As filed with the Securities and Exchange Commission on May 27, 1997
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------------
ANCOR COMMUNICATIONS, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1569659
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
6130 Blue Circle Drive
Minnetonka, Minnesota 55343
(612) 932-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Lee B. Lewis Copy to: Amy E. Lange
Ancor Communications, Incorporated Dorsey & Whitney LLP
6130 Blue Circle Drive 220 South Sixth Street
Minnetonka, Minnesota 55343 Minneapolis, MN 55402
(612) 932-4000 (612) 340-6323
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================================
Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share* Offering Price* Fee
- ------------------------------------------------------------------------------------------------
Common Stock
($.01 par value) 4,905,556 $5.75 $28,206,947 $8,548
================================================================================================
* Estimated solely for purposes of computing the registration fee and based
upon the average of the high and low sales prices for such Common Stock on
May 20, 1997, as reported on the Nasdaq SmallCap Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
SUBJECT TO COMPLETION, DATED MAY 27, 1997
PROSPECTUS
ANCOR COMMUNICATIONS, INCORPORATED
-----------------------
4,905,556 SHARES OF
COMMON STOCK
($.01 PAR VALUE)
-----------------------
This Prospectus relates to an aggregate of 4,905,556 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Ancor Communications, Incorporated, a Minnesota corporation ("Ancor" or the
"Company"), that may be sold from time to time by the shareholders named herein
(the "Selling Shareholders"). See "Selling Shareholders." The Company will not
receive any proceeds from the sale of the Shares. The Company has agreed to pay
the expenses of registration of the Shares, including legal and accounting fees.
Any or all of the Shares may be offered from time to time in
transactions on the Nasdaq SmallCap Market or the Pacific Stock Exchange in
brokerage transactions at prevailing market prices or in transactions at
negotiated prices. See "Plan of Distribution."
The Shares offered hereby have not been registered under the blue sky
or securities laws of any jurisdiction, and any broker or dealer should assure
the existence of an exemption from registration or effectuate such registration
in connection with the offer and sale of the Shares.
The Common Stock is traded on the Nasdaq SmallCap Market and the
Pacific Stock Exchange. On May 23, 1997, the last sale price of the Common
Stock as reported on the Nasdaq SmallCap Market was $6.25 per share.
THE ACQUISITION AND OWNERSHIP OF THE COMMON STOCK INVOLVE A HIGH DEGREE
OF RISK. THE COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS WHO
ARE ABLE TO AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
(SEE "RISK FACTORS" ON PAGE 4.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities offered hereby in any jurisdiction in which
it is not lawful or to any person to whom it is not lawful to make any such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
The date of this Prospectus is , 1997.
TABLE OF CONTENTS
PAGE
Available Information 3
Incorporation of Certain Documents
by Reference 3
Risk Factors 4
Ancor Communications, Incorporated 10
Selling Shareholders 11
Plan of Distribution 12
Certain Recent Events 12
Experts 12
Legal Matters 12
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). This Prospectus does
not contain all the information set forth in the Registration Statement and
exhibits thereto which the Company has filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and to which
reference is hereby made. Reports, proxy statements and other information filed
by the Company can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. A copy of
the Registration Statement is also available on the Commission's EDGAR site on
the World Wide Web at: http:\\www.sec.gov. In addition, the Common Stock of the
Company is listed on the Nasdaq SmallCap Market and the Pacific Stock Exchange,
and reports, proxy statements and other information concerning the Company can
also be inspected at such exchanges.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company, which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus:
(a) the Annual Report on Form 10-K, as amended, for the year
ended December 31, 1996;
(b) the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; and
(c) the description of the Common Stock contained in the
Registration Statement on Form 8-A dated March 11, 1994, and any
amendment or report filed for the purpose of updating such description
filed subsequent to the date of this Prospectus and prior to the
termination of the offering described herein.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or part of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Lee Lewis, Chief Financial Officer, Ancor Communications,
Incorporated, 6130 Blue Circle Drive, Minnetonka, Minnesota 55343, telephone
number (612) 932-4000.
