SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 22, 1999
NETRIX CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-20512 54-1345159
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 20171
(Address of Principal Executive Offices, Including Zip Code)
(703) 742-6000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 22, 1999, pursuant to the Agreement and Plan of Merger
dated September 30, 1999, OpenROUTE Networks, Inc., a Massachusetts corporation
("OpenROUTE"), merged with and into Netrix Corporation, a Delaware corporation
that survived the merger ("Netrix"). Pursuant to the terms of the Merger
Agreement, Netrix stockholders retained their shares and OpenROUTE shares were
converted on a one-for-one basis into shares of Netrix common stock. Options to
purchase shares of OpenROUTE common stock also were converted on a one-for-one
basis into options to purchase shares of Netrix common stock in the same number
and at the same exercise price per share as was held under the option to
purchase OpenROUTE shares. Based upon the 15,527,189 shares of OpenROUTE common
stock outstanding as of November 16, 1999, the record date, Netrix expects to
issue approximately 15,527,189 shares of Netrix common stock in connection with
the merger. No other consideration was paid in connection with the merger.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of the business acquired, OpenROUTE
Networks, Inc., as of and for the years ended December 31, 1998 and 1997 and as
of and for the periods ended September 30, 1999 and 1998 required by this item
are incorporated herein by reference to the Form S-4 registration statement (No.
333-91323) filed with the Securities and Exchange Commission on November 19,
1999.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item is contained
in the pro forma financial statements (and footnotes thereto) filed as Exhibit
99.2 to this report.
(c) Exhibits.
The following exhibits are filed with this Report:
EXHIBIT NO. DESCRIPTION.
2.1 Agreement and Plan of Merger by and between Netrix
Corporation and OpenROUTE Networks, Inc., dated
as of September 30, 1999 (incorporated by reference
to Exhibit 2.1 of Netrix Corporation's Current
Report on Form 8-K, dated October 14, 1999).
23.1 Consent of BDO Siedman, LLP.
23.2 Consent of PricewaterhouseCoopers, LLP.
99.1 Press Release of Netrix Corporation dated December
22, 1999.
99.2 Pro Forma Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETRIX CORPORATION
Date: February 7, 2000 By: /s/ Peter J. Kendrick
---------------------------------
Name: Peter J. Kendrick
Title: Chief Financial Officer
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EXHIBIT LIST
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger by and between Netrix
Corporation and OpenROUTE Networks, Inc., dated as of
September 30, 1999 (incorporated by reference to
Exhibit 2.1 of Netrix Corporation's Current Report on
Form 8-K, dated October 14, 1999).
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of PricewaterhouseCoopers, LLP.
99.1 Press Release of Netrix Corporation dated December
22, 1999.
99.2 Pro Forma Financial Statements
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Form 8-K/A of
Netrix Corporation of our report dated February 12, 1999 relating to the
consolidated financial statements of OpenROUTE Networks, Inc. and subsidiaries
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
/S/ BDO SEIDMAN, LLP
Boston, Massachusetts
February 3, 2000
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Form 8-K/A of
Netrix Corporation of our report dated February 11, 1998, except as to the
segment information for the years ended December 31, 1997 and 1996 presented in
Note 8, for which the date is March 26, 1999, on our audits of the consolidated
financial statements of OpenROUTE Networks, Inc. as of December 31, 1997 and
1996, and for the two years ended December 31, 1997.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 2000
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EXHIBIT 99.1
NETRIX CORPORATION AND OPENROUTE NETWORKS SHAREHOLDERS
APPROVE INFORMATION OF NX NETWORKS
--NEW COMPANY TO LEAD IN BURGEONING SECURE INTERNET TELEPHONY MARKET--
HERNDON, VA, AND WESTBORO, MA, DECEMBER 22, 1999 - Leaders in Internet telephony
Voice over Internet Protocol (VoIP) and Virtual Private Networking (VPN), NETRIX
Corporation (NASDAQ: NTRX) and OpenRoute Networks, Inc. (NASDAQ: OPEN), today
announced that shareholders of each company have voted to approve the merger of
NETRIX and OpenROUTE at separate shareholders meetings. This approval concludes
the merger transaction of the companies. The combined company will begin doing
business as NX Networks (pronounced NEX) on December 23, 1999. NX Networks will
trade under the NASDAQ symbol NTRX.
On September 30, 1999, NETRIX announced it had signed a definitive agreement to
merge with OpenROUTE. The agreement received regulatory approval in November,
and approval by a majority of NETRIX and OpenROUTE's shareholders in the two
meetings held today.
