Delaware | 3577 | 33-0676350 |
(State or other jurisdiction | (Primary Standard Industrial | (I.R.S. employer |
of incorporation or organization) | Classification Code Number) | Identification No.) |
Title of each Class of Securities to be Registered | Number of Units/Shares to be Registered | Proposed Maximum Offering PriceShare1 | Proposed Maximum AggregateOffering Price1 | Amount ofRegistration Fee2 |
Common Stock, par value $.001 per share | 15,802,083 | $0.21 | $3,318,437.43 | $420.45 |
1 | ||
2 | ||
SUMMARY INFORMATION | 4 |
RISK FACTORS | 9 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | 20 |
USE OF PROCEEDS | 21 |
SELLING SECURITY HOLDERS | 21 |
PLAN OF DISTRIBUTION | 25 |
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS | 26 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 29 |
DESCRIPTION OF OUR COMMON STOCK | 31 |
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES | 31 |
OUR BUSINESS | 32 |
WHEREYOU CAN FIND MORE INFORMATION | 34 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 34 |
Results of Operations: Comparison of the Years Ended January 31, 2004 and January 31, 2003 | 36 |
Results of Operations: Comparison of the Years Ended January 31, 2003 and January 31, 2002 | 37 |
Liquidity and Capital Resources | 40 |
EXPERTS | 44 |
DESCRIPTION OF PROPERTY | 44 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 44 |
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 44 |
EXECUTIVE COMPENSATION | 45 |
CONSOLIDATED FINANCIAL STATEMENTS | F-1 |
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS | F-2 |
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JANUARY 31, 2004 | F-3 |
CONSOLIDATED BALANCE SHEETS JANUARY 31, 2004 AND 2003 | F-3 |
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 31, 2002, 2003, 2004 | F-4 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JANUARY,2004, 2003 and 2002 | F-5 |
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 31, 2003-2001 | F-6 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY 31, 2004 | F-7 - F-21 |
PART II | 67 |
INFORMATION NOT REQUIRED IN PROSPECTUS | 67 |
INDEMNIFICATION OF DIRECTORS AND OFFICERS | 67 |
OTHER EXPENSES OF ISUANCE AND DISTRIBUTION | 68 |
EXHIBITS | 68 |
UNDERTAKINGS | 69 |
SIGNATURES | 70 |
3 | ||
4 | ||
5 | ||
Tranche | Number of Tranche Shares to be Purchased by SBI Brightline IV | Purchase Price | Number of Tranche Shares to be Purchased by Trilogy Investment Fund I | Purchase Price |
First Tranche | 1,500,000 | $300,000 ($0.20 per share) | 750,000 | $150,000 ($0.20 per share) |
Second Tranche | 1,500,000 | $412,500 ($0.275 per share) | 750,000 | $150,000 ($0.20 per share) |
Third Tranche | 1,500,000 | $412,500 ($0.275 per share) | 750,000 | $206,250 ($0.275 per share) |
Fourth Tranche | 1,500,000 | $450,000 ($0.30 per share) | 750,000 | $206,250 ($0.275 per share) |
TOTAL | 6,000,000 | $1,575,000 | 3,000,000 | $712,500 |
6 | ||
7 | ||
For the Fiscal Year Ended | ||||||||||
January 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Operating Data: | ||||||||||
Revenue | ||||||||||
Product | $ | 5,224 | $ | 12,243 | $ | 10,125 | ||||
Services | 997 | 1,388 | 3,138 | |||||||
Total Revenues | 6,221 | 13,631 | 13,263 | |||||||
Operating expenses | ||||||||||
Selling and Marketing | 456 | 830 | 3,438 | |||||||
Engineering, research and development | 1,150 | 1,172 | 6,499 | |||||||
General & administrative expenses | 1,457 | 2,139 | 4,035 | |||||||
Other operating expenses | 341 | 480 | 1,741 | |||||||
Non-recurring one time charges | - | - | 248 | |||||||
Total operating expenses | 3,404 | 4,621 | 15,961 | |||||||
Net income (loss) | $ | (1,984 | ) | $ | 1,742 | $ | (7,249 | ) | ||
Net income (loss) per share | $ | (0.15 | ) | $ | 0.14 | $ | (0.66 | ) | ||
Weighted average shares outstanding | 13,528 | 12,801 | 10,994 | |||||||
As of January 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||
Balance Sheet Data: | ||||||||||
Current assets | $ | 3,277 | $ | 6,267 | $ | 7,301 | ||||
Total assets | 3,906 | 7,671 | 9,439 | |||||||
Current liabilities | 1,107 | 2,761 | 6,174 | |||||||
Long-term liabilities | - | - | 27 | |||||||
Stockholders' equity | 2,799 | 4,910 | 3,238 | |||||||
Working capital | $ | 2,170 | $ | 3,506 | $ | 1,127 |
8 | ||
9 | ||
10 | ||
11 | ||
12 | ||
13 | ||
14 | ||
15 | ||
16 | ||
17 | ||
19 | ||
| ||
20 | ||
21 | ||
23 | ||
Name of Selling Shareholder | Shares of Common Stock Owned Prior to Offering (1) | Number of Shares to be Offered for Sale | Number of Shares of Common Stock Owned after Offering |
SBI Brightline IV, LLC (2) | 9,450,000 | 9,450,000 | 0 |
Trilogy Investment Fund I, LLC (3) | 3,000,000 | 3,000,000 | 0 |
James Dziak | 1,302,083 | 1,302,083 | 1,302,083 |
Brightline Bridge Partners I, LLC(4) | 1,550,000 | 1,550,000 | 0 |
SBI Advisors, LLC (5) | 400,000 | 400,000 | 0 |
Matt McGovern | 25,000 | 25,000 | 0 |
Jon Buttles | 25,000 | 25,000 | 0 |
Shelly Singhal | 50,000 | 50,000 | 0 |
(1) Except as otherwise indicated, the number of shares beneficially owned is determined under rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. The selling shareholders have sole voting power and investment power with respect to all shares listed as owned by each selling shareholder.
