AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 2002
REGISTRATION NO. 333-81276
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
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COM21, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<Table>
DELAWARE 7370 94-3201698
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NUMBER)
</Table>
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750 TASMAN DRIVE
MILPITAS, CALIFORNIA 95035
(408) 953-9100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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GEORGE MERRICK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COM21, INC.
750 TASMAN DRIVE
MILPITAS, CALIFORNIA 95035
(408) 953-9100
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
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COPIES TO:
JOHN M. MONTGOMERY, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE
2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable on or after this Registration Statement is declared
effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act of 1933, as amended, registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act of 1933, as amended, registration statement number of the
earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
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Common Stock, $0.001 par value per
share................................ 553,731 $.965 $534,351 $49.16
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</Table>
(1) Pursuant to Rule 457(c) under the Securities Act, this per share amount is
based on the average high and low prices of our common stock on February 11,
2002 as reported on the NASDAQ National Market. Estimated solely for the
purpose of calculating the registration fee.
(2)$58.45 previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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553,731 Shares
COM21, INC.
Common Stock
-------------------------
This prospectus relates to the sale of up to 553,731 shares of our common
stock by the selling shareholder identified in this prospectus on page 13. This
amount constitutes 553,731 shares of common stock potentially issuable upon
exercise of a currently outstanding amended warrant to purchase common stock
held by the selling shareholder. The prices at which the selling shareholder may
sell the shares will be determined by the prevailing market for the shares or in
negotiated transactions. We will not receive any proceeds from the sale of
shares offered under this prospectus. We will receive proceeds from the exercise
of the outstanding warrant by the selling shareholder and those proceeds will be
used for our general corporate purposes.
Our common stock is traded on the Nasdaq National Market under the symbol
CMTO. The closing price on December 31, 2001 was $1.37 per share.
-------------------------
THE SHARES OF OUR COMMON STOCK OFFERED OR SOLD UNDER THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. SEE RISK FACTORS BEGINNING ON PAGE 1 OF THIS
PROSPECTUS TO READ ABOUT IMPORTANT FACTORS YOU SHOULD CONSIDER BEFORE BUYING THE
COMMON STOCK.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is February 19, 2002.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
COM21, INC.
Com21's principal executive offices are located at 750 Tasman Drive,
Milpitas, California 95035. Com21's telephone number is (408) 953-9100.
RISK FACTORS
You should carefully consider the following risks and the other information
included or incorporated by reference in this prospectus, before deciding
whether you wish to purchase any of the shares offered.
WE MAY BE CHARGED FOR EXCESS INVENTORY HELD OR ON ORDER WITH OUR CONTRACT
MANUFACTURERS WHICH WOULD REDUCE OUR GROSS PROFIT.
Our contract manufacturers have obtained or have on order substantial
amounts of inventory to meet our revenues forecasts. If our future shipments do
not use up the committed inventory, these contract manufacturers have the right
to charge us for inventory carrying costs and to bill us for any excess
component and finished goods inventory. Through September 30, 2001, we have been
billed for inventory carrying charges of approximately $2.1 million. As of
September 30, 2001, our two largest contract manufacturers had approximately
$18.6 million of on hand inventory and purchase commitments for materials and
components used to manufacture our products. We must fulfill these obligations
even if demand for our products is lower than we anticipate, which could reduce
our working capital and have a negative impact on our financial position. We
believe that within the next nine months, shipments of our modem products will
create sufficient orders to relieve our commitment to our contract
manufacturers.
WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL NEEDED TO OPERATE AND GROW OUR
BUSINESS, WHICH COULD WEAKEN OUR FINANCIAL CONDITION AND MAKE US UNABLE TO
DEVELOP OUR TECHNOLOGIES AND PRODUCTS.
We cannot assure you that any additional financing will be available to us
on acceptable terms, or at all, when required. As previously announced, we are
currently evaluating alternative forms of financing. These alternatives may
include the sale of additional stock, additional lines of credit, and the
additional divestiture of certain business assets. If additional funds are
raised by issuing equity securities, significant dilution to existing
stockholders may result given the current price of our common stock. If
additional funds are not available, we may be required to delay, scale back, or
eliminate one or more of our research and development or manufacturing programs.
In December 2001, we entered into a loan and security agreement, for
working capital purposes, which allows us to borrow through a revolving loan up
to the lesser of $10,000,000 or 75% of our eligible accounts receivable.
Borrowings under the line are secured by substantially all of Com21's assets and
bear annual interest at the prime rate plus 2.0%. The line expires on November
30, 2002 at which time all outstanding borrowings and unpaid interest are due.
The agreement requires us to comply with certain financial covenants.
In light of our current financial situation and our history of operating
losses, we expect such financing to be available but it may be at less favorable
terms than our present financing arrangement. Further alternative forms of
financing may also restrict Com21's operations or limit our ability to respond
quickly to changes in the marketplace.
As of September 30, 2001 we had an accumulated deficit of approximately
$230.2 million. If we do not increase revenues, improve gross margins and reduce
operating expenses, we may also incur net losses
1
during future quarters. Because of a decline in our revenues in the fourth
quarter of 2000, we introduced measures to reduce operating expenses that
resulted in restructuring charges of $87,000, $67.4 million and $1.2 million in
the three months ended March 31, 2001, June 30, 2001 and September 30, 2001,
respectively. Management continues to monitor market conditions to assess the
need to take further action, if necessary. Any subsequent actions may result in
additional workforce reductions, restructuring charges, discontinuation of
product lines, and provisions for impairment of long-lived assets which could
harm our financial position, results of operations and stock price.
OUR REVENUES IN ONE OR MORE FUTURE PERIODS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY
AND MAY FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS OR
INVESTORS.
Our operating results are likely to fluctuate significantly in the future
on a quarterly and an annual basis due to a number of factors, many of which are
outside our control. Supply of components, delays in getting new products into
high volume manufacturing, and manufacturing or testing constraints could result
in delays in the delivery of products and impact revenues and gross margins.
Revenues for any future quarter are difficult to predict. Delays in the
product distribution schedule of one or more of our cable operator customers
would likely reduce our operating results for a particular period.
Factors that could cause our revenues to fluctuate include:
- pressure to reduce prices;
- variations in the timing of orders and shipments of our products;
- variations in the size of orders by our customers;
- new product introductions by us or by competitors;
- delays in certifying standards-based products;
- general economic conditions and economic conditions specific to the cable
and electronic data transmission industries;
- cable operators financial ability to purchase our products; and
- delays in obtaining CableLabs and regulatory approvals necessary to sell
our products.