RISK FACTORS
PROSPECTIVE INVESTORS IN THE SHARES OFFERED HEREBY SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION
APPEARING IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
DEPENDENCE ON FIBRE CHANNEL PRODUCTS; COMPETING TECHNOLOGIES; UNCERTAINTY OF
MARKET ACCEPTANCE OF FIBRE CHANNEL TECHNOLOGY
The Company's current products are all designed to comply with the
Fibre Channel standard for data communications network technology, and the
Company's success will thus depend on the market acceptance of Fibre Channel as
a technology for addressing data communications needs. Fibre Channel competes
with a number of other network technologies, including both established
technologies, such as Fiber Distributed Data Interface ("FDDI"), Ethernet and
Token Ring, and newer technologies that have not yet achieved wide market
penetration, such as Fast Ethernet, Gigabit Ethernet and Asynchronous Transfer
Mode ("ATM"). The Company believes that users generally do not replace existing
network technologies until system demands significantly strain their capacity,
relying instead on interim solutions such as greater segmentation of networks
using additional networks and routers. In addition, many users who install new
network technology continue to choose the older, established technologies rather
than newer technologies such as Fibre Channel. Furthermore, users who are
replacing existing data communications networks may choose other new data
communications technologies rather than Fibre Channel; in particular, many
believe that ATM products, which are available from a number of companies, are
the most significant new technology competitive with Fibre Channel. In order to
gain market acceptance, the Company's products must be priced to provide a
cost-effective alternative to competing technologies. Market acceptance of Fibre
Channel technology may also be affected by the fact that Fibre Channel is not
suitable for wide area network ("WAN") applications due to distance limitations
specified in the American National Standards Institute ("ANSI") standards. There
can be no assurance that Fibre Channel technology will gain widespread
acceptance or that it will be able to compete successfully with existing or
future technologies. The failure of Fibre Channel to gain widespread market
acceptance or of the Fibre Channel market to expand would have a material
adverse effect on the Company's business, financial condition and results of
operations.
RAPID TECHNOLOGICAL CHANGE AND RISK OF TECHNOLOGICAL OBSOLESCENCE
The data network communications market is characterized by rapid
technological change, including changes in customer requirements, frequent new
product introductions and enhancements, and evolving industry standards. The
Company's success will depend in part on its ability to keep pace with
technological developments and emerging industry standards and to respond to
customer requirements by enhancing its current products and developing and
introducing new products. Failure to anticipate or respond rapidly to advances
in technology and to adapt the Company's products appropriately could render the
Company's products obsolete and have a material adverse effect on the success of
the Company's products and thus on the Company's business, financial condition
and results of operations.
PRODUCT DEVELOPMENT RISKS
The Company's success will depend in part on its ability to develop and
introduce product enhancements and new products. The success of any product
enhancement or new product depends on many factors, including the amount of
resources devoted to its development, product competition and marketing
campaigns. There can be no assurance that the Company will succeed in
developing, introducing and marketing any product enhancements or new products
in a timely fashion, if at all, or that such enhancements or new products will,
if introduced, gain market acceptance. Failure to develop or introduce
enhancements or new products, or significant delays in doing so, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Products as complex as the Company's frequently contain undetected
hardware or software errors ("bugs") when first introduced or as new versions
are released. Despite testing and quality control efforts by the Company and
current and potential customers, the Company anticipates that such errors may be
found from time to time in new or enhanced products after commercial
introduction. In addition, errors may occur when the Company's products are
integrated with products of other companies which are designed to interoperate
with the Company's products. The occurrence of such errors could, and the
inability to correct errors would, result in the delay or loss of market
acceptance of the Company's products, possible warranty expense, diversion of
engineering and other resources from product development efforts and the loss of
credibility in the market, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY; RISK OF
PRODUCT RETURNS
The Company has incurred net losses in each of the past three years
and, at December 31, 1996, had an accumulated shareholders' deficit of
approximately $17.3 million. Net losses for the years ended December 31, 1994,
1995 and 1996, and for the three months ended March 31, 1997, were approximately
$2.6 million, $3.3 million, $5.3 million and $1.8 million, respectively. Future
operating results will depend on many factors, including the growth of the Fibre
Channel market, demand for the Company's products, the level of product and
price competition, the Company's ability to develop and market new products,
general economic conditions and other factors. There can be no assurance that
the Company will achieve or sustain profitability in the future.
In addition, in recognition of the difficulty in obtaining market
penetration of the Company's new technology and the necessity to make
concessions to customers during the initial introduction of a new technology
product, the Company has allowed customers to return products to the Company
which do not meet the customer's needs. At December 31, 1996, the Company
recorded a net sales return reserve of $150,000 ($300,000 gross sales less the
estimated value of the product to be returned) as an estimate of future
anticipated returns of product. There can be no assurance that this reserve will
be adequate, or that significant returns will not occur in the future.