24 | ||
25 | ||
26 | ||
Name | Age | Position |
Kanwar J.S. Chadha | 57 | Chairman, President, Chief Executive Officer, Director |
Davinder Sethi | 56 | Vice Chairman, Chief Financial Officer, Director (i) |
Leonard Hecht | 67 | Director (ii)(iii) |
Rohit Phansalkar | 58 | Director (ii)(iv) |
Raymond Ngan | 30 | Director (ii) |
27 | ||
28 | ||
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner | Percent of Class |
Common | Springboard Harper | 741,249 shares | 5.3% |
Common | SBI Advisors, LLC | 400,000 shares (1) | 2.8% |
Common | SBI Brightline IV, LLC | 9,450,000 shares (2) | 54.5% |
Common | Brightline Bridge Partners I, LLC | 1,550,000 shares (3) | 10.0% |
Common | Jim Dziak | 1,302,803 shares | 9.4% |
Common | Trilogy Investment Fund I | 750,000 shares (4) | 5.4% |
Number of | Percentage of | ||
Title of Class | Name of Beneficial Owner (A) | Shares | Outstanding (H) |
Common | Kanwar J.S. Chadha 12 Morgan, Irvine, CA 92618 | 1,371,769 (B) | 9.9% |
Common | Leonard N. Hecht 12 Morgan, Irvine, CA 92618 | 361,621 (C) | 2.6% |
Common | Rohit Phansalkar 12 Morgan, Irvine, CA 92618 | 471,833 (D) | 3.3% |
Common | Davinder Sethi 12 Morgan, Irvine, CA 92618 | 1,287,823 (E) | 8.8% |
Common | Raymond Ngan | 311,534 (F) | 2.2% |
All Directors and Executive Officers as a group | 3,804,580 | 23.3% | |
29 | ||
30 | ||
We have agreed to indemnify selling shareholders, SBI Brightline IV, LLC and Trilogy Investment Fund I, LLC, and they have agreed to indemnify us against certain losses, claims, damages, liabilities or expenses under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any other federal or state statutory law or regulation, or at common law or otherwise.
31 | ||
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers or controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Securities Act of 1933 and is therefore unenforceable.
32 | ||
33 | ||
34 | ||
35 | ||
Fiscal Years Ended January 31 | |||||||||||||||||||
2004 | Pct of Revenue | 2003 | Pct of Revenue | Difference | Pct | ||||||||||||||
NET REVENUES | |||||||||||||||||||
PRODUCT | $ | 5,224 | 84.0 | % | $ | 12,243 | 89.8 | % | $ | ( 7,109 | ) | 58.1 | % | ||||||
SERVICES | 997 | 16.0 | % | 1,388 | 10.2 | % | (391 | ) | 28.2 | % | |||||||||
TOTAL NET REVENUES | $ | 6,221 | 100.0 | % | 13,631 | 100.0 | % | $ | (7,410 | ) | 54.4 | % |
Fiscal Years Ended | |||||||||||||||||||
January 31, 2004 | January 31, 2003 | ||||||||||||||||||
Expense | Pct of Revenue | Expense | $ | Pct of Revenue | Difference | Pct | |||||||||||||
Selling and marketing | $ | 456 | 7.3 | % | $ | 830 | 6.1 | % | $ | (374 | ) | (45.1) | % | ||||||
Engineering, research and development | 1150 | 18.5 | % | 1172 | 8.6 | % | (22 | ) | (1.9) | % | |||||||||
General and administrative | 1,457 | 23.4 | % | 2139 | 15.7 | % | (682 | ) | (31.9) | % | |||||||||
Other operating expenses | 341 | 5.5 | % | 480 | 3.5 | % | (139 | ) | (29.0) | % | |||||||||
Total | $ | 3,404 | 54.7 | % | 4,621 | 33.9 | % | (1,217 | ) | (26.3) | % |
36 | ||
37 | ||
38 | ||
The following table presents, at January 31, 2004, our obligations and commitments to make future payments under contracts and contingent commitments. | |||||||||||||
Payment Due by Period as of January 31, 2003 | |||||||||||||
(In thousands) | Less than | 1-3 | 4-5 | After 5 | |||||||||
Contractual Obligations | Total | 1 Year | Years | Years | Years | ||||||||
Short Term Debt | $ 65 | $ 65 | $ - | $ - | $ - | ||||||||
Operating Leases | 153 | 153 | - | $ - | $ - | ||||||||
Total Contractual Cash Obligations | $ 218 | $ 218 | $ - | $ - | $ - |
39 | ||
40 | ||
Tranche | Number of Tranche Shares to be Purchased by SBI Brightline IV | Purchase Price | Number of Tranche Shares to be Purchased by Triology Investment Fund I | Purchase Price |
First Tranche | 1,500,000 | $300,000 ($0.20 per share) | 750,000 | $150,000 ($0.20 per share) |
Second Tranche | 1,500,000 | $412,500 ($0.275 per share) | 750,000 | $150,000 ($0.20 per share) |
Third Tranche | 1,500,000 | $412,500 ($0.275 per share) | 750,000 | $206,250 ($0.275 per share) |
Fourth Tranche | 1,500,000 | $450,000 ($0.30 per share) | 750,000 | $206,250 ($0.275 per share) |