FLUCTUATIONS IN OUR STOCK PRICE COULD IMPACT OUR RELATIONSHIPS WITH EXISTING
CUSTOMERS AND DISCOURAGE POTENTIAL CUSTOMERS FORM DOING BUSINESS WITH US.
Fluctuations in our stock price could lead to a loss of revenues due to our
inability to engage new customers and vendors and to renew contracts with our
current customers and vendors. Existing and potential customers and vendors may
perceive our fluctuating stock price as a sign of instability and may be
unwilling to do business with us. If this were to continue to occur, our
business, results of operations and financial condition could be harmed.
OUR GROSS MARGIN IN ONE OR MORE FUTURE PERIODS IS LIKELY TO FLUCTUATE
SIGNIFICANTLY AND MAY CAUSE OPERATING RESULTS TO FALL BELOW THE EXPECTATIONS OF
ANALYSTS AND INVESTORS.
Our operating results are impacted significantly by our ability to improve
and sustain gross margins. The factors which impact gross margins and cause them
to fluctuate from quarter to quarter include:
- pressures to reduce prices;
- changes in the cost of inventory;
- the sales mix within a product group, especially between proprietary ATM
and DOCSIS modems;
- component prices we secure from our vendors;
- the average selling prices of our products;
- the effectiveness of our cost reduction efforts;
2
- the sales mix between our headend equipment and cable modems; and
- the volume of products manufactured.
Additionally, our inability to reduce inventory levels may result in
substantial inventory-related charges including marking component inventory to
current market prices because of falling component prices, and significant
excess and obsolete inventory write-offs.
A reduction in gross margins would harm our operating results and reduce
the amount of cash flow generated from operations. Additionally, if operating
results did not satisfy the expectations of analysts or investors, the trading
price of our common stock would likely decline.
WE MUST REDUCE THE COST OF OUR CABLE MODEMS TO REMAIN COMPETITIVE.
Some of our competitors have assets and annual revenues that far exceed
ours and because of their financial status are able to offer cable modem
products at lower prices than we can. As headend equipment becomes more widely
distributed, the price of cable modems and related equipment will continue to
decrease. In particular, the adoption of industry standards, such as the
data-over-cable service interface specification, or DOCSIS, standard in North
America, has caused increased price competition for cable modems. To remain
competitive, we may have to lower the price of our modems in anticipation of
planned product cost reductions of our DOCSIS modems. We may not be able to
continually reduce the costs of manufacturing our cable modems or to secure
component parts at a low enough cost to enable us to lower our modem prices to
compete effectively. As we perform on our cost reduction program, we may not be
able to continue to certify our DOCSIS modems in a timely manner by various
standards bodies including CableLabs. If we are unable to continue to reduce the
manufacturing costs of our cable modems, our gross margin and operating results
could be harmed.
WE HAVE A SHORT OPERATING HISTORY, HAVE NOT YET MADE A PROFIT AND EXPECT TO
INCUR LOSSES IN THE FUTURE.
We have not made a profit, and we expect to continue to operate at a loss
through at least the first half of 2002. To achieve and subsequently maintain
profitable operations, we must successfully design, develop, test, manufacture,
introduce, market and distribute our products on a broad commercial basis and
secure higher revenues and gross profits and contain our operating expenses. Our
future revenue will depend on a number of factors, many of which are beyond our
control. These factors include our ability to:
- reduce prices;
- manufacture products at acceptable quality standards;
- have product available when our customers need it;
- meet industry standards;
- respond to technological change; and
- have a strong competitive advantage.
Due to these factors, we cannot forecast with a degree of accuracy what our
revenues will be or how quickly cable operators will adopt our systems and buy
our cable modems. If we do not generate sufficient revenues and gross margins,
we may not achieve, or be able to sustain, profitability.
WE MAY NOT BE ABLE TO MAINTAIN OUR LISTING ON THE NATIONAL MARKET.
Our common stock is currently listed on the Nasdaq National Market. We must
satisfy a number of requirements to maintain our listing on the Nasdaq National
Market, including maintaining a minimum bid price for our common stock of $1.00
per share. As of December 31, 2001, the price of our common stock was $1.37. If
the common stock loses its Nasdaq National Market status, it would likely trade
on the Over the Counter Bulletin Board maintained by Nasdaq, which is viewed by
most investors as a less desirable, less liquid marketplace.
3
OUR FUTURE SUCCESS WILL DEPEND IN PART UPON OUR ABILITY TO ENHANCE OUR EXISTING
PRODUCTS AND TO DEVELOP AND INTRODUCE, ON A TIMELY BASIS, NEW PRODUCTS AND
FEATURES THAT MEET CHANGING CUSTOMER REQUIREMENTS AND EMERGING INDUSTRY
STANDARDS.
The market for cable modem systems and products is characterized by rapidly
changing technologies and short product life cycles. Our future success will
depend in large part upon our ability to:
- identify and respond to emerging technological trends in the market;
- develop and maintain competitive products;
- enhance our products by adding innovative features that differentiate our
products from those of competitors;
- bring products to market on a timely basis at competitive prices; and
- respond effectively to new technological changes or new product
announcements by others.
The technological innovations required for us to remain competitive are
inherently complex, require long development cycles, are dependent in some cases
on sole source suppliers and require us, in some cases, to license technology
from others. If our product development and enhancements take longer than
planned, the availability of products would be delayed. We must continue to
invest in research and development to attempt to maintain and enhance our
existing technologies and products, but we may not have the funds available to
do so. Even if we have sufficient funds, these investments may not serve the
needs of our customers or be compatible with changing technological requirements
or standards. Most costs must be incurred before we can determine the
technological feasibility or commercial viability. In addition, revenues from
future products or product enhancements may not be sufficient to recover the
development costs incurred by these products or enhancements.
We may not be successful in managing the transition from our current
products to our new and enhanced products. Product transitions contain a number
of inherent risks including obsolescence of product inventory, unavailability of
product as inventory of existing product is exhausted before availability of new
product, market acceptance of new products, undetected defects in new products,
and availability of components and parts in new products. If we are unable to
successfully manage the risks of the release and transition of new and enhanced
products, our revenues would be reduced.