RISKS ASSOCIATED WITH MANAGING GROWTH
The anticipated growth of the Company's operations will place
significant strain on the Company's management, sales and marketing,
manufacturing, operating and financial systems and resources. If such growth
occurs, the Company may encounter difficulties, including problems involving
lower than projected production rates, lower quality control and assurance,
decreased product reliability, increased manufacturing costs, difficulties in
maintaining internal accounting controls, malfunctioning of existing and new
equipment, insufficient or untimely component supplies and shortages of
personnel. There can be no assurance that the Company will be able successfully
to plan for or manage increased production and marketing of its products. The
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION IN FIBRE CHANNEL MARKET
The Company's Fibre Channel products encounter competition from other
Fibre Channel products in addition to competition from other network technology
products. For example, Hewlett-Packard Company ("Hewlett-Packard") and
International Business Machines Corporation ("IBM") have developed Fibre Channel
switches, and a number of other companies, including Brocade Communications
Systems, Inc. have announced switch development efforts. In addition, a number
of companies, including Hewlett-Packard, IBM, Emulex Corp. and Interphase Corp.
are developing Fibre Channel products other than switches, such as adapters, and
the Company anticipates that these and other companies will introduce commercial
Fibre Channel products in the near future. In the event that Fibre Channel
technology gains wider market acceptance, it is likely that an increasing number
of competitors will begin developing and marketing Fibre Channel products. Some
of the companies that produce or may produce Fibre Channel products competitive
with the Company's products have substantially greater financial, technological
and marketing resources than the Company. There can be no assurance that the
Company will be able to compete effectively against current or future
competitors, or that such competitors will not succeed in adapting more rapidly
and effectively to changes in technology or in the market or in developing or
marketing products that will be more widely accepted. A failure to compete
effectively would prevent the Company from generating sufficient sales to allow
the Company to attain profitable operations.
DEPENDENCE ON SUBCONTRACTORS
The Company subcontracts a majority of its production activities,
including the manufacture, assembly and testing of the Company's proprietary
Fibre Channel switch and adapter designs. Utilization of subcontractors results
in dependence on the timely delivery of high quality products from these
manufacturers and may leave the Company with less flexibility and control over
the manufacturing process than if it conducted all of these operations
internally. There can be no assurance that the timely delivery of quality
products will not be interrupted; any such interruption would have a material
adverse effect on the Company's ability to deliver its products until acceptable
arrangements could be made with a qualified alternative subcontractor. There can
be no assurance that the Company would be able to reach an arrangement with such
a subcontractor at acceptable prices and adequate quality levels on a timely
basis. If the Company were unable to do so, such an interruption would have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON SUPPLIERS AND AVAILABILITY OF COMPONENTS
Certain of the components used in Ancor's products are available only
from a single supplier or from a limited number of suppliers, and others may
from time to time be in short supply or temporarily be available from only a
single supplier. The unavailability of adequate quantities of components, a
reduction or interruption in component supply, a disruption of existing supplier
relationships, an inability to develop alternative sources or a significant
increase in the price of components could each have a material adverse effect on
the Company's ability to produce and market its products.
DEPENDENCE ON CUSTOMER
A significant portion of the Company's revenues in fiscal 1996 were
generated by a single customer, Hucom. The Company's business would be
materially, adversely effected if such customer ceased doing business with the
Company. The Company's revenues in the future may also be generated by a single
customer or a small number of significant customers.
NEED TO ATTRACT AND RETAIN KEY PERSONNEL
The success of the Company is dependent on its ability to attract and
retain personnel needed for its business. The Company's personnel needs include
highly trained personnel for such areas as management, sales and engineering. In
particular, the Company's success will depend in part on the continued service
of certain key personnel, including Mr. Calvin G. Nelson, its President, Mr.
Terry M. Anderson, its Senior Vice President, Systems Development, and Mr.
Robert S. Cornelius, its Senior Vice President, Research & Development. The
Company is currently searching for a Chief Executive Officer to replace the
Company's prior Chief Executive Officer who was removed from such position in
April 1997. The Company's success will depend in part on its ability to attract
and retain a suitable candidate for such position. In addition, as the Company
increases its production and sales levels, it will need to attract and retain
additional qualified skilled and unskilled workers for its operations. In recent
years there has been great demand for qualified skilled and unskilled employees
in the Minneapolis area, where the Company's main operations are located. There
can be no assurance that the Company will be successful in attracting and
retaining the personnel needed for its business. Any failure to do so would
adversely affect the Company's business, financial condition and results of
operations.