TOTAL | 6,000,000 | $1,575,000 | 3,000,000 | $712,500 |
41 | ||
42 | ||
- Since we account for and report our physical inventory at the "lower of cost or market", and such inventory comprises 70% of our current assets and 58% of total assets at Jan 31, 2004, we carefully evaluate the market value of that inventory on a continual basis. In a business such as ours, wherein we are stocking replacement parts to satisfy a customer's unknown needs, determining obsolescence is an inherently subjective process. Adjustments to obsolescence reserves are made based on judgments of market value that are supported by our best estimates of the future salability of specific items in that inventory.
- Accounts receivable balances are evaluated on a continual basis and allowances are provided for potentially uncollectable accounts based on management's estimate of the collectability of customer accounts. If the financial condition of a customer were to deteriorate, resulting in an impairment of their ability to make payments, an additional allowance may be required. Allowance adjustments are charged to operations in the period in which the facts that give rise to the adjustments become known.
43 | ||
44 | ||
Fiscal 2003 | High | Low |
Quarter from February 1, 2002 to April 30, 2002 | $0.25 | $0.09 |
Quarter from May 1, 2002 to July 31, 2002 | $0.35 | $0.16 |
Quarter from August 1, 2002 to October 31, 2002 | $0.19 | $0.06 |
Quarter from November 1, 2002 to January 31, 2003 | $0.05 | $0.26 |
Fiscal 2004 | ||
Quarter from February 1, 2003 to April 30, 2003 | $0.40 | $0.20 |
Quarter from May 1, 2003 to July 31, 2003 | $0.37 | $0.19 |
Quarter from August 1, 2003 to October 31, 2003 | $0.23 | $0.14 |
Quarter from November 1, 2003 to January 31, 2004 | $0.21 | $0.11 |
Annual Compensation | Long-Term Compensation | ||||||||
| Other | Restricted | Securities | Long-Term | All | ||||
| Annual | Stock | Underlying | Incentive | Other | ||||
| Fiscal | Salary | Bonus | Compensation | Award(s) | Options | Plan | Compensation | |
Name and Principal Position |
| Year | ($) | ($) | ($) | ($) | (#) | Payouts | ($) |
Kanwar J.S. Chadha, Ph.D., | 2004 | $ 187,986 | $ 55,000 | - | 810,000 | - | |||
Chairman, CEO, | 2003 | 257,942 | - | - | $ 100,000 | - | - | - | |
President, Director | 2002 | 211,110 | - | - | - | 160,000 | - | - | |
Davinder Sethi, Ph.D. | |||||||||
Vice Chairman, CFO, | 2004 | 141,066 | 30,000 | - | - | 200,000 | - | - | |
Director | 2003 | 180,000 | - | - | 50,000 | - | - | - | |
2002 | 35,805 | - | - | - | 500,000 | - | - |
45 | ||
Page | |
Report of Independent Certified Public Accountant | F-2 |
Consolidated Balance Sheets as of January 31, 2004 and 2003 | F-3 |
Consolidated Statements of Operations for the years ended January 31, 2004, 2003, and 2002 | F-4 |
Consolidated Statements of Stockholders' Equity for the years ended January 31, 2004, 2003, and 2002 | F-5 |
Consolidated Statements of Cash Flows for the years ended January 31, 2004, 2003, and 2002 | F-6 |
Notes to Consolidated Financial Statements | F- 7to F-21 |
30 F-1 | ||
/s/ BDO Seidman, LLP |
BDO Seidman, LLP |
Los Angeles, California |
March 25, 2004, except for Note P, which is as of May 14, 2004 |
F-2 | ||
ENTRADA NETWORKS, INC. | |||||||
AND SUBSIDIARIES | |||||||
(In Thousands) | As of | ||||||
January 31, 2004 | January 31, 2003 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and equivalents | $ | 72 | $ | 808 | |||
Short-term investments | - | 45 | |||||
Accounts receivable, net (Note R) | 561 | 1,329 | |||||
Inventory, net (Notes B, and R) | 2,294 | 3,576 | |||||
Prepaid expenses and other current assets | 350 | 509 | |||||
TOTAL CURRENT ASSETS | 3,277 | 6,267 | |||||
PROPERTY AND EQUIPMENT, NET (Note C) | 590 | 1,073 | |||||
OTHER ASSETS | |||||||
Deposits | 39 | 31 | |||||
Restricted Cash | - | 300 | |||||
TOTAL OTHER ASSETS | 39 | 331 | |||||
TOTAL ASSETS | $ | 3,906 | $ | 7,671 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable | $ | 383 | $ | 810 | |||
Other current and accrued liabilities (Note E) | 659 | 1,409 | |||||
Short-term debt (Note D) | 65 | 474 | |||||
