Company had cash of $37,000 and booked liabilities of $27,000. The net book
value of the Company at September 30, 2001, was $10,000.
The Company's CFO and major shareholder voted to revoke the dissolution of AST
and to retain the corporate shell for an unspecified time in hope that it has
some additional future value for AST's shareholders. The Company paid a
liquidating dividend to shareholders in August, 2001 of approximately $229,000.
The Company estimates that $37,000 of undistributed cash, plus future interest
income will be sufficient to cover the future carrying costs of the corporate
shell.
11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL DATA
FINANCIAL STATEMENTS PAGE
- -------------------- ----
Statements of Operations - Years ended 13
September 30, 2001, 2000, 1999
Balance Sheets - September 30, 2001, 2000, 1999 14
Statements of Cash Flows - Years ended 15
September 30, 2001, 2000, 1999
Statements of Shareholders' Equity - Years ended 16
September 30, 2001, 2000, 1999
Notes to Financial Statements 17-19
The following data are included herein and should be read in
conjunction with the financial statements referred to above.
FINANCIAL STATEMENTS SCHEDULES:
- -------------------------------
VIII - Valuation and Qualifying Accounts 20
X - Supplementary Income Statement Information 21
All other schedules are omitted as the required information in
inapplicable or the information is presented in the consolidated financial
statements or related notes.
12
APPLIED SPECTRUM TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
---------------------------------------------
2001 2000 1999
---------- ---------- ----------
REVENUES:
Net sales $ 0 $ 0 $ 0
Sublicensing revenues 0 0 0
---------- ---------- ----------
Total revenues 0 0 0
Cost of product sold -- -- --
---------- ---------- ----------
Gross profit 0 0 0
General and administrative expense 16,208 0 3,974
---------- ---------- ----------
Operating profit (loss) (16,208) 0 (3,974)
---------- ---------- ----------
Interest Income 10,757 14,175 11,110
Interest expense -- -- --
---------- ---------- ----------
Net profit (loss) $ (5,451) $ 14,175 $ 7,136
Net profit (loss) per share $ 0 $ 0 $ 0
========== ========== ==========
Weighted average number of
shares outstanding 2,953,941 2,953,941 2,953,941
See notes to financial statements
13
APPLIED SPECTRUM TECHNOLOGIES, INC.
BALANCE SHEETS
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 36,906 $ 262,376
Other -- --
------------ ------------
Total current assets 36,906 262,376
PROPERTY AND EQUIPMENT
Equipment at fair market value -- --
------------ ------------
$ 36,906 $ 262,376
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LAIBILITIES
Accounts payable $ 8,035 $ 534
Accrued severance costs -- 15,833
Other accrued expenses 18,626 1,132
------------ ------------
Total current liabilities 26,661 17,499
SHAREHOLDERS' EQUITY
Common Stock, par value $.01 per share
authorized 10,000,000 shares, issued
and outstanding 2,953,941 29,539 29,539
Additional paid-in-capital 16,044,973 16,274,154
Accumulated deficit (16,064,267) (16,058,816)
------------ ------------
10,245 244,877
------------ ------------
$ 36,906 $ 262,376
============ ============
See notes to financial statements
14
APPLIED SPECTRUM TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
YEAR ENDED SEPTEMBER 30,
------------------------------------------
2001 2000 1999
---------- ---------- ----------
OPERATING ACTIVITIES
Net profit (loss) $ (5,451) $ 14,175 $ 7,136
Net cash flow from (used for) changes in:
Accounts receivable -- -- --
Accounts payable 7,501 534 --
Other current assets and liabilities 1,661 7,954 --
---------- ---------- ----------
Net cash from (used for) operating activities 3,711 6,755 7,136
INVESTING ACTIVITIES
Purchase of assets -- -- --
---------- ---------- ----------
Net cash from investing activities -- -- --
FINANCING ACTIVITIES
Liquidating Dividend (229,181) -- --
---------- ---------- ----------
Net cash from (used for) financing
activities (229,181) -- --
---------- ---------- ----------
INCREASE(DECREASE) IN CASH (225,470) 6,755 7,136
Cash beginning of year 262,376 255,621 248,485
---------- ---------- ----------
CASH END OF YEAR $ 36,906 $ 262,376 $ 255,621
========== ========== ==========
See notes to financial statements
15
APPLIED SPECTRUM TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ----------- ----------- ---------
BALANCE AT 2,953,941 $ 29,539 $16,274,154 ($16,080,127) $ 223,566
September 30, 1998
Net profit for the year $ 7,136 $ 7,136
------------------------------------------------------------------------
BALANCE AT
September 30, 1999 2,953,941 $ 29,539 $16,274,154 ($16,072,991) $ 230,702
Net profit for the year $ 14,175 $ 14,175
------------------------------------------------------------------------
BALANCE AT
September 30, 2000 2,953,941 $ 29,539 $16,274,154 ($16,058,816) $ 244,877
Liquidating dividend $ (229,181) $(229,181)
Net profit for the year $ (5,451) $ (5,451)
------------------------------------------------------------------------
BALANCE AT
September 30, 2001 2,953,941 $ 29,539 $16,044,973 ($16,064,267) $ 10,245
========================================================================
See notes to financial statements
16
APPLIED SPECTRUM TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF FINANCIAL STATEMENT PRESENTATION
The September 30, 2001, 2000 and 1999, financial statements are
"unaudited" and include a reserve for administration expenses.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prior to implementing the Plan of Dissolution, the Company was engaged
in the development, manufacture, marketing and sale of products for the digital
transmission of data.