DEPENDENCE ON INTELLECTUAL PROPERTY
The Company's success will depend in part on its ability to protect its
proprietary rights and to operate without infringing on the proprietary rights
of third parties. The Company currently holds one U.S. patent covering certain
aspects of one of its Fibre Channel switches. The Company may apply for
additional patents in the future. There can be no assurance that any of the
Company's future patent applications will result in issued patents, that the
scope of any current or future patents issued to the Company will prevent
competitors from introducing competitive products or that any current or future
patents issued to the Company would be enforceable if challenged. In addition,
other parties may hold or receive patents that contain claims covering other
technology included in the Company's current or future products that could
hinder or prevent the sale of the Company's products or require the Company to
obtain licenses to such technology, which might not be available on acceptable
terms or at all.
In addition to patents, the Company intends to rely upon unpatented
trade secrets and know-how and on the expertise of its employees. Although the
Company believes that it has in the past taken, and intends in the future to
take, appropriate steps to protect its unpatented proprietary rights, including
requiring that its employees and third parties granted access to the Company's
proprietary technology enter into confidentiality agreements with the Company,
there can be no assurance that these measures will be sufficient to protect the
Company's rights against third parties. Likewise, there can be no assurance that
others will not independently develop or otherwise acquire unpatented
technologies or products similar or superior to those of the Company.
The Company has registered three trademarks with the United States
Patent and Trademark Office (the "PTO") and has filed for registration of four
additional marks in which it claims trademark rights, one of which has been
allowed. United States trademark rights are acquired by use rather than by
registration, and there can be no assurance that others do not have conflicting
or superior rights to the Company's unregistered trademarks. There can thus be
no assurance that any of the trademarks covered by the Company's applications
for registration will be found registrable, that registrations will issue, or
that the Company can support the cost of defense of its trademarks.
The high technology area frequently features disputes over intellectual
property. The Company may in the future be required to defend its intellectual
property rights against infringement, duplication and discovery by third parties
or to defend itself against third-party claims of infringement. Likewise,
disputes may arise in the future with respect to ownership of technology
developed by employees who were previously employed by other companies. Any such
litigation or disputes could result in substantial costs to, and a diversion of
effort by, the Company. An adverse determination could subject the Company to
significant liabilities to third parties, require the Company to seek licenses
from or pay royalties to third parties or require the Company to develop
appropriate alternative technology. There can be no assurance that any such
licenses would be available on acceptable terms or at all, or that the Company
could develop alternate technology at an acceptable price or at all. Any of
these events could have a material adverse effect on the Company's business,
financial condition and results of operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter due to such factors as changes in customer buying patterns, the timing
of the announcement and introduction of new products by the Company or its
competitors, the tactics of the Company's competitors, technological
developments affecting the data communication network market, and the overall
strength of the economy. All of these factors, along with the uncertainties
associated with the introduction of any new product or product enhancement, in
gauging ultimate customer demand, and in predicting general trends in the market
for the Company's products, may limit management's ability to plan for
production and to forecast quarterly results of operations accurately.
Fluctuations in such quarterly operating results or the Company's failure to
meet analysts' projections or public expectations as to results may adversely
affect the market price of the Common Stock. The Company's operating results for
any particular quarter are not necessarily indicative of results that the
Company may achieve for any subsequent quarter or full fiscal year.
STOCK PRICE VOLATILITY
The stock markets recently have experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many high
technology companies and which have often been unrelated to the operating
performance of such companies. The trading prices of the Company's Common Stock
have in the past been, and could in the future be, subject to wide fluctuations
in response to a variety of events or factors, many of which are beyond the
Company's control. These could include, without limitation (i) quarterly
variations in the Company's operating results, (ii) the liquidity of the market
for the Common Stock, (iii) announcements of business developments by the
Company or its competitors, (iv) public perception regarding Fibre Channel's
market status, (v) developments or disputes concerning proprietary rights,
(vi) technological innovations or newly introduced products, and (vii) general
conditions in the data communications network industry and the economy.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company anticipates that the net proceeds of this offering,
together with cash on hand, interest expected to be earned thereon and
anticipated revenues from operations will be sufficient to finance the Company's
operations at least through 1997, although there can be no assurance that
additional capital will not be required sooner. In order to meet its needs
beyond such time, the Company may be required to raise additional capital. There
can be no assurance that sufficient capital will be available if and when
required on terms acceptable to the Company, if at all. Any additional equity
financings may be dilutive to purchasers in this offering, and any debt
financing may involve restrictive covenants. Failure to secure additional
financing if and when needed could adversely affect the Company and its
operations, including requiring the Company to delay, scale back, or eliminate
market expansion activities and research and development on existing or new
products, or forcing the Company to cease operations entirely.