Current maturities of long term debt and capital leases (Note G) | - | 68 | |||||
TOTAL LIABILITIES | 1,107 | 2,761 | |||||
COMMITMENTS AND CONTINGENCIES (Notes H and I) | |||||||
STOCKHOLDERS' EQUITY (Note J) | |||||||
Preferred stock, $.001 par value; 2,000 shares authorized; -0- shares issued. | |||||||
Common stock, $.001 par value; 50,000 shares authorized; 13,901 shares | |||||||
issued and outstanding at January 31, 2004; 12,937 shares issued | |||||||
and outstanding at January 31, 2003 | 13 | 13 | |||||
Treasury Stock (402,616 shares at cost) | (127 | ) | - | ||||
Additional paid-in capital | 52,001 | 52,001 | |||||
Accumulated deficit | (49,088 | ) | (47,104 | ) | |||
TOTAL STOCKHOLDERS' EQUITY | 2,799 | 4,910 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 3,906 | $ | 7,671 | |||
F-3 | ||
ENTRADA NETWORKS, INC. | |||||||||||||
AND SUBSIDIARIES | |||||||||||||
(In Thousands, except per share amounts) | |||||||||||||
Years Ended January 31 | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
NET REVENUES | |||||||||||||
PRODUCT | $ | 5,224 | $ | 12,243 | $ | 10,125 | |||||||
SERVICES | 997 | 1,388 | 3,138 | ||||||||||
TOTAL NET REVENUES | 6,221 | 13,631 | 13,263 | ||||||||||
COST OF REVENUE | |||||||||||||
PRODUCT | 4,532 | 6,909 | 6,868 | ||||||||||
SERVICES | 326 | 206 | 889 | ||||||||||
TOTAL COST OF REVENUE | 4,858 | 7,115 | 7,757 | ||||||||||
GROSS PROFIT | 1,363 | 6,516 | 5,506 | ||||||||||
OPERATING EXPENSES | |||||||||||||
Selling and marketing | 456 | 830 | 3,438 | ||||||||||
Engineering, research and development | 1,150 | 1,172 | 6,499 | ||||||||||
General and administrative | 1,457 | 2,139 | 4,035 | ||||||||||
Other operating expenses | 341 | 480 | 1,741 | ||||||||||
Non-recurring one-time charges (Note F) | - | - | 248 | ||||||||||
TOTAL OPERATING EXPENSES | 3,404 | 4,621 | 15,961 | ||||||||||
INCOME (LOSS) FROM OPERATIONS | (2,041 | ) | 1,895 | (10,455 | ) | ||||||||
OTHER INCOME (EXPENSE) | |||||||||||||
Interest expense, net | (14 | ) | (69 | ) | (195 | ) | |||||||
Other income (expense) | 71 | (84 | ) | - | |||||||||
TOTAL OTHER INCOME (EXPENSE) | 57 | (153 | ) | (195 | ) | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | (1,984 | ) | 1,742 | (10,650 | ) | ||||||||
INCOME (LOSS) ON DISCONTINUED | |||||||||||||
OPERATIONS (Note A) | - | - | 3,401 | ||||||||||
NET INCOME (LOSS) | $ | (1,984 | ) | $ | 1,742 | $ | (7,249 | ) | |||||
INCOME (LOSS) PER COMMON SHARE (Note M): | |||||||||||||
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 13,528 | 12,801 | 10,994 | ||||||||||
NET INCOME (LOSS) PER COMMON SHARE: | |||||||||||||
CONTINUING OPERATIONS | $ | (0.15 | ) | $ | 0.14 | $ | (0.97 | ) | |||||
DISCONTINUED OPERATIONS | - | - | $ | 0.31 | |||||||||
BASIC AND DILUTED NET LOSS PER COMMON SHARE | $ | (0.15 | ) | $ | 0.14 | $ | (0.66 | ) | |||||
F-4 | ||
ENTRADA NETWORKS, INC. | |||||||||||||||||||
AND SUBSIDIARIES | |||||||||||||||||||
(In Thousands) | |||||||||||||||||||
COMMON | ADDITIONAL | TOTAL | |||||||||||||||||
STOCK | TREASURY | PAID IN | ACCUMULATED | STOCKHOLDERS' | |||||||||||||||
Shares | Amount | STOCK | CAPITAL | DEFICIT | EQUITY | ||||||||||||||
BALANCE AT JANUARY 31, 2001 | 10,993 | $ | 11 | - | $ | 51,722 | $ | (41,597 | ) | $ | 10,136 | ||||||||
Silicon Valley Bank Warrants | - | - | 42 | - | 42 | ||||||||||||||
Beneficial conversion feature of | - | ||||||||||||||||||
convertible note | - | - | 229 | - | 229 | ||||||||||||||
Stock issuance program | 586 | 1 | 79 | - | 80 | ||||||||||||||
Net Loss | (7,249 | ) | (7,249 | ) | |||||||||||||||
BALANCE AT JANUARY 31, 2002 | 11,579 | 12 | - | 52,072 | (48,846 | ) | 3,238 | ||||||||||||
Stock issuance program | 1,358 | 1 | 188 | - | 189 | ||||||||||||||
Acquisition of beneficial conversion | |||||||||||||||||||
f eature (Note G ) | - | - | (259 | ) | - | (259 | ) | ||||||||||||
Net income | - | - | - | 1,742 | 1,742 | ||||||||||||||
BALANCE AT JANUARY 31, 2003 | 12,937 | 13 | - | 52,001 | (47,104 | ) | 4,910 | ||||||||||||
Treasury Stock | $ | (127 | ) | ||||||||||||||||
Warrants Exercised | 964 | - | - | - | - | ||||||||||||||
Net Loss | - | - | - | (1,984 | ) | (1,984 | ) | ||||||||||||
