As field with the Securities and Exchange Commission on February 15, 2001
Registration No. 333-53844
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NX NETWORKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
54-1345159
(I.R.S. Employer Identification No.)
13595 Dulles Technology Drive
Herndon, Virginia 20171
(Address of Principal Executive Offices, Including Zip Code)
AMENDED AND RESTATED AETHERWORKS CORPORATION 1997 STOCK OPTION PLAN
(Full Title of the Plan)
Jay R. Schifferli
General Counsel
Nx Networks, Inc., 13595 Dulles Technology Drive, Herndon, Virginia 20171
(Name and Address of Agent for Service)
(703) 742-6000
(Telephone Number, Including Area Code of Agent For Service)
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COPY TO:
John T. Capetta, Esq.
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
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PROSPECTUS
NX NETWORKS, INC.
This prospectus relates to the offer of 354,742 shares of common stock
of Nx Networks, Inc. that may be offered for sale by the stockholder
identified on page 13 of this prospectus under the caption "Selling
Stockholder." We will not receive any proceeds from the sale of the common
stock by the selling stockholder.
Nx Networks' common stock is currently traded on the Nasdaq National
Market under the trading symbol "NXWX." On February 13, 2001, the last sale
price of the common stock on that market was $1.69 per share.
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INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL AND COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS FEBRUARY 15, 2001
YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE
NOT, AND THE SELLING STOCKHOLDER HAS NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE SELLING
STOCKHOLDER IS NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION
APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
SUMMARY
NX NETWORKS
We are a worldwide provider of internet telephony and data networking
products and services. Our products are designed to deliver multi-service
networks for the transport of voice and data that enable our customers to
provide a wide variety of voice and data services. We combine patented,
switched, compressed voice technology and advanced networking capabilities to
provide networking solutions that improve network performance and deliver an
array of tariffable network services.
We were incorporated in Virginia in October 1985, and reincorporated in
Delaware in March 1987. Our principal executive offices are located at 13595
Dulles Technology Drive, Herndon, Virginia 20171, and our telephone number is
(703) 742-6000.
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. BEFORE INVESTING IN THE
COMMON STOCK, YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS. OUR BUSINESS AND
RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF THE FOLLOWING RISKS.
THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THESE RISKS,
AND YOU COULD LOSE PART OR ALL OF YOUR INVESTMENT.
TO DATE, WE HAVE INCURRED SUBSTANTIAL NET LOSSES, AND IF THIS CONTINUES, WE MAY
BE UNABLE TO MEET OUR WORKING CAPITAL REQUIREMENTS
For the years ended December 31, 1999 and 1998, respectively, we
incurred net losses of approximately $26.2 million and $6.5 million and, on a
pro forma basis, after giving effect to our December 1999 merger with OpenRoute
Networks, Inc. and our March 2000 acquisition of AetherWorks Corporation, we
would have had a net loss of approximately $94.5 million for the year ended
December 31, 1999. Through September 30, 2000, we have incurred additional
losses of approximately $88.5 million. These losses present a significant risk
to our stockholders. If we cannot achieve profitability or positive cash flows
from operating activities, we may be unable to meet our working capital and
other payment obligations, which would have a material adverse effect on our
business, financial condition and results of operation and the price of our
common stock. In addition, if we cannot return to sustained profitability we
will be forced to sell all or part of our business, liquidate or seek to
reorganize.