ANTI-TAKEOVER PROVISIONS
Under the Company's Amended and Restated Articles of Incorporation, the
Board of Directors may issue up to five million shares of preferred stock, $0.01
par value, on such terms, and with such rights, preferences and designations, as
the Board of Directors may determine, without further shareholder action. The
Board of Directors exercised this power to create and issue a series of 1,100
shares of Series A Convertible Preferred Stock in March 1996 and to create and
issue a series of 900 shares of Series B Convertible Preferred Stock in March
1997. The rights of the holders of the Common Stock will be subject to, and may
be adversely affected by, the rights of any holders of any preferred stock so
issued. Furthermore, under the Company's Amended and Restated Articles of
Incorporation, the Company's Board of Directors is classified and directors
serve for staggered three-year terms. In addition to these provisions in its
Amended and Restated Articles of Incorporation, the Company is subject to
certain provisions of the Minnesota Business Corporation Act that limit the
voting rights of shares acquired in certain acquisitions and restrict certain
business combinations. The existence or issuance of "blank check" preferred
stock, the existence of a staggered board and the effect of other anti-takeover
provisions in the Company's charter documents or Minnesota law, individually or
in the aggregate, may render more difficult or discourage any attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest or
otherwise, which could deprive the Company's shareholders of opportunities to
sell their shares of Common Stock at prices higher than prevailing market
prices.
NO DIVIDENDS
The Company has never paid or declared a dividend on its capital stock
and does not anticipate doing so for the foreseeable future.
VOLATILITY OF STOCK PRICE; SHARES AVAILABLE FOR FUTURE SALE
The market prices for securities of high-technology companies,
including the Company's securities, have been volatile. Announcements of
technological innovations or new products by the Company or its competitors, the
loss of a significant customer, public perception of the success of Fibre
Channel technology, technological delays and period-to-period fluctuations in
revenues and financial results, may have a significant impact on the market
price of the Company's Common Stock.
As of May 19, 1997, the Company had 10,853,256 shares of Common Stock
outstanding. The Company also has options or warrants outstanding to purchase a
total of approximately 1,308,761 shares of Common Stock. Because the Company's
Series A Preferred Stock and Series B Preferred Stock carry a variable
conversion rate that may fluctuate with the market price of the Company's Common
Stock, it is not possible to currently quantify the precise number of shares to
be issued upon future conversion of the Series A or Series B Preferred Stock.
Accordingly, the Company has registered a total of 4,905,556 shares of Common
Stock, which includes shares in excess of the number of shares currently
issuable upon conversion of the Series B Preferred Stock and the exercise of
warrants issued or to be issued by the Company in connection with the sale of
the Series B Preferred Stock, if all such conversions and exercises occurred as
of the date hereof, in order to ensure that a sufficient number of shares are
registered in the event the price of the Company's Common Stock were to
decrease. All of the shares registered hereby, if and when issued, will be
eligible for sale in the open market without restriction. Additional shares of
Common Stock, including shares issuable upon exercise of options and warrants,
will also become eligible for sale in the public market from time to time. Sales
and potential sales of substantial amounts of the Company's Common Stock in the
public market pursuant to Rule 144 or otherwise could adversely affect the
prevailing market prices for the Common Stock and impair the Company's ability
to raise additional capital through the sale of equity securities.
ANCOR COMMUNICATIONS, INCORPORATED
Ancor Communications, Incorporated, incorporated in 1986, is recognized
as a leading developer of Fibre Channel network products. Fibre Channel is a
high bandwidth, low latency advance in data communications technology developed
under the auspices of the ANSI. Ancor develops, manufactures, and markets Fibre
Channel switches, interface adapters and application specific integrated
circuits ("ASICs") and router products.
In 1992, Ancor delivered its first prototype Fibre Channel switches and
interface adapters. Commercial Fibre Channel switch and interface deliveries
began in 1993. Since that product introduction, joint development and marketing
alliances and significant customer relationships have been achieved with major
industry players such as IBM, Hewlett-Packard, AT&T and Sun Microsystems.
Ancor's Fibre Channel products are used by organizations worldwide for enhanced
network performance, scalability and connectivity. Fibre Channel enables the
transfer of data at speeds ranging from 266 Mbps to 1 Gigabit per second.