BALANCE AT JANUARY 31, 2004 | 13,901 | $ | 13 | $ | (127 | ) | $ | 52,001 | $ | (49,088 | ) | $ | 2,799 |
F-5 | ||
ENTRADA NETWORKS, INC. | ||||||||||
AND SUBSIDIARIES | ||||||||||
(In Thousands) | 2004 |
|
| 2003 |
|
| 2002 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income (loss) | $ | (1,984 | ) | $ | 1,742 | $ | (7,249 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||||||||||
Depreciation and amortization | 486 | 606 | 2,700 | |||||||
Non cash write off | - | 1,062 | - | |||||||
Non cash interest | - | 104 | - | |||||||
Write off of fixed assets | 1 | 153 | - | |||||||
Accounts receivable and inventory reserve (Note R) | 1002 | - | 2,412 | |||||||
Warrants issued in conjunction with credit facility | - | - | 42 | |||||||
Gain on extinguishment of convertible note | - | (134 | ) | |||||||
Issuance of common stock in payment of expenses | - | 100 | 80 | |||||||
Changes in assets and liabilities net of effects of business entity acquisition: | ||||||||||
(Increase) decrease in accounts receivable | 807 | 648 | 2,720 | |||||||
(Increase) decrease in inventories | 175 | (538 | ) | (1,582 | ) | |||||
(Increase) decrease in prepaid and other current assets | 517 | 17 | 65 | |||||||
Increase (decrease) in accounts payable | (428 | ) | (1,722 | ) | (722 | ) | ||||
Increase (decrease) in accrued expenses | (584 | ) | (1,474 | ) | (2,620 | ) | ||||
Increase (decrease) in other current liabilities | (164 | ) | 196 | - | ||||||
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES | (172 | ) | 760 | (4,154 | ) | |||||
CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||||
Purchase of property and equipment | (4 | ) | (26 | ) | (2,055 | ) | ||||
Short-term investments | (82 | ) | (45 | ) | - | |||||
NET CASH USED IN INVESTING ACTIVITIES | (86 | ) | (71 | ) | (2,055 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Acquisition of beneficial conversion feature (Note G) | - | (259 | ) | - | ||||||
Proceeds from issuances of common stock (Note J) | - | 4 | ||||||||
Net proceeds from short-term debt (Note D) | (410 | ) | (211 | ) | (2,882 | ) | ||||
Proceeds (repayment) from long-term debt, net (Note G) | - | 30 | 250 | |||||||
Repayment of capital lease obligations (Note H) | (68 | ) | (143 | ) | (414 | ) | ||||
Proceeds from exercise of stock options (Note K) | - | - | - | |||||||
NET CASH USED IN FINANCING ACTIVITIES | (478 | ) | (579 | ) | (3,046 | ) | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (736 | ) | 110 | (9,255 | ) | |||||
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 808 | 698 | 9,953 | |||||||
CASH AND CASH EQUIVALENTS - END OF YEAR | $ | 72 | $ | 808 | $ | 698 | ||||
See accompanying notes to consolidated financial statements. |
F-6 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except share and per share amounts) |
Item | Amount (millions) | Description |
Inventory impairment | $ 2.2 | This adjustment records a full reserve against the cost basis of Sync’s inventory based upon the intent to abandon the inventory. This assumes that as a discontinued operation, the inventory value is zero as the need to dispose of inventory would result in minimal return. |
Severance | 1.1 | This adjustment records the costs associated with the termination of our employees and assumes the elimination of all of the Sync employees: 45 people including 8 change of control/contract personnel. |
Vendor payables | 1.1 | We recorded an accrual for costs due and payable under the termination provisions of an agreement with a contract manufacturing vendor. |
Lease termination accrual | 0.7 | We recorded an accrual for the remaining lease costs and lease related costs for the physical location of the discontinued operations, net of sub lease income. |
Goodwill impairment | 4.3 | Assumes 4.2 million shares at $2.75 per share offset by the valuation of Sync Research of $8.4 million at August 30, 2000 with the addition of $1.1 million merger expenses. |
Fixed asset impairment | 1.0 | This adjustment assumed that the Sync fixed asset book value would be fully reserved as a discontinued operation due to the abandonment of fixed assets. |
Total Loss | $10.4 | |