WE REQUIRE ADDITIONAL CAPITAL TO CONTINUE OUR OPERATIONS, AND WE CANNOT BE
CERTAIN THAT THE NECESSARY FUNDS WILL BE AVAILABLE
Our ability to return to and maintain profitability is largely
dependent upon our ability to introduce new products and technologies and expand
our sales efforts in new geographic and product markets. These activities
require substantial capital, and if we do not have access to sufficient funds,
either from our own operations or through third party financing, our ability to
make these necessary expenditures will be limited. Also, if our stockholders do
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not approve some of the proposals we present to them at our scheduled March 6,
2001 Special Meeting of Stockholders, we will be required to make significant
cash payments. These payments are described below under the caption "--If our
stockholders do not approve proposals presented to them at our March 6, 2001
Special Meeting of Stockholders, we may have substantial additional cash payment
obligations in March 2001 and September 2001, and we do not currently have
sufficient capital to pay these obligations." Our current available cash and our
anticipated cash from operations are insufficient to fund our operations until
we are able to attain profitability. Accordingly, we will require third party
financing in order to continue our operations. We cannot assure you that we will
be able to obtain financing on terms favorable to us, or at all. If we obtain
additional funds by selling any of our equity securities, the percentage
ownership of our stockholders will be reduced, stockholders may experience
additional dilution, or the equity securities may have rights, preferences or
privileges senior to the common stock. If we obtain additional funds by selling
assets, we cannot assure you that we will be able to negotiate a favorable price
for those assets or that the loss of those assets will not affect our future
business prospects. If adequate funds are not available to us or available to us
on satisfactory terms, we may be required to limit our marketing and product
development activities or other operations, or otherwise modify our business
strategy. These actions, if taken, could increase the difficulties we face in
returning to sustained profitability.
We have been advised by our independent public accountants that if we
have not raised sufficient capital to meet our projected obligations for 2001
prior to the completion of their audit of our financial statements for the year
ending December 31, 2000, their auditors' report on those financial statements
will be modified to reflect this contingency.
UNLESS OUR STOCKHOLDERS APPROVE PROPOSALS PRESENTED TO THEM AT OUR MARCH 6, 2001
SPECIAL MEETING OF STOCKHOLDERS, THE NUMBER OF SHARES OF COMMON STOCK THAT WE
HAVE AVAILABLE FOR SALE TO RAISE CAPITAL IS LIMITED
We have 55 million shares of authorized common stock, all of which are
currently issued or reserved for issuance. Unless the number of authorized
shares is increased, we will not be able to sell common stock to finance our
operations or other obligations. We require additional funds to finance our
operations, as described above under the caption "--We require additional
capital to continue our operations, and we cannot be certain that the necessary
funds will be available," and we may incur additional payment obligations in
2001 as described below under the caption "--If our stockholders do not approve
proposals presented to them at our March 6, 2001 Special Meeting of
Stockholders, we may have substantial additional cash payment obligations in
March 2001 and September 2001, and we do not currently have sufficient capital
to pay these obligations." We have called a meeting of stockholders for March 6,
2001 to vote upon a proposal to increase our capital stock from 55 million
shares to 85 million shares. We cannot assure you that our stockholders will
approve the increase in our authorized common stock. If our stockholders do not
approve the increase in our authorized common stock, we will have to raise the
necessary capital through debt financing or the sale of assets or securities
other than common stock. Although we cannot assure you that we will be able to
obtain the necessary funds if the stockholders approve the increase in our
authorized number of shares of common stock, we believe it will be much more
difficult for us to obtain the necessary financing if we cannot sell additional
shares of common stock.
IF OUR STOCKHOLDERS DO NOT APPROVE PROPOSALS PRESENTED TO THEM AT OUR MARCH 6,
2001 SPECIAL MEETING OF STOCKHOLDERS, WE MAY ISSUE SHARES THAT CAUSE US TO BE
DELISTED FROM THE NASDAQ STOCK MARKET
At our March 6, 2001 Special Meeting of Stockholders, we will ask our
stockholders to authorize us to issue shares of common stock in private
transactions which together with other shares we have issued would exceed 20% of
our outstanding common stock. The listing requirements of the Nasdaq Stock
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Market, on which our common stock is listed, will not permit us to issue more
than 20% of our common stock in private transactions without stockholder
approval if the sales price is less than the greater of the book or market price
of our common stock. As of November 30, 2000, the book value per share of our
common stock was approximately $2.66 and since December 16, 2000 the market
value of our common stock has fluctuated between $0.50 and $3.06 per share. We
cannot assure you that we will be able to raise the capital we need to fund our
operations and other obligations without selling shares below the greater of our
book value per share or market value per share. If our stockholders do not
approve this proposal but they do authorize the increase in the number of
authorized shares of common stock, we expect that we would sell the shares
necessary to finance our operations and then be delisted from the Nasdaq Stock
Market. Delisting from the Nasdaq Stock Market would have an adverse effect on
the trading market for our common stock and the price of our common stock.