"We have combined our award-winning technologies and experienced teams to lead
the explosively growing IP telephony market, which is expected to soar to more
than $10 billion by 2005 according to market researcher Frost & Sullivan,"
stated Steven T. Francesco, NX Networks Chairman and Chief Executive Officer.
"We will deliver highly secure, `infrastructure agnostic' solutions that can
handle both voice and data and be deployed over virtually any network."
Bryan R. Holley, President and Chief Operating Officer commented, "NX Networks
will take leadership in the emerging VoVPN market by removing the "stumbling
blocks" of Internet Telephony adoption, such as quality and security. Our first
product, which we showed two weeks ago at CTI Expo is the 3000 Series, the
industry's first VoVPN gateway router which combines superior voice quality with
advanced VPN envryption, compression and authentication technology."
ABOUT NX NETWORKS
NX Networks combines two leaders in Internet Telephony and Virtual Private
Networking (VPN) technology, NETRIX Corporation and OpenROUTE Networks, Inc. NX
Networks corporate headquarters are located in Herndon, Virginia and Westboro,
Massachusetts. Additional information can be found on the company's web site at
WWW.NXNETWORKS.COM.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements that involve a number of
risks and uncertainties, including references to the success of new products and
the transition between the sale of old products and the sale of new products.
Readers are cautioned that all forward-looking statement are subject to risks
and uncertainties, including, without limitation, the timing of new
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announcements or introductions by the company and its competitors, the hiring
and retention of key employees, competitive pricing pressures, the manufacturing
of products, the need for capital, dependence on third parties for
manufacturing, components and products, general economic conditions in the
United States and international markets, and the risk factors detailed from time
to time in the Company's periodic reports and registration statements filed with
the Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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EXHIBIT 99.2
NETRIX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet
of Netrix as of September 30, 1999 and the Unaudited Pro Forma Condensed
Consolidated Statement of Operations of Netrix for the nine months ended
September 30, 1999 and the year ended December 31, 1998 illustrate the effect of
the merger with OpenROUTE. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet assumes that the merger had been completed as of September 30,
1999 and the Unaudited Pro Forma Condensed Consolidated Statements of Operations
assume that the merger was completed as of the beginning of the fiscal year
presented, January 1, 1998. Certain reclassifications have been made to
OpenROUTE's financial statements to conform to Netrix's presentation.
Under the terms of the OpenROUTE transaction, the holders of OpenROUTE
common stock and stock options received one share of Netrix common stock for
each OpenROUTE share converted.
ACCOUNTING TREATMENT
Netrix accounted for the merger under the purchase method of
accounting, with Netrix being the acquiror for accounting purposes. Immediately
following the merger, Netrix shares held by Netrix stockholders represented
approximately 45% of the outstanding shares of Netrix. The board of directors of
the combined companies consists of six former Netrix directors and two OpenROUTE
directors with the Chief Executive Officer of Netrix, Steven T. Francesco,
serving as Chairman of the Board of the combined companies' board of directors.
Under the purchase method of accounting, the assets and liabilities of
Netrix will be brought forward at their net book values, a new basis will be
established for OpenROUTE's assets and liabilities and any excess of the
consideration over the fair value of OpenROUTE's assets and liabilities will be
accounted for as goodwill. The revenues and expenses of Netrix and OpenROUTE
will be consolidated from the date of consummation of the merger.
The pro forma adjustments are based upon currently available
information and assumptions that Netrix management believes are reasonable and
certain information provided by OpenROUTE management. Netrix will account for
the merger based upon the estimated fair market value of the net tangible
assets, intangible assets and liabilities acquired at the date of acquisition.
The adjustments included in the Unaudited Pro Forma Condensed Consolidated
Financial Statements represent the preliminary determination of these
adjustments based upon available information. Netrix cannot assure you that the
actual adjustments will not differ significantly from the pro forma adjustments
reflected in the Unaudited Pro Forma Condensed Consolidated Financial
Statements.