F-7 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
2004 | 2003 | ||||||
Raw material | $ | 3,002 | $ | 3,736 | |||
Work in process | 61 | 163 | |||||
Finished goods | 2,642 | 3,486 | |||||
Total Inventory | 5,705 | 7,385 | |||||
Less: Valuation reserve | (3,411 | ) | (3,809 | ) | |||
Total Net Inventory | $ | 2,294 | $ | 3,576 | |||
F-8 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
F-9 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Fiscal Year | |||
2004 | 2003 | 2002 | |
Net income (loss) As reported: | $ (1,984) | $ 1,742 | $ (7,249) |
Add: Stock based employee compensation expense | 117 | - | - |
Deduct: Total stock based employee compensation expense determined under fair value method | (250) | (15) | (836) |
Pro forma income (loss) per share: | (2,117) | 1,727 | (8,085) |
Basic and diluted EPS as reported | $ (0.15) | $ 0.14 | $ (0.66) |
Pro forma basic and diluted EPS | $ (0.15) | $ 0.13 | $ (0.74) |
F-10 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
2004 |
|
| 2003 | ||||
Manufacturing, engineering and plant equipment and software | $ | 8,469 | $ | 8,471 | |||
Office furniture and fixtures | 275 | 275 | |||||
Leasehold and building improvements | 249 | 249 | |||||
Total property and equipment | 8,993 | 8,995 | |||||
Less: Accumulated depreciation and amortization | (8,403 | ) | (7,922 | ) | |||
Net book value | $ | 590 | $ | 1,073 | |||
Fiscal 2004 | Fiscal 2003 | ||||||
Floating interest rate loan based on 2.5% over lender’s | |||||||
prime rate secured by all of our tangible assets | $ | 65 | $ | 474 | |||
Fiscal Year | |||||||
2004 | 2003 | ||||||
Payroll and employee benefits | $ | 102 | $ | 202 | |||
Accrued accounts payable | 55 | 269 | |||||
Sales tax payable | 29 | 35 | |||||
Deferred maintenance | 394 | 559 | |||||
Accrued audit | 60 | 23 | |||||
Office lease | - | 257 | |||||
Other | 19 | 64 | |||||
Total | $ | 659 | $ | 1,409 | |||
F-11 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
2004 |
|
| 2003 | ||||
Obligations under finance leases (See Note H) | - | $ | 68 | ||||
Sub Total | - | 68 | |||||
Less: Current portion | - | 68 | |||||
Total | - | - | |||||
F-12 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
50,000,000 shares of Common Stock ($.001 par value) | |
2,000,000 shares of Preferred Stock ($.001 par value) |
Weighted Average | |||||||
Number of Shares | Exercise Price | ||||||
Shares under option at January 31, 2001 | 3,407,347 | $ | 4.08 | ||||
Granted | 1,376,400 | $ | 0.61 | ||||
Canceled | (1,777,981 | ) | $ | 3.39 | |||
Shares under option at January 31, 2002 | 3,005,766 | $ | 2.89 | ||||
Granted | 85,500 | $ | 0.14 | ||||
Cancelled | (1,584,524 | ) | $ | 3.59 | |||
Shares under option at January 31, 2003 | 1,506,742 | $ | 2.65 | ||||
Granted | 1,521,583 | $ | 0.23 | ||||
Cancelled | (53,519 | ) | $ | 0.54 | |||
Shares under option at January 31, 2004 | 2,974,806 | $ | 1.11 | ||||
F-13 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Outstanding | Exercisable | |||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||
Exercise PricePer Share | Shares | Life (Years | ) | Exercise Price | Shares | Exercise Price | ||||||||||
$0.10 - $0.15 | 813,250 | 7.98 | $ | 0.13 | 610,516 | $ | 0.13 | |||||||||
$0.17 - $0.20 | 109,000 | 8.13 | $ | 0.19 | 73,792 | $ | 0.18 | |||||||||
$0.22 – $0.22 | 1,041,883 | 9.02 | $ | 0.22 | 943,576 | $ | 0.22 | |||||||||
$0.28- $4.00 | 623,373 | 7.87 | $ | 1.50 | 287,873 | $ | 2.91 | |||||||||
$4.06 - $20.00 | 387,300 | 6.21 | $ | 5.33 | 387,300 | $ | 5.33 | |||||||||
$0.10 - $20.00 | 2,974,806 | 8.09 | $ | 1.11 | 2,303,057 | $ | 1.39 | |||||||||
2004 | 2003 | |
Risk free interest rate | 4.2% | 4.1% |
Stock volatility factor | 183% | 196% |
Weighted average expected option life | 8.09 years | 8.07 years |
Expected dividend yield | 0.0% | 0.0% |
Fair value of options granted | $0.01 to $0.23 | $0.01 to $0.16 |
Weighted average fair value of options granted | $0.23 | $0.13 |
F-14 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
2004 | 2003 | 2002 | ||||||||
Net income (loss) available to common shareholders used in basic EPS | $ | (1,984 | ) | $ | 1,742 | $ | (7,249 | ) | ||