THE MARKET IN WHICH WE SELL OUR PRODUCTS IS CHARACTERIZED BY MANY COMPETING
TECHNOLOGIES, AND THE TECHNOLOGY ON WHICH OUR PRODUCT IS BASED MAY NOT COMPETE
EFFECTIVELY AGAINST OTHER TECHNOLOGIES.
There are many different methods of getting high speed Internet access to
the end customers. These methods include:
- Regular dial up connection -- using a telephone line and the average 28K
or 56K modem;
- Digital subscriber line/asymmetric digital subscriber line -- a digital
high-speed modem connection offered by telephone companies, also known as
DSL or ADSL;
- Cable modems -- high speed modem connections offered by cable television
companies;
- Wireless -- high speed wireless local loop connections that work similar
to cell phones. Digital subscriber line/asymmetric digital subscriber
line and cable modems can operate in a wireless environment; and
- Fiber optics -- strands of very pure glass capable of carrying enormous
volumes of data and voice traffic.
Because of the widespread reach of telephone networks and the financial
resources of telephone companies, competition from telephone-based solutions is
expected to be intense. Cable modem technology may not be able to compete
effectively against wireline or wireless technologies. Significant market
acceptance of alternative solutions for high-speed data transmission could
decrease the demand for our products if these alternatives are viewed as
providing faster access, greater reliability, increased cost-effectiveness or
other advantages.
4
OUR MARKET IS HIGHLY COMPETITIVE AND HAS MANY ESTABLISHED COMPETITORS.
The market for our products is intensely competitive, rapidly evolving and
subject to rapid technological change. Our competitors include Motorola, Inc.,
Toshiba America, Inc., RCA/Thomson, Scientific Atlanta, Inc., Ericsson, Terayon
Communication Systems, Cisco Systems, Inc., and Nortel Networks, Inc.
We believe that our business is affected by the following competitive
factors:
- costs;
- ease of installation;
- technical support and service;
- breadth of product line;
- conformity to industry standards; and
- implementation of additional product features and enhancements.
Many of our existing and potential competitors have been operating longer,
have better name recognition, more established business relationships and
significantly greater financial, technical, marketing and distribution resources
than we do. These competitors may undertake more extensive marketing campaigns,
adopt more aggressive pricing policies, undertake more vendor financing programs
or longer customer payment cycles and devote substantially more resources to
developing new or enhanced products than we do. Some competitors may sell their
modems at below cost to reduce excess inventories causing severe price
competition.
SUPPLY OF OUR PRODUCTS MAY BE LIMITED BY OUR ABILITY TO FORECAST DEMAND
ACCURATELY.
Our customers have increasingly been requiring us to ship product upon
ordering instead of submitting purchase orders far in advance of expected
shipment dates. This practice requires us to keep inventory on hand for
immediate shipment. Any significant cancellations or deferrals could adversely
affect our business by slowing our growth and decreasing our revenues.
Additionally, cancellations or deferrals could cause us to hold excess
inventory, which could reduce our profit margins and restrict our ability to
fund our operations. In particular, increases in inventory could cause a harmful
effect on operations if this inventory is not used or becomes obsolete. This
risk could be realized in inventory write-downs in any given period.
WE MAY BE SUBJECT TO PRODUCT RETURNS AND PRODUCT LIABILITY CLAIMS DUE TO DEFECTS
IN OUR PRODUCTS.
Our products are complex and may contain undetected defects, errors, design
deficiencies, or may have been manufactured incorrectly. Our products have
contained errors in the past and may contain errors in the future. Defects,
errors, or failures in our other products could result in delayed shipments,
returned products, and loss or delay of market acceptance of our products. We
could incur costs or losses in excess of amounts that we have reserved for these
events. Although we have not experienced any product liability claims, due to
the highly technical nature of our products, such a risk exists. A successful
product liability claim brought against us could impair our business, operating
results and financial condition by forcing us to use cash and personnel
resources. This would limit our ability to grow and would decrease our revenues.
OUR STOCK PRICE IS HIGHLY VOLATILE AND BROAD MARKET FLUCTUATIONS MAY ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
The trading price of our common stock has fluctuated significantly since
our initial public offering in May 1998. Our common stock price has fluctuated
between $0.39 per share and $8.6875 per share in the last twelve month period.
The price of our common stock could continue to be subject to wide fluctuations
in response to a variety of factors including:
- variations in quarterly earnings,
- announcements of technological innovations or new products by us or our
competitors,
5
- announcements by certification and standards bodies,
- the state of our patents or proprietary rights, and
- changes in financial estimates by securities analysts.
Additionally, the stock market is volatile. This volatility has
particularly affected the stock prices of equity securities of many high
technology companies and, often, has been unrelated or disproportionate to the
operating performance of these companies. Our stock price has declined
significantly and our stock price may continue to decline because of these broad
market and industry factors, regardless of our actual operating performance. The
broad market fluctuations may lower the market price of our common stock.
Additionally, we may choose to structure acquisitions or other financing
transactions by issuing additional common stock, or warrants or options to
purchase our common stock that would dilute common stock outstanding. Although
management believes these types of transactions will increase the overall value
of Com21, these transactions may initially decrease the market price of our
common stock.
WE MAY BE SUBJECT TO ADDITIONAL CREDIT RISK IN THE FORM OF TRADE ACCOUNTS
RECEIVABLE.
Our standard credit terms are net 30 days from the date of shipment, and we
do not require collateral or other security to support customer receivables.
Starting with the third quarter 2001, we offered our customers a 2% discount if
they pay within 10 days of the invoice date. We may require letters of credit
from a customer before shipping an order if we determine that the customer has
not proven itself to be creditworthy. Due to the overall market decline during
the second half of 2000, we had difficulties in receiving payment within our net
30 day payment terms resulting in an increase in the number of days of sales
outstanding as compared to the first half of 2000.
WE ARE DEPENDENT ON KEY PERSONNEL AND THE SUCCESSFUL PRODUCT MARKETING AND
DEVELOPMENT ACTIVITIES OF OUR PROPRIETARY PRODUCTS IN OUR CORK, IRELAND
FACILITY.