For illustrative purposes, Netrix has made a preliminary allocation of
excess cost over estimated net assets acquired to goodwill as OpenROUTE's assets
and liabilities are estimated to approximate fair value. The final allocation of
purchase price to assets and liabilities acquired will depend upon the final
purchase price and final estimates of fair values of assets and liabilities of
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OpenROUTE at the closing date, Netrix will undertake a study to determine the
fair values of assets and liabilities acquired and will allocate the purchase
price accordingly. Netrix believes that the carrying value of current assets and
current liabilities approximates fair value and that the excess of cost over
historical net assets acquired will be allocated to property and equipment,
goodwill and other identifiable intangibles. However, there can be no assurance
that the actual allocation will not differ significantly from the pro forma
allocation.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
not necessarily indicative of either future results of operations or results
that might have been achieved if the merger with OpenROUTE had been consummated
as of the indicated dates. The Unaudited Pro Forma Condensed Consolidated
Financial Statements should be read in conjunction with the historical financial
statements of Netrix and OpenROUTE, together with the related notes thereto,
which are incorporated by reference into this registration statement.
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NETRIX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
NETRIX OPEN OPEN NETRIX PRO
HISTORICAL HISTORICAL PROFORMA FORMA
(1) (2) ADJUSTMENTS ADJUSTMENTS
ASSETS
Current Assets:
Cash and cash equivalents $ 4,698 $ 2,804 $ -- $ 7,502
Marketable Securities -- -- -- --
Accounts receivable, net 6,957 3,450 -- 10,407
Inventories 4,761 5,563 -- 10,324
Other current assets 359 343 -- 702
-------------- --------------- --------------- ---------------
Total current assets 16,775 12,160 -- 28,935
-------------- --------------- --------------- ---------------
Property and equipment, net 3,043 2,239 -- 5,282
Goodwill and intangibles, net 330 -- 58,085 (3) 58,415
Other assets 121 41 -- 162
-------------- --------------- --------------- ---------------
Total assets $ 20,269 $ 14,440 $ 58,085 $ 92,794
============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 1,174 $ -- $ -- $ 1,174
Accrued expenses 3,018 2,087 500 (4) 5,605
Accounts payable 3,907 1,226 -- 5,133
-------------- --------------- --------------- ---------------
Total current liabilities 8,099 3,313 500 11,912
-------------- --------------- --------------- ---------------
Stockholders' equity
Preferred stock 4,424 -- -- 4,424
Common stock 581 160 636 (5) 1,377
Additional paid-in capital 59,231 49,689 18,227 (5) 127,147
Deferred compensation (637) -- -- (637)
Accumulated deficit (52,131) (37,836) 37,835 (5) (52,131)
Warrants 862 -- -- 862
Less Treasury stock at cost -- (1,010) 1,010 (5) --
Accumulated other comprehensive income
(loss) (160) 123 (123) (5) (160)
-------------- --------------- --------------- ---------------
Total stockholders' equity 12,170 11,127 57,585 80,882
-------------- --------------- --------------- ---------------
Total liabilities and
stockholders' equity $ 20,269 $ 14,440 $ 58,085 $ 92,794
============== =============== =============== ===============
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NETRIX CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(1) Information obtained from the historical unaudited condensed
consolidated balance sheet of Netrix.
(2) Information obtained from the historical unaudited consolidated balance
sheet of OpenROUTE.
(3) Reflects goodwill resulting from the purchase of all of the outstanding
stock of OpenROUTE and the allocation of the purchase price using the
purchase method of accounting for the transaction after adjusting the
assets acquired and the liabilities assumed to their respective fair
values.
(4) Reflects the transaction costs, primarily investment banking, legal and
accounting fees, directly incurred related to the acquisition and is
shown as a pro forma adjustment to accrued expenses and the purchase
price.
(5) Eliminates the equity of OpenROUTE upon consolidation with Netrix;
reflects the issuance of 15.9 million shares of Netrix common stock
using an exchange ratio of one share of Netrix for each share of
OpenROUTE common stock. The issued shares are valued at $3.90 per
share, which is the average of the closing prices for the three days
before and after the public announcement of the merger; reflects the
value of OpenROUTE stock options and warrants. Such value has been
determined using the Black-Scholes method assuming 98% volatility, a
risk free interest rate of 5.0% and an exercise period of three years.