Revenue Recognition: Revenues from sales were recognized on shipment of the
product. Revenues pertaining to development contracts and sub-license fees were
recognized when billed. The billings were done on a progress basis to cover
expenses incurred or achievement of certain contract milestones and
specifications. Expenses in excess of related development contract revenues were
charged to product development costs because the Company believes that such
contracts may result in future product sales. The Company entered into
development contracts to perform feasibility studies and to develop certain
products.
Warranties: The Company's products were generally under warranty against defects
in material and workmanship for a period of one year. During 1992, the Company
increased the warranty period on its CENTRA T-1 Multiplexer products to five
years. Under the terms of the sale of the Company's T-1 inventory in 1994, an
extended warranty was granted to the Buyer. The Company maintained an accrual
for these anticipated future warranty costs based on management's estimates of
such costs. The final liability for warranty costs expired in 1997 when the
Company's agreement with the buyer expired.
Property and Equipment: During 1997, the Company disposed of all remaining
property and equipment.
Profit (Loss) Per Share: Profit (Loss) per share is computed by dividing the net
profit (loss) for the period by the weighted average number of shares of Common
Stock. Outstanding stock options and warrants are not included in the loss per
share calculations as they are anti-dilutive.
NOTE C - REVOLVING CREDIT LINE
The Company had a revolving credit line with Norwood Venture Corp. The
revolving credit line secured by all assets was called by Norwood during the
third fiscal quarter of 1993, because the Company was in default on its
borrowing conditions. As part of the dissolution process, the Company was able
to repay the secured lender, Norwood, as of September 30, 1993.
17
NOTE D - COMMON STOCK
On January 29, 1988, the Company completed its initial public offering
and as a result issued 328,073 shares of Common Stock and 164,036 warrants. The
Company received net proceeds of $3,841,222.
On March 23, 1990, the shareholders approved a one-for-one hundred
reverse stock split of the Company's Common Stock and an amendment to the
Articles of Incorporation reducing the authorized Common Stock available for
issuance from 175,000,000 common shares to 10,000,000 common shares.
On March 26, 1990, the Company issued 1,268,000 shares of Common Stock
to private investors and received net proceeds of $634,000. The Company also
granted warrants to purchase up to 600,000 shares of the Company's Common Stock
at $0.50 per share to Norwood as a condition to Norwood's revolving credit line.
As a condition to amendments to Norwood's revolving credit line on
March 29, 1991, and March 19, 1992, the Company granted additional warrants to
purchase an additional 400,000 shares of the Company's Common Stock at $0.50 per
share to Norwood. When the Company defaulted on the Norwood loan on 1993, the
Warrant price was automatically reduced to $0.01 per share. Norwood exercised
its rights to the warrants in January 1995 and purchased 957,877 shares of
common stock.
NOTE E - STOCK OPTIONS AND WARRANTS
Edward F. Mackay has a warrant, expiring 7/26/03 to purchase 200,000
common shares at $0.10 per share.
NOTE F - MAJOR CUSTOMERS
Not applicable.
NOTE G - INCOME TAXES
Due to the change in ownership and plan of dissolution it is estimated
that most of the Company's net operating loss carryforwards will not be
utilized.
NOTE H - LEASES
The Company's previously leased facility was vacated on September 16,
1993. The facility leases expired on March 31, 1993 and the Company extended the
use of the space on a month-to-month basis through August 31, 1993.
18
During fiscal 2001, 2000 and 1999, the Company obtained practically
rent-free space for storage of its assets and operation of its business through
voice mail, post office box, and facsimile machines.