Since its inception, Ancor's core technology has been built around the
utilization of fiber optic cable for data transmission. Originally, through its
Anderson Cornelius division, Ancor provided fiber optic manufacturing data
collection systems to Ford Motor Company. In 1989, Ancor began selling its fiber
optic defense communication products to the U.S. Navy. Its current Fibre Channel
product category was initiated in 1988 when Ancor participated as an original
member of the founding task group of the ANSI committee dedicated to the
creation of the Fibre Channel standard. Today Ancor -- an active member of the
ANSI Fibre Channel committee and the Fibre Channel Association -- focuses
entirely on the development of Fibre Channel solutions.
Today, Ancor offers one of the industry's most complete lines of Fibre
Channel solutions for high performance network environments. Ancor's product
line includes: quarter and full gigabit speed switches, stackable in modules of
8 or 16 ports and scaleable to support a Fibre Channel network of more than
3,000 nodes; Fibre Channel adapters and drivers for EISA, MCA, PCI, SBus and VME
bus types, offering connectivity to popular work stations and servers; and
router products offering seamless connectivity between Fibre Channel networks
and legacy LAN's. Customers for Ancor Fibre Channel products run high band
width, mission critical applications that require optimal network performance
and quality of service in data storage, client/server and network backbone
market segments. Specific spplications include data mining and backup, CAD/CAM,
scientific visualization, storage clusters, server interconnect and data backup.
Ancor Fibre Channel products include gigabit speed network performance,
scalability, interoperability and an ANSI standard that specifies a road map to
increase network performance of two and four gigabits per second transfer rates.
Ancor's principal executive offices are located at 6130 Blue Circle Drive,
Minnetonka, Minnesota 55343, (telephone number (612) 932-4000). For further
information concerning Ancor, see the documents incorporated by reference herein
as described under "Incorporation of Certain Documents by Reference."
SELLING SHAREHOLDERS
The following table sets forth certain information, as of May 15, 1997, as
to the maximum number of Shares that may be sold by each of the Selling
Shareholders pursuant to this Prospectus.
COMMON STOCK MAXIMUM
ISSUABLE UPON NUMBER OF
SERIES B CONVERSION OF SHARES
PREFERRED STOCK SERIES B PREFERRED OF COMMON SHARES
OWNED PRIOR TO STOCK(2) INVESTOR AGENT STOCK TO BE OWNED AFTER
NAME THE OFFERING(1) MINIMUM MAXIMUM WARRANTS(3) WARRANTS(4) OFFERED(2)(3) OFFERING(5)
- ---- --------------- ------- ------- ----------- ----------- ------------- -----------
Capital Ventures International... 85 174,898 381,754 95,439 - 477,193
The Matthew Fund N.V............. 15 30,865 67,368 16,842 - 84,210
Nelson Partners.................. 143 294,239 642,246 160,561 - 802,807
Olympus Securities, Ltd.......... 142 292,181 637,755 159,439 - 797,194
The Tail Wind Fund Limited....... 45 95,593 202,105 50,526 - 252,631
Queensway Financial Holdings Ltd. 40 82,305 179,649 44,912 - 224,561
Overseas Growth Investments Ltd.. 320 658,437 1,437,193 359,298 - 1,796,491
OTA Limited Partnership.......... 40 82,305 179,649 44,912 - 224,561
CC Investments, LDC.............. 25 51,440 112,281 28,071 - 140,352
Swartz Family Partnership, L.P... - - - - 40,340 40,340
Kendrick Family Partnership, L.P. - - - - 40,340 40,340
P. Bradford Hathorn.............. - - - - 5,000 5,000
Glenn R. Archer.................. - - - - 5,000 5,000
Lisa B. Lawrence................. - - - - 1,500 1,500
Frank G. Mauro................... - - - - 2,500 2,500
Charles Krusen................... - - - - 1,779 1,779
Joe Hale......................... - - - - 6,597 6,597
Robert L. Hopkins................ - - - - 1,250 1,250
Dwight B. Bronnum................ - - - - 1,250 1,250
---------- ----------- ---------- --------- ---------- -----------
Total..................... 855 1,762,263 3,840,000 960,000 105,556 4,905,556
- ----------------------
(1) The Company's Series B Preferred Stock was issued pursuant to
subscription agreements dated March 21, 1997. Each share of Series B
Preferred Stock has a stated value of $10,000 and converts into Common
Stock, subject to certain restrictions, at a variable conversion rate
equal to the lower of $4.86 (the "Fixed Conversion Price") or 85% of
the average closing bid price of the Common Stock for the five trading
days prior to the date of conversion, subject to certain minimum price
protections until December 24, 1997, and to a 5% annual accretion.