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NETRIX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
NETRIX OPEN OPEN PRO NETRIX PRO
HISTORICAL HISTORICAL FORMA FORMA
(1) (2) ADJUSTMENTS COMBINED
-------------- --------------- --------------- ----------------
Revenues
Product $ 16,079 $ 8,425 $ -- $ 24,504
Service and other 5,309 1,401 -- 6,710
Software licensing -- 785 -- 785
-------------- --------------- --------------- ----------------
Total revenues 21,388 10,611 -- 31,999
-------------- --------------- --------------- ----------------
Cost of revenues
Product 7,512 5,058 -- 12,570
Service and other 3,638 1,187 -- 4,825
Software licensing -- -- -- --
-------------- --------------- --------------- ----------------
Total cost of revenues 11,150 6,245 -- 17,395
-------------- --------------- --------------- ----------------
Gross profit 10,238 4,366 -- 14,604
-------------- --------------- --------------- ----------------
Operating expenses
Sales and marketing 4,621 3,181 -- 7,802
General and administrative 3,683 2,418 10,891 (5) 16,992
Research and development 5,337 2,935 -- 8,272
Stock compensation expense 763 -- -- 763
Restructuring reserve 900 243 -- 1,143
-------------- --------------- --------------- ----------------
Loss from operations (5,066) (4,411) (10,891) (20,368)
Interest and other income, net (218) 112 -- (106)
-------------- --------------- --------------- ----------------
Loss before income taxes (5,284) (4,299) (10,891) (20,474)
Provision for income taxes -- 10 -- 10
-------------- --------------- --------------- ----------------
Net loss (5,284) (4,309) (10,891) (20,484)
Dividends on preferred stock (574) -- -- (574)
-------------- --------------- --------------- ----------------
Net loss attributable to common
stockholders $ (5,858) $ (4,309) $ (10,891) $ (21,058)
============== =============== =============== ================
Basic and diluted loss per common share
$ (0.51) $ (0.28) $ (0.77) (6)
============== =============== ================
Weighted average common shares
outstanding, basic and diluted 11,513 15,461 27,413
============== =============== ================
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NETRIX CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
NETRIX OPEN OPEN PRO NETRIX PRO
HISTORICAL HISTORICAL FORMA FORMA
(3) (4) ADJUSTMENTS COMBINED
-------------- --------------- ---------------- ---------------
Revenues
Product $ 21,840 $ 10,416 $ -- $ 32,256
Service and other 9,642 2,247 -- 11,889
Software licensing -- 1,663 -- 1,663
-------------- --------------- ---------------- ---------------
Total revenues 31,482 14,326 -- 45,808
-------------- --------------- ---------------- ---------------
Cost of revenues
Product 10,939 6,836 -- 17,775
Service and other 5,155 1,760 -- 6,915
Software licensing -- -- -- --
-------------- --------------- ---------------- ---------------
Total cost of revenues 16,094 8,596 -- 24,690
-------------- --------------- ---------------- ---------------
Gross profit 15,388 5,730 -- 21,118
-------------- --------------- ---------------- ---------------
Operating expenses
Sales and marketing 10,781 8,018 -- 18,799
General and administrative 4,324 5,376 14,521 (5) 24,221
Research and development 6,771 4,610 -- 11,381
Stock compensation expense -- -- -- --
Restructuring reserve -- -- -- --
-------------- --------------- ---------------- ---------------
Loss from operations (6,488) (12,274) (14,521) (33,283)
Interest and other income, net (29) 589 -- 560
-------------- --------------- ---------------- ---------------
Loss before income taxes (6,517) (11,685) (14,521) (32,723)
Provision for income taxes -- 175 -- 175
-------------- --------------- ---------------- ---------------
Net loss (6,517) (11,860) (14,521) (32,898)
Basic and diluted loss per
common share $ (0.60) $ (0.77) $ (1.23) (6)
============== =============== ===============
Weighted average common shares
outstanding, basic and diluted 10,891 15,312 26,791
============== =============== ===============
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NETRIX CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
(1) Information obtained from the historical unaudited condensed
consolidated statement of operations of Netrix.
(2) Information obtained from the historical unaudited consolidated
statement of operations of OpenROUTE.
(3) Information obtained from the historical consolidated statement of
operations of Netrix.
(4) Information obtained from the historical statement of operations of
OpenROUTE.
(5) Reflects the amortization expense of the excess of cost over historical
net assets acquired in the merger by use of the straight-line method
over 4 years.
(6) The average common shares outstanding used in calculating basic and
diluted pro forma loss per common share are calculated assuming that
the estimated number of shares of Netrix common stock to be issued in
the merger was outstanding from the beginning of the periods presented.
For purposes of this Pro Forma Financial Information, the Company
assumed that it would issue approximately 15.9 million in connection
with the OpenROUTE acquisition. Options and warrants to purchase shares
of common stock were not included in computing pro forma diluted
earnings per common share because their inclusion would result in a
smaller loss per common share.
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