IF OUR STOCKHOLDERS DO NOT APPROVE PROPOSALS PRESENTED TO THEM AT OUR MARCH 6,
2001 SPECIAL MEETING OF STOCKHOLDERS, WE MAY HAVE SUBSTANTIAL ADDITIONAL CASH
PAYMENT OBLIGATIONS IN MARCH 2001 AND SEPTEMBER 2001, AND WE DO NOT CURRENTLY
HAVE SUFFICIENT CAPITAL TO PAY THESE OBLIGATIONS
At our March 6, 2001 Special Meeting of Stockholders, we will ask our
stockholders to authorize us to issue 1.75 million shares of common stock
related to our acquisition of AetherWorks Corporation. Under the listing
requirements of the Nasdaq Stock Market, on which our common stock is listed, we
cannot issue more than 20% of our common stock in an acquisition transaction
without stockholder approval. This 1.75 million shares represents the amount by
which the shares we have agreed to issue to the former owners of AetherWorks
exceeds this 20% limitation. We agreed with the former owners of AetherWorks
Corporation that if our stockholders do not approve the issuance of the 1.75
million shares, then we will pay the former owners of AetherWorks the cash value
of those shares. The cash value per share will be the greater of $2.93 or the
average last sales price for our common stock for the five trading days
preceding March 6, 2001. Based solely on the $2.93 figure, this payment will be
at least $5.1 million. In addition, we agreed with the recent purchasers of our
preferred stock and related warrants that if our stockholders do not increase
the number of our authorized shares of common stock to at least 65 million by
September 2001, then we will redeem the preferred stock and warrants. The
redemption price will be the liquidation value of the preferred stock and, for
each share of common stock issuable upon conversion of the preferred stock or
the warrants, 110% of the amount, if any, by which the price of our common stock
at the redemption date exceeds the conversion or exercise price of the related
preferred stock or warrants. Based solely on the liquidation preference of the
preferred stock we have issued, this payment will be at least $2.5 million. The
terms of the preferred stock and the warrants are described more fully under the
caption "Recent Developments -Private Financing" below. We cannot assure you
that our stockholders will approve these proposals. If we become obligated to
pay these amounts in cash, we cannot assure you that we will be able to fund
these obligations. Also, if our stockholders do not approve these proposals, it
may become more difficult for us to obtain financing on terms favorable to us
because many investors will be reluctant to invest if the proceeds from their
investment are used to pay obligations to other investors.
WE RELY TO A LARGE EXTENT ON INDEPENDENT DISTRIBUTION CHANNELS AND THE LOSS OF A
SIGNIFICANT NUMBER OF DISTRIBUTORS COULD ADVERSELY EFFECT US
We rely on reseller channels, including distributors and systems
integrators, for a significant portion of our revenues. In particular, in
foreign markets we often have one distributor designated for an entire country,
and that distributor provides local support and service for our products. The
loss of one or more significant resellers could adversely affect our business in
terms of:
o lost revenues;
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o lost market presence; and
o the difficulties we would encounter in servicing customers
introduced to us by our resellers if we do not have other
resellers in that geographic area.