Our future operating results depend greatly upon the continued contribution
of key technical and senior management personnel. Future operating results also
depend on the ability to attract and retain these specially qualified
management, manufacturing, quality assurance, engineering, marketing, sales and
support personnel. Competition for these personnel is intense and we may not be
successful in attracting or retaining these personnel. Only a limited number of
persons with the requisite skills to serve in these positions may exist and it
may be increasingly difficult for us to hire these personnel. However, there is
less competition for these skilled workers in other countries. In February 2001,
we began, and as of the end of June 2001 we have completed, the transfer of the
research and development, product management and marketing functions for our
proprietary ComUNITY(R) Access product line to our facility in Cork, Ireland. We
made this transition to take advantage of the greater availability of qualified
personnel in Cork to support this product line. However, the loss of any key
Cork employee with technical, marketing or support knowledge may affect our
ability to provide timely development and support activities for the ComUNITY(R)
Access product line.
WE MAY NOT BE ABLE TO PRODUCE SUFFICIENT QUANTITIES OF OUR PRODUCTS BECAUSE WE
DEPEND ON THIRD-PARTY MANUFACTURERS, THEIR SUPPLIERS AND ORIGINAL EQUIPMENT
MANUFACTURERS AND HAVE LIMITED MANUFACTURING EXPERIENCE.
We contract for the manufacture of cable modems and integrated circuit
boards on a turnkey basis. Our future success will depend, in significant part,
on our ability to have others manufacture our products cost-effectively, in
sufficient volumes and to meet production and delivery schedules. Dependence on
third-party manufacturers presents a number of risks including:
- not taking sufficient credit exposure on new product bids;
- lowering available credit limits;
- not providing sufficient payment terms;
- failure to meet delivery schedules;
6
- not building product that meets our quality standards;
- less than satisfactory manufacturing yields and costs;
- building product to meet our demand;
- difficulty in planning mix of units to be produced; and
- the potential misappropriation of our intellectual property if the
manufacturer were to market our products as its own.
Any manufacturing disruption could impair our ability to fulfill orders. We
have no long-term contracts or arrangements with any of our vendors that
guarantee product availability, the continuation of particular payment terms, or
the extension of credit limits. In the first half of 2000, we experienced supply
problems for components including flash memory, which limited our ability to
fulfill customer orders and had the effect of decreasing our revenues for that
period. We may also experience manufacturing or supply problems in the future.
We are dependent on our manufacturers to secure components at favorable prices
and in sufficient volume. If our contract manufacturers fail to perform in any
of these areas, it could harm our relationships with customers. Failure to
obtain these components and supply our customers with product could decrease our
revenues.
WE MAY NOT BE SUCCESSFUL IN ATTRACTING AND RETAINING KEY PERSONNEL AND
MANAGEMENT.
Our future success depends, to a significant extent, on the ability of our
management to operate effectively, both individually and as a group. We must
retain and attract high caliber personnel. Competitors and others have in the
past and may in the future attempt to recruit our employees. We do not have
employment contracts with any of our key personnel. We have experienced higher
turnover recently than in prior years and over the past five months have had to
lay off a number of employees, which may impact employee morale. We do not
maintain key person life insurance on our key personnel. The loss of the
services of any of our key management or personnel, the inability to attract or
retain qualified personnel in the future or delays in hiring required personnel,
particularly engineers, could harm our business by slowing research and
development efforts and delaying product development programs.
OUR STANDARDS-BASED PRODUCTS ARE SUBJECT TO EVOLVING INDUSTRY STANDARDS. IF OUR
PRODUCTS DO NOT COMPLY WITH ANY STANDARD THAT ACHIEVES MARKET ACCEPTANCE,
CUSTOMERS MAY REFUSE TO PURCHASE OUR PRODUCTS.
Early cable modem technology was not interoperable, meaning cable modem
products from different cable modem developers would not work together. For
different companies' products to work together, each company must meet an
established standard. For each standard, a certification body is established to
certify that a product does meet the standard. Cable operators are demanding
certified standards-based cable modem products for two primary reasons. First, a
certified product has proven to have the functionality they want. Second,
certified interoperable products give cable operators the freedom to buy
products from a variety of cable modem manufacturers, creating increased
competition and driving down prices.
Different standards are emerging in different parts of the world. In North
America, the DOCSIS standard has achieved substantial market acceptance. Cable
Television Laboratories, or CableLabs, performs certification for this DOCSIS
standard. The DOCSIS standard is an evolving standard and becomes more complex
and more difficult to comply with as it evolves. As we continue to enhance and
develop our DOCSIS products to meet the evolving DOCSIS standards, we may incur
additional costs. Additionally, we cannot assure you that enhancements or new
DOCSIS products will be CableLabs certified. Even if these products are
certified, we cannot assure you that they will be accepted by the market. In
Europe, there is movement by some cable operators towards a European DOCSIS
standard. We cannot assure you that if a European DOCSIS standard obtains
widespread acceptance, we will be able to produce a cable modem to meet these
specifications. The emergence or evolution of industry standards, either through
adoption by official standards committees or widespread use by cable operators
or telephone companies could require us to redesign our products. The
development of new competing technologies and standards increases the risk that
current or new competitors could develop products that
7
would reduce the competitiveness of our products. If any of these new
technologies or standards achieve widespread market acceptance, any failure by
us to develop new products or enhancements, or to address these new technologies
or standards, could harm our business.
THE ADOPTION OF STANDARDS COULD RESULT IN LOWER SALES OF OUR PROPRIETARY
PRODUCTS.
The widespread adoption of DOCSIS, European DOCSIS or other standards could
cause aggressive competition in the cable modem market and result in lower sales
of our proprietary products which do not conform to these standards. As cable
operators move to standards based products, sales of our proprietary headend
products, and revenues from licensing of our network management software could
decrease if our products do not meet the appropriate standards. This could
reduce our gross margin and operating results.
WE RELY ON INDIRECT DISTRIBUTION CHANNELS FOR OUR PRODUCTS AND NEED TO DEVELOP
ADDITIONAL DISTRIBUTION CHANNELS.
Today, cable operators and systems integrators purchase cable modems from
vendors through direct and indirect sales channels. In North America, due to the
DOCSIS standard achieving widespread market acceptance, we anticipate that the
North American cable modem market may at some point shift to a consumer purchase
model. If this occurs, we will likely sell more of our cable modems directly
through consumer sales channels. Our success will be dependent on our ability to
market effectively to end users, to establish brand awareness, to set up the
required channels of distribution and to have cable operator's reference sell
our products. We have begun to establish new distribution channels for our cable
modems. We may not have the capital required or the necessary personnel, or
expertise to develop these distribution channels, which could materially
adversely affect our business, operating results and financial condition. As
large consumer electronics companies enter the cable modem market, their
well-established retail distribution capabilities and brand would provide them
with a significant competitive advantage.