NOTE I - CHANGE IN CONTROL OF THE COMPANY
During the second fiscal quarter of 1993, Norwood Venture Corp.,
acquired all of the Company stock owned by Oxford Venture Fund Limited
Partnership and Oxford Venture Fund II Limited Partnership placing Norwood in
voting control of the majority of the outstanding common stock of the Company.
NOTE J - SIGNIFICANT EVENTS
During 1991 and 1992 the Company entered into OEM sub-licensing
agreements with three T-1 customers and during 1993 the Company entered into an
OEM sub-licensing agreement with one T-1 customer. These agreements required the
Company to transfer certain non-exclusive manufacturing, sales and technology
rights to the OEMs. In exchange for the rights, the Company received
sub-licensing fees, future royalties and development contract revenues. During
1997, 1996, and 1995, the Company recognized $8,000, $58,000, and $71,000
respectively in sub-licensing revenues from these agreements.
In December 1993, the Company completed an Agreement to sell the
majority of its assets to HT Communications.
Based on the results of the Dissolution Plan the Company paid a partial
liquidating dividend to shareholders in August, 2001.
19
APPLIED SPECTRUM TECHNOLOGIES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Not Applicable)
20
APPLIED SPECTRUM TECHNOLOGIES, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Not Applicable)
21
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCUSSIONS
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a) Directors of the Company
------------------------
Principal Occupation
Name of Director Age and Business Experience
- ---------------- --- ---------------------------
Mark R. Littell 50 President, Norwood Venture Corp., 1988
a firm which manages venture capital
funds. Mr. Littell is also a Director of
Video Services Acquisition Corp.
(b) Executive Officers of the Company
---------------------------------
The information required by this Item 10 regarding executive officers
is included in this Report under Item 4A, "Executive Officers of the
Registrant."
(The remainder of this page has been intentionally left blank.)
22
ITEM 11. EXECUTIVE COMPENSATION
(a) Cash Compensation
-----------------
The following table provides information as to the compensation of the
executive officers for services rendered in all capacities during the fiscal
year ended September 30, 2001 and to all executive officers as a group.
Name of Individual Capacities in Cash
or Number in Group Which Served Compensation
- ------------------ ------------ ------------
Mark R. Littell Chief Executive Officer $ 0
All Executive Officers
as a Group (1 Person) $ 0
(b) Compensation Pursuant to Plans
(None)
(c) Director's Compensation
Mr. Littell has waived his directors fees.
(The remainder of this page has been intentionally left blank.)
23
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth information pertaining to directors,
executive officers and persons who, to the best of AST's knowledge owned
beneficially more than five percent (5%) of the voting common stock of AST as of
September 30, 2001.
SHARES OF COMMON
NAME OF STOCK BENEFICIALLY
BENEFICIAL OWNER AMOUNT PERCENT OF CLASS OWNED(1)(2)
- ---------------- ------ ---------------- -----------
Norwood Venture Corp.(6) 2,282,564(3) 77.27
Mark R. Littell(7) 2,282,564(4) 77.27
Edward F. Mackay 216,718(5) 6.87
All Directors and 2,499,282 79.24
Officers as a Group
(1) Shares not outstanding but beneficially owned by virtue of the right of
an individual or entity to acquire them within sixty (60) days are
treated as outstanding only when determining the amount and percentage
owned by such individual or entity. Fractional shares have been rounded
to the nearest whole share.
(2) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares opposite the
name of such person or group.
(3) Consists of 2,282,564 shares owned by Norwood Venture Corp. (Norwood).
(4) Includes 2,282,564 shares owned by Norwood. Mr. Littell may be a
beneficial owner of Norwood shares.
(5) Includes 200,000 shares Mr. Mackay has the right to acquire within
sixty (60) days upon the exercise of options which expire on 7/26/03.
24
(6) Norwood Venture Corp. is located at 65 Norwood Avenue, Upper Montclair,
N.J. 07043.
(7) Mr. Littell's business address is 65 Norwod Avenue, Upper Montclair,
N.J. 07043.
(b) Changes in Control
------------------
None
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
(The remainder of this page has been intentionally left blank.)
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
PAGE
----
No.
- ---
(a) 1. Financial Statements:
Reference is made to the Index to
Financial Data contained in this Report 12
2. Financial Statement Schedules:
Reference is made to the Index to
Financial Data contained in this Report 12
3. Reference is made to the Exhibit Index
contained in this Report 27-31
A copy of any of the Exhibits listed or referred to in the Exhibit
Index will be furnished at a reasonable cost to any person upon a written
request for any such exhibit. Such requests should be sent to Applied Spectrum
Technologies, Inc., c/o Norwood Venture Corp., 65 Norwood Avenue, Upper
Montclair, N.J. 07043.