Average number of common shares used in basic EPS | 13,528,059 | 12,800,555 | 10,994,240 | |||||||
2004 | 2003 | 2002 | |||||||||||
Net income (loss) available to common shareholders | |||||||||||||
used in basic EPS | $ | (1,984 | ) | $ | 1,742 | $ (7,249) | |||||||
Average number of common shares used in basic EPS | 13,528,059 | 12,800,555 | 10,994,240 | ||||||||||
Effect of dilutive securities: stock benefit plans | 239,426 | 84,134 | - | ||||||||||
Average number of common shares and dilutive | |||||||||||||
potential common stock used in diluted EPS | 13,767,485 | 12,884,689 | 10,994,240 | ||||||||||
F-15 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Percent net revenues | Percent net receivables | |||||
Description | Fiscal years ended January 31, | Fiscal years ended January 31, | ||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |
Cisco | 56.7% | 56.9% | 19.6% | -% | 45.9% | 47.0% |
MCI WorldCom | - | - | - | - | 31.9 | - |
Ingram Micro | - | - | - | 14.0 | 10.9 | - |
Wells Fargo Bank - | - | - | - | - | 14.2 | - |
Solectron | - | - | 11.3 | - | - | 11.7 |
IntegraSys | -% | -% | -% | 62.0% | -% | -% |
Tranche | Number of Tranche Shares to be Purchased by SBI Brightline IV | Purchase Price | Number of Tranche Shares to be Purchased by Triology Investment Fund I | Purchase Price | |||||||||
First Tranche | 1,500,000 | $ | 300,000 ($0.20 per share | ) | 750,000 | $ | 150,000 ($0.20 per share | ) | |||||
Second Tranche | 1,500,000 | $ | 412,500 ($0.275 per share | ) | 750,000 | $ | 150,000 ($0.20 per share | ) | |||||
Third Tranche | 1,500,000 | $ | 412,500 ($0.275 per share | ) | 750,000 | $ | 206,250 ($0.275 per share | ) | |||||
Fourth Tranche | 1,500,000 | $ | 450,000 ($0.30 per share | ) | 750,000 | $ | 206,250 ($0.275 per share | ) | |||||
TOTAL | 6,000,000 | $ | 1,575,000 | 3,000,000 | $ | 712,500 |
F-16 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
The Company may elect to sell all or part of Tranche Shares in the order listed above to the Purchasers at any time commencing on the date on which the Registration Statement of the Company covering the resale of the Shares is declared effective. The Company plans to file this Registration Statement in May 2004.
Balance at January 31, 2001 | 3,340 | |||
Additions charged to costs and expenses | 2,200 | |||
Amounts used during year | (81 | ) | ||
Balance at January 31, 2002 | 5,459 | |||
Additions charged to costs and expenses | 1,062 | |||
Amounts used during year | (2712 | ) | ||
Balance at January 31, 2003 | 3,809 | |||
Additions charged to costs and expenses | 1,097 | |||
Amounts used during year | (1,495 | ) | ||
Balance at January 31, 2004 | $ | 3,411 | ||
F-17 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Balance at January 31, 2001 | 400 | |||
Additions charged to costs and expenses | 692 | |||
Amounts used during year | ( 335 | ) | ||
Balance at January 31, 2002 | 757 | |||
Additions charged to costs and expenses | 16 | |||
Amounts used during year | ( 561 | ) | ||
Balance at January 31, 2003 | 212 | |||
Reductions charged to costs and expenses | (95 | ) | ||
Amounts used during year | (78 | ) | ||
Balance at January 31, 2004 | $ | 39 | ||
F-18 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
First |
|
| Second |
|
| Third |
|
| Fourth |
|
| Total |
| |||
|
| Quarter |
|
| Quarter |
|
| Quarter |
|
| Quarter |
|
| Year | ||
Year ended January 31, 2004: | ||||||||||||||||
Net revenue | $ | 2,708 | $ | 2,053 | $ | 931 | $ | 529 | 6,221 | |||||||
Gross profit | 1,212 | 761 | 373 | (983 | ) | 1,363 | ||||||||||
Net income (loss) | 233 | (546 | ) | (230 | ) | (1,441 | ) | (1,984 | ) | |||||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | 0.02 | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.15 | ) | ||
Diluted | $ | 0.02 | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.15 | ) | ||
First |
|
| Second |
|
| Third |
|
| Fourth |
|
| Total |
| |||
|
| Quarter |
|
| Quarter |
|
| Quarter |
|
| Quarter |
|
| Year | ||
Year ended January 31, 2003: | ||||||||||||||||
Net revenue | $ | 3,223 | $ | 3,366 | $ | 4,059 | $ | 2,983 | 13,631 | |||||||