WE ARE EXPOSED TO POTENTIAL DELAYS IN PRODUCT SHIPMENTS BECAUSE WE CONTRACT OUT
PRODUCT MANUFACTURING AND SOME COMPONENTS FOR OUR PRODUCTS ARE AVAILABLE ONLY
FROM A SINGLE SUPPLIER OR A LIMITED NUMBER OF SUPPLIERS
We rely on others to manufacture our products and product components
and this dependence exposes us to potential interruptions or delays in product
delivery. An interruption could have a short- term effect on our revenues and a
longer term effect on our ability to market our products. Currently, we rely on
a single contract manufacturer to assemble and test our voice products. Also,
some of the components we use in our products are available from only one source
or a limited number of suppliers. Although we have been able to obtain our
products and these components to date, our inability to develop alternative
sources if and as required in the future, or to obtain sufficient sole source or
limited source components as required, could result in delays or reductions in
product shipments.
WE HAVE A SIGNIFICANT PAYMENT OBLIGATION TO OUR PRIMARY MANUFACTURER, AND IF WE
DO NOT MAINTAIN OUR PAYMENT SCHEDULE THE MANUFACTURER MAY CEASE SHIPPING OUR
PRODUCTS
We authorized our primary manufacturer to purchase a substantial amount
of parts, materials and long lead-time items during 2000 in anticipation of a
significant increase in product sales during the year. Our sales did not reach
the levels we expected, and we have not utilized a substantial amount of the raw
materials. Accordingly, we have a payment obligation of approximately $5.5
million to the manufacturer to pay for the cost of these materials. We have
agreed upon a payment schedule with the manufacturer, and during the period we
are paying down the obligation the manufacturer is requiring us to pay in
advance for all fabrication costs. If we do not adhere to the payment schedule
or if we do not pay fabrication costs in advance, the manufacturer has expressed
its intent not to ship any products on our behalf. Although we expect to have
sufficient capital to maintain this payment schedule and pay the fabrication
costs, if we do not adhere to the schedule and the manufacturer ceases to ship
products on our behalf, then a material and adverse result to our revenues could
occur.
OUR BUSINESS WILL SUFFER IF WE LOSE CERTAIN KEY PERSONNEL OR FAIL TO ATTRACT AND
RETAIN OTHER QUALIFIED PERSONNEL
The success of our business is dependent, to a significant extent, upon
the abilities and continued efforts of our management, sales and engineering
personnel, many of whom would be difficult to replace. We do not have employment
contracts with all of our key employees and we do not have "key man" life
insurance on any of our officers or directors.
Our success will also depend on our ability to attract, retain and
motivate qualified management, sales and engineering executives and other
personnel who are in high demand and who often have multiple employment options.
In addition, as a result of the changes to technology-based industries, and
particularly telecommunications companies, over the past year, many employees
that we would like to retain may decide to pursue other opportunities or we may
be forced to increase their compensation to retain them. The loss of the
services of key personnel, or the inability to attract, retain and motivate
qualified personnel, could have a material adverse effect on our business,
financial condition, results of operations and the price of our common stock.
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OUR INTELLECTUAL PROPERTY RIGHTS ARE AN IMPORTANT PROTECTION FOR OUR PRODUCTS,
AND WE COULD BE ADVERSELY AFFECTED IF OUR RIGHTS ARE CHALLENGED OR CIRCUMVENTED
BY COMPETITORS
Our ability to compete successfully within our industry is dependent in
part upon:
o patents and nondisclosure agreements that we have obtained;
o technical measures that we take to protect confidential
information; and
o trade secret, copyright and trademark laws that we rely on to
establish and protect our proprietary rights.
If any of our proprietary rights are successfully challenged or
circumvented by competitors, or if other companies are able to market
functionally similar products, systems or processes without infringing our
proprietary rights, then our results of operations and the value of our common
stock could be materially and adversely affected.
THE MARKET PRICE OF OUR COMMON STOCK IS VOLATILE
The market price of our common stock has been and can be expected to be
significantly affected by factors such as:
o quarterly variations in our results of operations;
o the announcement of new services or service enhancements by us or
our competitors;
o technological innovations by us or our competitors;
o changes in earnings estimates or buy/sell recommendations by
analysts;
o the operating and stock price performance of other comparable
companies; and
o general market conditions or market conditions specific to
particular industries.