(b) Reports on form 8-K: None were filed during the fourth quarter of the
fiscal year covered by this Report.
(The remainder of this page has been intentionally left blank.)
26
ITEM 14.(A)3.EXHIBITS
The following is a complete list of Exhibits filed or incorporated by
reference as a part of this Report:
APPLIED SPECTRUM TECHNOOGIES, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2001
ITEM
NO. DESCRIPTION METHOD OF FILING
- ---- ----------- ----------------
1.1 Forms of Underwriting Incorporated by reference to Exhibit 1.1 to
Agreement and Dealer the Company's Registration Statement on
Agreement. Form S-1 (File No. 33-17959)
3.1 Amended and Restated Incorporated by reference to Exhibit 3.1 to
Articles of Incorporation the Company's Registration Statement on
of the Company. Form S-1 (File No. 33-17959)
3.2 By Laws of the Company Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on
Form S-1 (File No. 33-17959)
4.1 Specimen Form of the Incorporated by reference to Exhibit 4.1 to
Company's Common Stock the Company's Registration Statement on
Certificate. Form S-1 (File No. 33-17959)
4.2 Amended and Restated Incorporated by reference to Exhibit 4.4 to
Articles of Incorporation the Company's Registration Statement on
of the Company Form S-1 (File No. 33-17959)
(See Exhibit 3.1).
4.3 By-laws of the Company Incorporated by reference to Exhibit 4.5 to
(see Exhibit 3.2). the Company's Registration Statement on
Form S-1 (File No. 33-17959)
4.4 Agreement for 1987 Bridge Incorporated by reference to Exhibit 4.6 to
Financings, Conversion and the Company's Registration Statement on
Sale of Shares, dated Form S-1 (File No. 33-17959)
September 18, 1987 between
the Company and certain
shareholders.
27
ITEM
NO. DESCRIPTION METHOD OF FILING
- ---- ----------- ----------------
4.5 Form of Convertible Incorporated by reference to Exhibit 4.1 to
Debentures issued pursuant the Company's Registration Statement on
to Agreement for 1987 Bridge Form S-1 (File No. 33-17959)
Financing, Conversion and
Sales of Shares.
4.6 Amended and Restated Incorporated by reference to Exhibit 4.8 to
Registration Agreement, dated the Company's Registration Statement on
April 11, 1985, between the Form S-1 (File 33-17959)
Company and certain
shareholders.
4.7 Amendment dated October 28, Incorporated by reference to Exhibit 4.10
1987 to Agreement for 1987 to the Company's Registration Statement
Bridge Financing Conversion on Form S-1 (File No. 33-17959)
and Sales of Shares.
10.1 Employment Agreement dated Incorporated by reference to Exhibit 10.3
December 12, 1985 between to the Company's Registration Statement
the Company and on Form S-1 (File No. 33-17959)
Richard V. Palermo.
10.2 Exclusive License Agreement Incorporated by reference to Exhibit 10.20
dated July 16, 1986, between to the Company's Registration Statement
the Company and Morse on Form S-1 (File No. 33-17959)
Security Group, Inc.
10.3 License Agreement dated Incorporated by reference to Exhibit 10.21
January 30, 1986, between the to the Company's Registration Statement
Company and Databit, Inc. on Form S-1(File No.33-17959)
10.4 Agreement dated April 11, Incorporated by reference to Exhibit 10.22
1986, between the Company to the Company's Registration Statement
and Databit, Inc., as amended. on Form S-1 (File No. 33-17959)
10.5 Amendment to Agreement with Incorporated by reference to Exhibit 10.30
Siemens Data Switching to the Company's Form 10-K for the
Systems, Inc. period ending September 30, 1988
(File No. 0-16397)
10.6 Form of Amendment to Incorporated by reference to Exhibit 10.32
Warrant Agreement dated to the Company's Form 10-K for the
December 18, 1987. period ending September 30, 1988
(File No. 0-16397)
28
ITEM
NO. DESCRIPTION METHOD OF FILING
- ---- ----------- ----------------
10.7 Agreement dated March 30, Incorporated by reference to Exhibit 10.30
1998, between the Company to the Company's Form 10-K for the
and Digi-Voice Corporation. period ending September 30, 1989
(File No. 0-16397)
10.8 Agreement dated March 19, Incorporated by reference to Exhibit 10.18
1990, between the Company to the Company's Form 10-K for the
and Norwood Venture Corp. period ending September 30, 1990
(File No. 0-16397)
10.9 Applied Spectrum Incorporated by reference to Exhibit 10.19
Technologies, Inc. 1990 to the Company's 1990 Stock Option Plan