Gross profit | 1,317 | 1,541 | 2,188 | 1,470 | 6,516 | |||||||||||
Net income | 152 | 349 | 866 | 375 | 1,742 | |||||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.01 | $ | 0.03 | $ | 0.07 | $ | 0.03 | $ | 0.14 | ||||||
Diluted | $ | 0.01 | $ | 0.03 | $ | 0.07 | $ | 0.03 | $ | 0.14 | ||||||
F-19 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Fiscal year ended January 31 | |||||||
2004 | 2003 | ||||||
Net Revenues: | |||||||
United States | $ | 5,550 | $ | 12,638 | |||
Europe | 671 | 993 | |||||
Total net revenues | $ | 6221 | $ | 13,631 |
Fiscal year ended January 31 | |||||||
2004 | 2003 | ||||||
Net Revenues: | |||||||
Network adapter cards | $ | 4,701 | $ | 11,715 | |||
Frame relay network products | 523 | 528 | |||||
Service and support | 997 | 1,388 | |||||
Total net revenue | $ | 6,221 | $ | 13,631 | |||
F-20 | ||
ENTRADA NETWORKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (In Thousands, except share and per share amounts) |
Rixon Networks | Sync Research | Torrey Pines Networks | Total | ||||||||||
Fiscal year ended January 31, 2004 | |||||||||||||
Total Revenues | $ | 4,702 | $ | 1,519 | $ | - | 6,221 | ||||||
Net Income (loss) | (2,328 | ) | 706 | (362 | ) | (1,984 | ) | ||||||
Depreciation and amortization expense | 269 | 52 | 165 | 486 | |||||||||
Inventory reserve additions | 1,096 | - | - | 1,097 | |||||||||
Capital asset additions | 4 | - | - | 4 | |||||||||
Total Assets | $ | 2,544 | $ | 744 | $ | 618 | $ | 3,906 |
Rixon Networks | Sync Research | Torrey Pines Networks | Total | ||||||||||
Fiscal year ended January 31, 2003 | |||||||||||||
Total Revenues | 11,718 | 1,913 | - | $ | 13,631 | ||||||||
Net income (loss) | 1,603 | 429 | (290 | ) | 1,742 | ||||||||
Depreciation and amortization expense | 379 | 66 | 161 | 606 | |||||||||
Inventory reserve additions | 1,066 | (4 | ) | - | 1,062 | ||||||||
Capital asset additions | 15 | - | 11 | 26 | |||||||||
Total Assets | $ | 5,828 | $ | 1,414 | $ | 429 | $ | 7,671 |
F-21 | ||
____________________________________ ____________________________________ We have not authorized any dealer, sales person or other person to give any information or represent anything contained in this prospectus. You must not rely on any unauthorized information. This prospectus is not an offer to sell, or a solicitation of an offer to buy, securities in any jurisdiction where it is unlawful. The information contained in this prospectus is current as of May 28, 2004 _______________________________________ _______________________________________ | _______________________________ _______________________________ 15,802,083 Shares ENTRADA NETWORKS, INC. Common Stock _______________ PROSPECTUS _______________ May_____, 2004 ______________________________ ______________________________ |
66 | ||
67 | ||
Item | Amount |
Securities and Exchange Commission Registration Fee | $ 420.45 |
Printing and Engraving Expenses | $ 5,000.00 |
Accountants' Fees and Expenses | $ 15,000.00 |
Legal Fees and Expenses | $ 15,000.00 |
Miscellaneous | $ 1,000.00 |
Total | $ 36,420.45 |
68 | ||
69 | ||
By: /s/ Kanwar J.S. Chadha |
Kanwar J.S. Chadha, Ph.D., |
Chief Executive Officer |
70 | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kanwar J.S. Chadha, his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his her name, place and stead, in any and all capacities, to sign (i) any and all amendments (including post-effective amendments) to this Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith and (ii) any registration statement and any and all amendments thereto, relating to the offer covered hereby filed pursuant to Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature | Title | Date |
By:/s/ Kanwar J.S. Chadha | Chairman, President, Director, | May 28, 2004 |
Kanwar J.S. Chadha, Ph.D. | Chief Executive Officer | |
By:/s/ Leonard Hecht | Director | May 28, 2004 |
Leonard Hecht | ||
By:/s/ Rohit Phansalkar | Director | May 28, 2004 |
Rohit Phansalkar | ||
By:/s/ Davinder Sethi | Vice Chairman, CFO, | May 28. 2004 |
Davinder Sethi, Ph.D. | Principal Accounting Officer, | |
Director | ||
By: | Director | May 28, 2004 |
Raymond Ngan |
71 | ||