In particular, the stock prices for many companies in the
telecommunications equipment sector have experienced wide fluctuations that have
often been unrelated to their operating performance. We have been, and we are
likely to continue to be, subject to such fluctuations.
WE RECENTLY REPRICED SUBSTANTIALLY ALL OF OUR STOCK OPTIONS TO A LOWER EXERCISE
PRICE, AND THE RESULTING ACCOUNTING CHARGES MAY CAUSE OUR FUTURE EARNINGS TO
FLUCTUATE WIDELY
As part of a program to retain our employees, we adopted a program to
reprice all the options of our current employees. We also repriced the options
issued to our board of directors and to our chairman of the board. Under the
program, each of these persons will exchange their current stock options for
newly issued stock options with an exercise price of $0.75 per share. Although
each employee may elect not to participate in the program, we expect that
approximately 10 million options will be exchanged to obtain the lower exercise
price. Under applicable accounting rules, we will have to account for future
variations in the price of our common stock above $0.75 per share as
compensation expense until the repriced options are either exercised, cancelled
or expire. This calculation will be made each quarter based upon the performance
of our common stock in that quarter. Accordingly, our operating results and
earnings per share will be subject to potentially significant fluctuations based
upon changes in the market price of our common stock.
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OUR CERTIFICATE OF INCORPORATION AND BY-LAWS CONTAIN PROVISIONS THAT COULD DELAY
OR PREVENT A CHANGE IN CONTROL
Provisions of our certificate of incorporation and by-laws may have the
effect of discouraging, delaying or preventing a take-over attempt that could be
in the best interests of our stockholders. These include provisions that:
o separate our board of directors into three classes;
o limit the ability of our stockholders to call special stockholder
meetings;
o require advance notice of nominations for directors and
stockholder proposals to be considered at stockholder meetings;
and
o require a vote greater than two-thirds to remove directors from
office or amend many of the provisions of our certificate
of incorporation and by-laws.
Our board of directors also has the right, without further action of
the stockholders, to issue and fix the terms of preferred stock, which could
have rights senior to the common stock. We are also subject to the "business
combination" provisions of the Delaware General Corporate Law, which impose
procedures impeding business combinations with "interested stockholders" that
are not approved of by our board of directors.
RAPIDLY CHANGING TECHNOLOGY MAY MAKE OUR PRODUCTS OBSOLETE OR UNMARKETABLE
We have focused our products on the edge of the Internet and telephony.
This market is characterized by rapid technological change, frequent new product
introduction and evolving industry standards. The introduction of products
embodying new technologies by our competitors and the emergence of new industry
standards could render our existing products obsolete and could cause new
products to be unmarketable. Under these circumstances, our revenue would be
adversely affected.
Our success will depend on the ability to address the increasingly
sophisticated needs of customers, to enhance existing products and to develop
and introduce, on a timely basis, new competitive products that keep pace with
technological development and emerging industry standards. If we cannot
successfully identify, manage, develop manufacture or market products
enhancements or new products, our business will be materially and adversely
effected.
WE HAVE ADOPTED A NEW MANAGEMENT INFORMATION SYSTEM AND IF WE CANNOT INTEGRATE
THIS SYSTEM WE MAY HAVE DIFFICULTY EFFECTIVELY MANAGING OUR BUSINESS AND
PREPARING TIMELY FINANCIAL REPORTS
We adopted a new comprehensive management information system, and we
are still in the process of implementing the installation and integrating the
operations of OpenRoute and AetherWorks, the companies we acquired in December
1999 and March 2000. If we are unable to fully implement and integrate this
system, we could have difficulties in preparing and maintaining the systems and
reports we need to effectively manage our business and ensure timely financial
reporting. These difficulties could result in adverse effects on our business.