Stock Option Plan Form 10-K for the period ending
September 30, 1990 (File No. 0-16397)
10.10 Agreement dated August 31, Incorporated by reference to Exhibit 10.22
1990, between the Company to the Company's Form 10-K for the
and Digi-Voice Corporation period ending September 30, 1990
amended. (File No. 0-16397)
10.11 Agreement dated December Incorporated by reference to Exhibit 10.23
14, 1990, between the to the Company's Form 10-K for the
Company and Norwood period ending September 30, 1990
Venture Corp. as amended. (File No. 0-16397)
10.12 Agreement dated November Incorporated by reference to Exhibit 10.17
30, 1990, between the to the Company's Form 10-K for the
Company and Penril Corp. period ending September 30, 1991
(File No. 0-16397)
10.13 Agreement dated January 1, Incorporated by reference to Exhibit 10.18
1991, between the Company to the Company's Form 10-K for the
and Memotec Datacom, Inc. period ending September 30, 1991
(File No. 0-16397)
10.14 Agreement dated January 1, Incorporated by reference to Exhibit 10.19
1991, between the Company to the Company's Form 10-K for the
and Memotec Datacom, Inc. period ending September 30, 1991
(File No. 0-16397)
10.15 Amendment dated March 13, Incorporated by reference to Exhibit 10.21
1991, to Agreement dated to the Company's Form 10-K for the
August 30, 1989, between the period ending September 30, 1991
Company and Digi-Voice Corp. (File No. 0-16397)
29
ITEM
NO. DESCRIPTION METHOD OF FILING
- ---- ----------- ----------------
10.16 Amendment dated March 29, Incorporated by reference to Exhibit 10.22
1991, to the Agreement dated to the Company's Form 10-K for the
March 19, 1990 between the period ending September 30, 1991
Company and Norwood (File No. 0-16397)
Venture Corp.
10.17 Employment Agreement dated Incorporated by reference to Exhibit 10.24
April 25, 191 between the to the Company's Form 10-K for the
Company and Edward Mackay. period ending September 30, 1991
(File No. 0-16397)
10.18 Amendment dated March 19, Incorporated by reference to Exhibit 10.27
1992, to the Agreement dated to the Company's Form 10-K for the
March 19, 1990 between the period ending September 30, 1992
Company and Norwood (File No. 0-16397)
Venture Corp.
10.19 Agreement dated June 30, Incorporated by reference to Exhibit 10.30
1992, between the Company to the Company's Form 10-K for the
and Data-Products of New period ending September 30, 1992
England, Inc. (File No.0-16397)
10.20 Employment Agreement dated Incorporated by reference to Exhibit 10.20
July 14, 1993, between the to the Company's Form 10-K for the
Company and Edward Mackay. period ending September 30, 1993
(File No. 0-16397)
10.21 Agreement dated August 19, Incorporated by reference to Exhibit 10.21
1993, between the Company to the Company's Form 10-K for the
and HT Communications, Inc. period ending September 30, 1993
(File No. 0-16397)
10.22 Agreement dated December 1, Incorporated by reference to Exhibit 10.22
1993, between the Company to the Company's Form 10-K for the
and HT Communications, Inc. period ending September 30, 1993
(File No. 0-16397)
10.23 Amendment to Employment Incorporated by reference to Exhibit 10.23
Agreement dated July 14, 1993, to the Company's Form 10-K for the
between the Company and period ending September 30, 1994
Edward Mackay. (File No. 0-16397)
30
ITEM
NO. DESCRIPTION METHOD OF FILING
- ---- ----------- ----------------
10.24 Agreement dated April 11, Incorporated by reference to Exhibit 10.24
1995, between the Company to the Company's Form 10-K for the
and HT Communications, Inc. period ending September 30, 1995
(File No. 0-16397)
10.25 Amendment dated April 28, Incorporated by reference to Exhibit 10.25
1995, to Agreement date to the Company's Form 10-K for the
August 30, 1989, between the period ending September 30, 1995
Company and Digi-Voice (File No. 0-16397)
Corporation.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: 2/28/02 APPLIED SPECTRUM TECHNOLOGIES, INC.
By /s/ Mark R. Littell
-----------------------------------
Mark R. Littell
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the Capacities and on the dates indicated:
Dated: 2/28/02 By /s/ Mark R. Littell
-----------------------------------
Mark R.Littell
Chief Executive Officer
Dated: 2/28/02 By /s/ Mark R. Littell
-----------------------------------
Mark R. Littell
Director
32