(2) The minimum number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock reflects the minimum number of shares
issuable upon conversion of the Series B Preferred Stock owned by each
investor at the Fixed Conversion Price. Because the maximum number of
shares of Common Stock issuable upon conversion of the Series B
Preferred Stock cannot be determined, the maximum number of shares
listed does not represent the maximum number of shares issuable upon
conversion of the Series B Preferred Stock, but rather represents each
Selling Shareholder's pro rata share of the total number of shares
registered. In the event any Selling Shareholder does not receive the
maximum number of shares upon conversion of such Selling Shareholder's
Series B Preferred Stock, or does not receive warrants for the total
number of shares listed, the excess number of shares may be sold, on a
pro-rata basis, by the remaining Selling Shareholders.
(3) Consists of Investor Warrants issuable to holders of Series B
Preferred Stock who own shares of Series B Preferred Stock on March
24, 1998. The number of shares of Common Stock subject to such
Investor Warrants will depend on the dates on which the holders
convert their shares of Series B Preferred Stock and the market price
of the Company's Common Stock on March 24, 1998. On March 24, 1998,
each holder will receive Investor Warrants equal to 20% of the
original value of such Investor's purchase of Series B Preferred Stock
that it has not converted as of that date divided by the conversion
price then in effect for the Series B Preferred Stock. The number of
shares listed represents each Selling Shareholder's pro rata share of
the total number of shares registered, assuming that all Series B
Preferred Stock is outstanding on March 24, 1998.
(4) Consists of warrants to purchase 105,556 shares of Common Stock by the
designees of Dunwoody Brokerage Services, Inc. in connection with such
company's role as placement agent for the private placement of the
Company's Series B Preferred Stock in March 1997.
(5) Gives effect to the conversion of all shares of Series B Preferred
Stock and the exercise of all Investor Warrants and Agent Warrants by
all Selling Shareholders.
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for their
own accounts. The Company will not receive any proceeds from the sale of the
Shares pursuant to this Prospectus. The Company has agreed to pay the expenses
of registration of the Shares, including legal and accounting fees.
The Selling Shareholders, or their respective pledges, donees,
transferees or successors in interest, may offer and sell the Shares from time
to time in transactions on the Nasdaq SmallCap Market or the Pacific Stock
Exchange, in brokerage transactions at prevailing market prices or in
transactions at negotiated prices. Sales may be made to or through brokers or
dealers who may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders or the purchasers of Shares for whom
such brokers or dealers may act as agent or to whom they may sell as principal,
or both. As of the date of this Prospectus, the Company is not aware of any
agreement, arrangement or understanding between any broker or dealer and the
Selling Shareholders. There is no assurance that any of the Selling Shareholders
will sell any or all of the Shares offered by them.
Sales may be made to or through brokers or dealers who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders or the purchasers of Shares for whom such brokers or
dealers may act as agent or to whom they may sell as principal, or both. As of
the date of this Prospectus, the Company is not aware of any agreement,
arrangement or understanding between any broker or dealer and the Selling
Shareholders.
The Selling Shareholders and any brokers or dealers acting in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and any profit realized by them on the resale of Shares as principals
may be deemed underwriting compensation under the Securities Act.
The Company has agreed to indemnify the Selling Shareholders and any
underwriter and certain control persons related to the foregoing persons against
certain civil liabilities, including liabilities under the Securities Act.
CERTAIN RECENT EVENTS
Stephen C. O'Hara was removed as the Company's President and Chief
Executive Officer effective April 16, 1997. In addition, the Board of Directors
has determined not to nominate Mr. O'Hara for reelection to the Board of
Directors of the Company at the Company's Annual Meeting of Shareholders to be
held on May 28, 1997. The Company has named Calvin G. Nelson, the Company's
former Vice President-Engineering, as its President.
EXPERTS
The financial statements of the Company incorporated herein and in the
registration statement by reference to the Company's Annual Report on Form 10-K,
as amended, have been audited by McGladrey & Pullen, LLP, independent auditors,
to the extent set forth in their report included therein and incorporated herein
by reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the
Company by Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee............................... $8,548
Accounting Fees and Expenses....................... 3,000
Legal Fees and Expenses............................ 7,000
-----
Total..................................... $18,548
All fees and expenses other than the SEC registration fee are estimated.