IF WE FAIL TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS WE MAY BE UNABLE TO
SUCCESSFULLY COMPETE IN OUR INDUSTRY.
We depend on our proprietary technology. To protect our intellectual
property rights we rely on a combination of patent, copyright, trademark and
trade secret laws, and contractual restrictions on disclosure. However, any of
our intellectual proprietary rights could be challenged by third parties. Our
means of protecting our proprietary rights in the U.S. or abroad may not be
adequate. An unauthorized party may attempt to copy aspects of our products or
to obtain and use our trade secrets or other proprietary information.
Additionally, the laws of some foreign countries do not protect our proprietary
rights as fully as do the laws of the U.S. Issued patents may not preserve our
proprietary position. Even if they do, competitors or others may develop
technologies similar to or superior to ours. If we do not enforce and protect
our intellectual property, our business will be harmed. Also, due to the rapid
pace of technological change in the cable modem industry, many of our products
rely on key technologies developed by third parties, and we may not be able to
continue to obtain licenses from these third parties on favorable terms, if at
all.
OUR PRODUCTS MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES,
WHICH MAY RESULT IN LAWSUITS AND PROHIBIT US FROM SELLING OUR PRODUCTS.
Third parties may claim that we are infringing on their intellectual
property. Even if we do not believe that our products are infringing third
parties' intellectual property rights, these claims can be time-consuming,
costly to defend and divert management's attention and resources away from our
business. Claims of intellectual property infringement might also require us to
enter into costly royalty or license agreements. If we cannot or do not license
the infringed technology or substitute similar technology from another source,
our business could suffer. We may initiate claims or litigation against third
parties for infringement of our proprietary rights or to establish the validity
of our proprietary rights. Litigation to determine the validity of any claims,
whether or not the litigation is resolved in our favor, could result in
significant expense to us and divert the efforts of our technical and management
personnel from productive
8
tasks. If there is an adverse ruling against us in any litigation, we may be
required to pay substantial damages, discontinue the use and sale of infringing
products, expend significant resources to develop non-infringing technology or
obtain licenses to infringing technology. Our failure to develop or license a
substitute technology could prevent us from selling our products.
OUR FAILURE TO MANAGE OUR OPERATIONS COULD SLOW OUR GROWTH RATE OR GIVE RISE TO
INEFFICIENCIES WHICH WOULD REDUCE OUR REVENUES.
To drive costs out of our business and improve our operating efficiencies,
we may be required to:
- improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
- hire, train and manage additional qualified personnel;
- expand and upgrade our core technologies; and
- effectively manage multiple relationships with our customers, suppliers
and other third parties.
Additionally, we must be able to continue to recruit and retain personnel,
and failure to do so would result in our not achieving our operational goals.
Also, our management team may not be able to achieve the rapid execution
necessary to fully exploit the market for our products and services. In the
future, we may experience difficulties meeting the demand for our products and
services. We cannot assure you that our systems, procedures or controls will be
adequate to support the anticipated growth in our operations or that we will be
able to achieve the operational efficiencies needed to be competitive. Any
failure could materially cause us not to meet our operating revenues and cost
objectives and weaken our financial position.
WE DEPEND ON STRATEGIC RELATIONSHIPS; IF WE ARE NOT ABLE TO FIND AND MAINTAIN
THESE RELATIONSHIPS, WE MAY NOT BE ABLE TO DEVELOP OUR TECHNOLOGIES OR PRODUCTS,
WHICH COULD SLOW OUR GROWTH AND DECREASE OUR REVENUES.
Our business strategy relies to a significant extent on strategic
relationships with other companies. These relationships include:
- software license arrangements for our network management system;
- technology licensing agreements;
- development arrangements and agreements with original equipment
manufacturers for advanced products;
- marketing arrangements with system integrators, and others; and
- collaboration agreements with suppliers of routers and headend equipment
to ensure the interoperability of our cable modems with these suppliers'
products.
The failure to maintain, develop or replace them if any of these
relationships are terminated and to renew or extend any license agreements with
a third party may harm our business.
OUR CUSTOMER BASE IS CONCENTRATED AND THE LOSS OF ONE OR MORE OF OUR CUSTOMERS
COULD CAUSE OUR BUSINESS TO SUFFER.
A relatively small number of customers have accounted for a large part of
our revenues, and we expect that this trend will continue. In the third quarter
of 2001, our top five customers accounted for 65% of total revenues. We expect
that our largest customers in the future could be different from our largest
customers today due to a variety of factors, including customers' distribution
schedules and budget considerations. Additionally, our systems integrators could
develop and manufacture products that compete with our products and therefore
could no longer distribute our products. Because a limited number of companies
account for a majority of our prospective customers, our future success will
depend upon our ability to establish and maintain relationships with these
companies. We may not be able to retain our current accounts or to obtain
additional accounts. Both in the U.S. and internationally, a substantial
9
majority of households passed by cable access are controlled by a relatively
small number of companies. The loss of one or more of our customers or our
inability to successfully develop relationships with other significant cable
operators could cause our business to suffer.
WE ARE SUBJECT TO RISKS OF OPERATING IN INTERNATIONAL MARKETS.
For the third quarter of 2001, international sales accounted for 65% of
revenues. We intend to enter new international markets, and we expect that a
significant portion of our sales will continue to be in international markets.
Because we sell primarily through systems integrators, a successful expansion of
our international operations and sales may require us to develop relationships
with new international systems integrators and distributors. If we are unable to
identify, attract or retain suitable international systems integrators or
distributors, we may not be able to successfully expand our international
operations. To increase revenues in international markets, we will need to
continue to establish foreign operations, to hire additional personnel to run
these operations and to maintain good relations with our foreign systems
integrators and distributors. If we are unable to successfully do so, our growth
in international sales will be limited which would reduce our operating results.
Additionally, international operations involve a number of risks not typically
present in domestic operations, including:
- changes in regulatory requirements;
- costs and risks of distributing systems in foreign countries;
- licenses, tariffs and other trade barriers;
- political and economic instability;
- difficulties in staffing and managing foreign operations;
- potentially adverse tax consequences;
- difficulties in obtaining governmental approvals for products;
- the burden of complying with a wide variety of complex foreign laws and
treaties;
- the imposition of legislation and regulations on the import and export of
high technology products;
- fluctuations in foreign currency; and
- the possibility of difficult accounts receivable collections.
THE INDUSTRY IN WHICH WE COMPETE IS SUBJECT TO CONSOLIDATION.
There has been a trend toward industry consolidation for several years,
which is expected to continue through 2002. We expect this trend toward industry
consolidation to continue as companies attempt to strengthen or hold their
market positions in an evolving industry. We believe that industry consolidation
may provide increasingly stronger competitors that are better able to compete.
This could lead to more variability in operating results as we compete to be a
vendor solution and could harm our business, operating results and financial
condition. We believe that industry consolidation may lead to fewer possible
customers. If we are unable to maintain our customers or secure additional
customers, our business could decrease.
OUR BUSINESS OPERATIONS MAY BE IMPACTED BY THE CALIFORNIA ENERGY CRISIS.
Our principal executive offices are located in the Silicon Valley in
northern California. California has been experiencing an energy crisis that has
resulted in disruptions in power supply and increases in utility costs to
consumers and businesses throughout the state. Should the energy crisis
continue, we, together with many other Silicon Valley companies, may experience
power interruptions and shortages and be subject to significantly higher costs
of energy. Although we have not experienced any material disruption to our
business to date, if the energy crisis continues and power interruptions or
shortages occur in the future, they may cause a decline in our business.
10
THE LOCATION OF OUR FACILITIES SUBJECTS US TO THE RISK OF EARTHQUAKES AND OTHER
NATURAL DISASTERS.
Our corporate headquarters, including some of our research and development
operations and our in-house manufacturing facilities, are located in the Silicon
Valley area of northern California, a region known for seismic activity. A
significant natural disaster in the Silicon Valley, such as an earthquake or
power loss, could halt our business, weaken our financial condition and create
disappointing operating results.
RISKS RELATED TO THIS OFFERING
THE COMMON STOCK SOLD IN THIS OFFERING WILL INCREASE THE SUPPLY OF OUR COMMON
STOCK ON THE PUBLIC MARKET, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
The sale into the public market of the common stock to be sold in this
offering could materially adversely affect the market price for our common
stock. Most of the shares of our common stock are eligible for immediate and
unrestricted sale in the public market at any time. Once the registration
statement of which this prospectus forms a part is declared effective, all
shares of common stock to be sold in this offering will be eligible for
immediate and unrestricted resale into the public market. The presence of all of
these additional shares of common stock in the public market may further depress
our stock price.
11
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document and the documents
incorporated by reference in this prospectus that are subject to risks and
uncertainties. These statements are based on management's beliefs and
assumptions, based on information available to management as of the date of this
prospectus. Some examples of forward-looking statements include information
concerning possible future results of our operations under Risk Factors.
Statements in this document and the documents incorporated into this prospectus
by reference preceded by, followed by or that include the following words
identify forward-looking statements: believes, expects, anticipates, intends,
plans, estimates, should or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of Com21 may differ materially from those expressed in these forward-looking
statements. Many of the factors that will determine these results and values are
beyond our ability to control or predict. Shareholders are cautioned not to put
undue reliance on any forward-looking statements. We do not have any intention
or obligation to update forward-looking statements after the date of this
prospectus even if new information, future events or other circumstances have
made them incorrect or misleading. For those statements, we claim the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
In evaluating our common stock, you should carefully consider the
discussion of risks and uncertainties in Risk Factors in this prospectus and in
the documents incorporated by reference into this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room 15 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference room. Our SEC filings are also available to the public
from our web site at http://www.Com21.com or at the SEC's web site at
http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed.
(a) Com21's quarterly report on Form 10-Q for the three month period
ended September 30, 2001, filed November 14, 2001;
(b) Com21's quarterly report on Form 10-Q for the three month period
ended June 30, 2001 filed August 14, 2001;
(c) Com21's quarterly report on Form 10-Q for the three month period
ended March 31, 2001 filed May 15, 2001 and as amended on June 25, 2001 and
August 28, 2001;
(d) Com21's annual report on Form 10-K for the fiscal year ended
December 31, 2000 filed April 2, 2001, as amended on July 31, 2001 and
August 28, 2001, including information in Com21's definitive proxy
statement for Com21's 2001 annual meeting of shareholders filed April 10,
2001;
(e) Com21's current reports on Form 8-K:
- filed April 24, 2000;
- filed July 18, 2000, and as amended and filed September 18, 2000,
and as further amended and filed December 6, 2000;
12
- filed February 14, 2001;
- filed March 7, 2001; and
(f) The description of Com21's common stock contained in our
registration statement on Form 8-A filed April 8, 1998, including any
amendments or reports filed for the purpose of updating these descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Ralph Marimon
Chief Financial Officer and Vice President, Finance
Com21, Inc.
750 Tasman Drive
Milpitas, CA 95035
(408) 953-9100
We have authorized no one to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
SELLING SHAREHOLDER
The following table shows the name of the selling shareholder and the
number of shares being registered for sale as of the date of this prospectus and
shows the number of shares of common stock known by us to be beneficially owned
by the selling shareholder. The following table assumes that the selling
shareholder will sell all of the shares being offered for its account by this
prospectus. However, we are unable to determine the exact number of shares that
actually will be sold. The shares offered by this prospectus may be offered at
different times by the selling shareholder.
This registration statement also covers any additional shares of common
stock that become issuable with the shares registered in this prospectus by
reason of any stock dividend, stock split, recapitalization or other similar
transaction made without the receipt of consideration that results in an
increase in the number of Com21's outstanding shares of common stock.
This information is based upon information provided by the selling
shareholder, and is not necessarily indicative of beneficial ownership for any
other purpose. The term selling shareholder includes the shareholder listed
below and its transferees, assignees, pledgees, donees or other successors. The
percent of beneficial ownership is based on 28,106,818 shares of common stock
outstanding as of December 31, 2001.
<Table>
<Caption>
PERCENT OF NUMBER OF
NUMBER OF OUTSTANDING SHARES OF COMMON
SHARES OF SHARES STOCK REGISTERED
COMMON STOCK BENEFICIALLY FOR SALE IN
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED OWNED THIS PROSPECTUS
--------------------------- ------------------ ------------ ----------------
Fletcher International, Ltd. ................... 2,450,000 8.7% 553,731
</Table>
- -------------------------
The number of shares of common stock registered constitutes 533,731 shares
of common stock not currently exercisable under a warrant.