The expenses listed above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article eight of the Company's Second Amended and Restated Articles of
Incorporation provides that a director shall not be liable to the Company or its
stockholders for monetary damages for a breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Sections 302A.559 or 80A.23 of the Minnesota Statutes, (iv) for any transaction
from which the director derived an improper personal benefit, or (v) for any act
or omission occurring prior to the date when such Article eight became
effective.
The Restated Bylaws of the Company provide that the officers and directors
of the Company and certain others shall be indemnified to substantially the same
extent permitted by Minnesota law.
Section 302A.521 of the Minnesota Business Corporation Act provides that a
corporation shall indemnify any person who was or is made or is threatened to be
made a party to any proceeding, by reason of the former or present official
capacity (as defined) of such person, against judgments, penalties, fines,
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding if
certain statutory standards are met. "Proceeding" means a threatened, pending or
complete civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the corporation. Section
302A.521 contains detailed terms regarding such right of indemnification and
reference is made thereto for a complete statement of such indemnification
rights.
The Company maintains a standard policy of officers' and directors'
insurance.
ITEM 16. LIST OF EXHIBITS
4.1 Loan and Warrant Purchase Agreement, dated as of June 24, 1992,
between Ancor Communications, Incorporated and International Business
Machines Incorporated (incorporated by reference to the Company's
Registration Statement on Form SB-2 filed April 28, 1994).
4.2 Agreement and Amendment to Loan and Warrant Purchase Agreement, dated
March 10, 1994, by and among Ancor Communications, Incorporated,
International Business Machines Corporation and IBM Credit Corporation
(incorporated by reference to the Company's Registration Statement on
Form SB-2 filed April 28, 1994).
4.3 Second Amendment to Loan and Warrant Purchase Agreement dated April
25, 1994, by and among Ancor Communications, Incorporated,
International Business Machines Corporation and IBM Credit Corporation
(incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form SB-2 filed April 28, 1994).
4.4 Shareholders Agreement, dated as of June 24, 1992, among Ancor
Communications, Incorporated, International Business Machines
Incorporated and the shareholders of the Company named on the
signature page thereto (incorporated by reference to the Company's
Registration Statement on Form SB-2 filed April 28, 1994).
4.5 Representative's Warrant (incorporated by reference to the Company's
Form 10-QSB for the quarter ended March 31, 1994).
4.6 Form of Warrant issued November 8, 1993 (incorporated by reference to
the Company's Registration Statement on Form SB-2 filed April 28,
1994).
4.7 Form of Warrant issued April 28, 1995 (incorporated by reference to
the Company's Form 10-QSB for the quarter ended March 31, 1995).
4.8 Form of Warrant issued to Andcor Human Resources on August 28, 1995
(incorporated by reference to the Company's Form 10-QSB for the
quarter ended September 30, 1995).
4.9 Form of Warrant issued to John G. Kinnard & Company on October 23,
1995 (incorporated by reference to the Company's Form 10-QSB for
the quarter ended September 30, 1995).
4.10 Certificate of Designation of Series A Preferred Stock (incorporated
by reference to the Company's Form 10-KSB for the year ended
December 31, 1995).
4.11 Form of Warrant issued to Swartz Investments, Inc. on March 7, 1996
(incorporated by reference to the Company's Form 10-KSB for the
year ended December 31, 1995).
4.12 Form of Warrant issued to Dunwoody Brokerage Services, Inc. on March
24, 1997 (incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997).
4.13 Form of Warrant to be issued to purchasers of Series B Preferred Stock
(incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997).
4.14 Certificate of Designations of Series B Preferred Stock (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
5 Opinion of Dorsey & Whitney LLP.
23.1 Consent of McGladrey & Pullen, LLP.
23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5 to this
Registration Statement).
24 Power of Attorney.
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 of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change in the information set forth in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against 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 Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minnetonka, State of Minnesota, on May 23, 1997.
ANCOR COMMUNICATIONS, INCORPORATED
By /s/ Calvin G. Nelson
-----------------------------------
Calvin G. Nelson
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 5, 1996.
Signature Title
- --------- -----
/s/ Calvin G. Nelson President
- ------------------------------- (principal executive officer)
Calvin G. Nelson
/s/ Lee B. Lewis Chief Financial Officer
- ------------------------------- (principal financial officer)
Lee B. Lewis
* Chairman of the Board
- -------------------------------
Dale C. Showers
* Director
- -------------------------------
Gerald M. Bestler
* Director
- -------------------------------
Thomas F. Hunt, Jr.
* Director
- -------------------------------
Stephen C. O'Hara
*By /s/ Calvin G. Nelson
---------------------------
Calvin G. Nelson