The securities listed above include outstanding securities held in one or
more accounts managed by Fletcher Asset Management, Inc. for the selling
shareholder. Fletcher Asset Management, Inc. is an investment adviser to the
selling shareholder and is registered under section 203 of the Investment
Advisors Act of 1940, and its amendments. An investment advisory agreement
between Fletcher Asset Management, Inc. and the selling shareholder gives
Fletcher Asset Management, Inc. the authority to vote and dispose of the
securities in these accounts. By reason of the provision of Rule 13d-3 under the
13
Securities Exchange Act of 1934, the selling shareholder and Fletcher Asset
Management Inc. may each beneficially own the securities registered under the
registration statement of which this prospectus is a part. Additionally, by
virtue of Alphonse Fletcher, Jr.'s position as chairman and chief executive
officer of Fletcher Asset Management, Inc., Mr. Fletcher may have the shared
power to vote or direct the vote of, and the shared power to dispose or direct
the disposition of, these securities. For these reasons, Mr. Fletcher may also
be the beneficial owner of these securities.
The 2,450,000 shares of common stock were issued on March 6, 2001 under a
subscription agreement and the warrant to potentially purchase up to an
additional 3,505,981 shares of common stock, was issued on March 6, 2001, as
amended on July 31, 2001 and January 18, 2002. The amended warrant includes the
553,731 shares of common stock being registered for sale as of the date of this
prospectus. The warrant will expire on June 23, 2008 and has an exercise price
of $9.0951 per share, subject to adjustment under the terms of the warrant.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the common stock
by the selling shareholder. All proceeds will be received by the selling
shareholder. We will receive the proceeds from the exercise of the outstanding
warrant by the selling shareholder and those proceeds will be used for general
corporate purposes. See the Selling Shareholder.
PLAN OF DISTRIBUTION
We are registering all 553,731 shares on behalf of the selling shareholder.
This amount constitutes 553,731 additional shares of common stock potentially
issuable upon exercise of an outstanding amended warrant to purchase common
stock held by the selling shareholder. We will not receive any of the proceeds
from sales by the selling shareholder of the offered shares of common stock. We
will receive proceeds from the exercise of the outstanding warrant by the
selling shareholder and those proceeds will be used for our general corporate
purposes. The selling shareholder named in the table above or pledgees, donees,
transferees or other successors-in-interest selling shares received from the
selling shareholder as a gift, distribution or other non-sale related transfer
after the date of this prospectus may sell the shares at different times. The
selling shareholder will act independently of us in making decisions for the
timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or other transactions, at prices and
at terms then prevailing or at prices related to the then current market price,
or in negotiated transactions. The selling shareholder may make these
transactions by selling the shares to or through broker-dealers.
The shares may be sold by one or more of, or a combination of, the
following:
- a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by this
broker-dealer for its account through this prospectus;
- an exchange distribution that complies with the rules of the exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
- in privately negotiated transactions.
If required, this prospectus may be amended or supplemented on a continual
basis to describe a specific plan of distribution. In making sales,
broker-dealers engaged by the selling shareholder may arrange for other
broker-dealers to participate in the resales.
The selling shareholder may enter into hedging transactions with
broker-dealers relating to distributions of the shares or other transactions. In
these transactions, broker-dealers may engage in short
14
sales of the shares in the course of hedging the positions they assume with the
selling shareholder. The selling shareholder also may sell shares short and
redeliver the shares to close out these short positions. The selling shareholder
may enter into option or other transactions with broker-dealers that require the
delivery to the broker-dealer of the shares. The broker-dealer may then resell
or transfer these shares through this prospectus. The selling shareholder may
also loan or pledge the shares to a broker-dealer. The broker-dealer may sell
the shares which are loaned, or upon a default the broker-dealer may sell the
pledged shares by use of this prospectus. Some or all of the shares offered in
this prospectus also may be sold to or through an underwriter or underwriters.
Any shares sold in that manner will be acquired by the underwriters for their
own accounts and may be resold at different times in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. These shares may be offered to
the public through underwriting syndicates represented by one or more managing
underwriters or may be offered to the public directly by one or more
underwriters. Any public offering price and any discounts or concessions allowed
or disallowed or paid to dealers may be changed at different times.
Underwriters, broker-dealers or agents may receive compensation in the form
of commissions, discounts or concessions from the selling shareholder.
Underwriters, broker-dealers or agents may also receive compensation from the
purchasers of the shares for whom they act as agents or to whom they sell as
principals, or both. Compensation for particular underwriter or broker-dealer
might be in excess of customary commissions and will be in amounts to be
negotiated at the time of the sale. Underwriters, broker-dealers or agents and
any other participating broker-dealers or the selling shareholders may be
considered to be underwriters within the meaning of section 2(11) of the
Securities Act relating to the sales of the shares. Underwriters are defined in
this section as any person who has purchased from an issuer with a view to, or
offers or sells for an issuer for the distribution of any security, or
participates or has a direct or indirect participation in any undertaking, or
participates or has a participation in the direct or indirect underwriting of
any undertaking. Any commission, discount or concession received by them and any
profit on the resale of the shares purchased by them may be considered to be
underwriting discounts or commissions under the Securities Act. Because selling
shareholders may be considered to be underwriters within the meaning of section
2(11) of the Securities Act, the selling shareholders may be subject to the
prospectus delivery requirements of the Securities Act. Neither the delivery of
any prospectus, or any prospectus supplement, nor any other action taken by us,
the selling stockholder or any purchaser relating to the purchase or sale of
shares under this prospectus shall be considered or treated as an admission that
any of them is an underwriter within the meaning of the Securities Act relating
to the sale of any shares. Additionally, any securities covered by this
prospectus that qualify for sale through Rule 144 under the Securities Act may
be sold under Rule 144 rather than through this prospectus.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. Additionally, in
some states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act,
any person engaged in the distribution of the shares may not engage in
market-making activities for our common stock during some restricted periods.
Additionally, the selling shareholder will be subject to applicable provisions
of the Securities Exchange Act and the associated rules and regulations under
the Securities Exchange Act, including Regulation M, that may limit the timing
of purchases and sales of shares of our common stock by the selling shareholder.
We will make copies of this prospectus available to the selling shareholder and
have informed them of the need for delivery of copies of this prospectus to
purchasers at or before the time of any sale of the shares.
We will file a supplement to this prospectus, if required, under Rule
424(b) under the Securities Act upon being notified by a selling shareholder
that any material arrangement has been entered into with a
15
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. This supplement will disclose:
- the name of each selling shareholder and of the participating
broker-dealer or broker-dealers,
- the number of shares involved,
- the price at which these shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealer or broker-dealers, where applicable,
- that the broker-dealer or broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated by reference into this prospectus, and
- other facts material to the transaction.
We will bear all costs, expenses and fees for the registration of the
shares. The selling shareholder will bear all commissions and discounts, if any,
attributable to their individual sales of the shares. The selling shareholder
may agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against some liabilities, including
liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the common stock offered in this prospectus and some other
legal matters will be passed upon for us by Brobeck, Phleger & Harrison LLP,
Palo Alto, California. As of the date of this prospectus, attorneys of Brobeck,
Phleger & Harrison LLP and their family members beneficially owned an aggregate
of approximately 1,015 shares of our common stock.
EXPERTS
The consolidated financial statements of Com21 and the related consolidated
financial statement schedule incorporated in this prospectus by reference from
Com21's annual report on Form 10-K/A for the year ended December 31, 2000 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of GADline, Ltd. for the year ended
December 31, 1999 incorporated in this prospectus by reference from Com21's
current report on Form 8-K/A filed on December 6, 2000 have been audited by
Brightman Almagor & Co., independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
16
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM
WHAT IS IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS
FROM WHAT IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS
NOT AN OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY
STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS
PROSPECTUS IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY
CHANGE AFTER THAT DATE.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Com21, Inc. ......................... 1
Risk Factors......................... 1
Forward-Looking Statements........... 12
Where You Can Find More
Information........................ 12
Selling Shareholder.................. 13
Use of Proceeds...................... 14
Plan of Distribution................. 14
Legal Matters........................ 16
Experts.............................. 16
</Table>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
COM21, INC.
553,731 Shares
of Common Stock
-------------------------
PROSPECTUS
-------------------------
February 19, 2002
- ------------------------------------------------------
- ------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Com21 in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
<Table>
SEC Registration Fee........................................ $ 60
Legal Fees and Expenses..................................... 10,000
Accounting Fees and Expenses................................ 7,500
Printing Fees............................................... 1,000
Transfer Agent Fees......................................... 1,000
Miscellaneous............................................... 1,000
-------
Total..................................................... $20,560
=======
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except for liability
for (i) any breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law, or (iv) any transaction from which
the director derives an improper personal benefit.
The Registrant's bylaws provide that the Registrant shall indemnify its
directors and may indemnify its officers, employees and other agents to the
fullest extent permitted by law. The Registrant believes that indemnification
under its bylaws covers at least negligence and gross negligence on the part of
an indemnified party in connection with the defense of any action or proceeding
arising out of such party's status or service as a director, officer, employee
or other agent of the Registrant upon an undertaking by such party to repay such
advances if it is ultimately determined that such party is not entitled to
indemnification. The Registrant has entered into indemnification agreements with
its officers and directors. The indemnification agreements provide the
Registrant's officers and directors with further indemnification to the maximum
extent permitted by the Delaware General Corporation Law.
ITEM 16. EXHIBITS
<Table>
4.2(1) Amended and Restated Information and Registration Rights
Agreement, among the Registrant and the investors and
founders named therein, dated July 22, 1997
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.21(2) Agreement, dated February 28, 2001, by and between the
Registrant and Fletcher International, Ltd.
10.22(2) Warrant Certificate, dated March 6, 2001, by and between the
Registrant and Fletcher International, Ltd.
10.23(3) Amended and Restated Warrant Certificate dated July 31,
2001, by and between the Registrant and Fletcher
International, Ltd.
10.24(4) Amended and Restated Warrant Certificate dated January 18,
2002, by and between the Registrant and Fletcher
International, Ltd.
23.1 Consent of Deloitte & Touche LLP.
23.2 Independent Auditors' Consent
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in its
opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see page II-3 of this Form S-3).
</Table>
II-1
- -------------------------
(1) Previously filed as an exhibit to the Registrant's registration statement on
Form S-1 (File No. 333-48107).
(2) Previously filed as an exhibit to the Registrant's current report on Form
8-K (File No. 000-24009).
(3) Previously filed as an exhibit to the Registration Statement on Form S-3
(File No. 333-58362).
(4)Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act, that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment
no. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Milpitas, State of
California, on this 19th day of February, 2002.
COM21, INC.
By: *
------------------------------------
George Merrick
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* President, Chief Executive Officer February 19, 2002
- ------------------------------------------------ and Director (Principal Executive
George Merrick Officer)
/s/ RALPH MARIMON Vice President, Finance and February 19, 2002
- ------------------------------------------------ Corporate Secretary (Principal
Ralph Marimon Financial and Accounting Officer)
* Director February 19, 2002
- ------------------------------------------------
Paul Baran
Director
- ------------------------------------------------
James Gagnard
Director
- ------------------------------------------------
James Spilker, Jr.
* Director February 19, 2002
- ------------------------------------------------
Daniel J. Pike
* Director February 19, 2002
- ------------------------------------------------
Susan Nycum
*/s/ RALPH MARIMON
----------------------------------------------
Ralph Marimon
Attorney-in-fact
</Table>
II-3
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
4.2(1) Amended and Restated Information and Registration Rights
Agreement, among the Registrant and the investors and
founders named therein, dated July 22, 1997
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.21(2) Agreement, dated February 28, 2001, by and between the
Registrant and Fletcher International, Ltd.
10.22(2) Warrant Certificate, dated March 6, 2001, by and between the
Registrant and Fletcher International, Ltd.
10.23(3) Amended and Restated Warrant Certificate dated July 31,
2001, by and between the Registrant and Fletcher
International, Ltd.
10.24(4) Amended and Restated Warrant Certificate dated January 18,
2002, by and between the Registrant and Fletcher
International, Ltd.
23.1 Consent of Deloitte & Touche LLP.
23.2 Independent Auditors' Consent
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in its
opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see page II-3 of this Form S-3).
</Table>
- -------------------------
(1) Previously filed as an exhibit to the Registrant's registration statement on
Form S-1 (File No. 333-48107).
(2) Previously filed as an exhibit to the Registrant's current report on Form
8-K (File No. 000-24009).
(3) Previously filed as an exhibit to the Registration Statement on Form S-3
(File No. 333-58362).
(4)Previously filed.