A PORTION OF OUR REVENUES ARE DERIVED FROM INTERNATIONAL SALES, WHICH ARE
SUBJECT TO FOREIGN REGULATORY STANDARDS AND CURRENCY EXCHANGE RATE FLUCTUATIONS
International sales accounted for 47% and 53% of our total revenues in
1999 and 1998, respectively, and international sales will continue to be
significant to us. The conduct of international operations subjects us to
certain risks. Foreign regulatory bodies continue to establish standards
different from those in the United States, and our products are designed
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generally to meet those standards. Our inability to design products in
compliance with such foreign standards could have an adverse effect on our
operating results. Also, our international business may be affected by changes
in demand resulting from fluctuation in currency exchange rates and tariffs and
difficulties in obtaining export licenses. We do not expect that we will hedge
against fluctuations in currency exchange rates.
RECENT DEVELOPMENTS
NEW EXECUTIVES
On January 8, 2001, John DuBois succeeded Steven Francesco as our chief
executive officer. Mr. Francesco had resigned as chief executive officer on
November 3, 2000. In connection with accepting the position, Mr. DuBois entered
into a three-year employment agreement with us and he also became a member of
our board of directors.
The term of Mr. DuBois' agreement is through January 3, 2004. Under the
agreement, Mr. DuBois is paid a base salary of $260,000 per annum, and he is
eligible for quarterly and annual bonuses at the sole discretion of the board of
directors. In addition, Mr. DuBois has been issued options to purchase 3,200,000
shares of common stock. 500,000 of the options have vested and the remainder
vest over the term of his employment contract. Mr. DuBois exercised the 500,000
vested options upon signing his agreement. Mr. DuBois' employment agreement also
provides that, in the event of a change in control of the Company, he will be
issued 400,000 shares of common stock. In the event we terminate Mr. DuBois'
employment without cause or Mr. DuBois terminates his employment for good
reason, as these terms are described in the employment agreement, he will be
entitled to: (1) receive an amount equal to 12 months base salary; (2)
accelerated vesting of all of his stock options; and (3) participation in our
benefit plans for up to 12 months. Mr. DuBois' employment agreement also
contains non-compete provisions for up to one year after termination of his
employment, that relate to the manner in which his employment is terminated. If
the payment to Mr. DuBois upon termination or change of control results in the
imposition of an excise tax pursuant to Section 280G of the Internal Revenue
Code, we will pay to Mr. DuBois a tax "gross-up" payment equal to the amount of
his resulting tax liability.
At the time Mr. Francesco resigned as chief executive officer, he
agreed that he would remain as a member of the board of directors only until
December 2000. However, at the request of the board, he agreed to continue as
Chairman of the Board and in support of Mr. DuBois and to provide such support
to the Company as Mr. DuBois may request.
On January 22, 2001, Steve Roberts joined us as our chief operating
officer. Mr. Roberts did not enter into an employment agreement with us, but
pursuant to the terms of his employment, we are paying him a salary of $220,000
per annum and we granted him stock options to purchase 1.0 million shares of our
common stock, vesting over two years.
On January 22, 2001, Heidi Heiden joined the board of directors, and on
February 5, 2001 John Faccibene resigned from our board of directors.
PRIVATE FINANCING
On December 29, 2000, we raised $2.5 million from the sale 333,333
shares of preferred stock and 666,667 warrants in a private offering. The
preferred stock bears a dividend of 8% per annum, which we can elect to pay in
cash or shares of common stock, and the preferred stock has a liquidation
preference equal to the purchase price per share plus the amount of any accrued
but unpaid dividends. The preferred stock will become convertible into 3,333,330
shares of common stock and the warrants will become exercisable for 666,667
shares of common stock, if and when the amendment to our restated certificate of
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incorporation to increase our authorized number of shares of common stock is
approved by our stockholders. The conversion price of the preferred stock is
$0.75 per share and the exercise price of the warrants is $0.90 per share, each
of which is in excess of the last reported sales price of our common stock on
the date the financing closed, $0.625 per share. If the amendment to our
restated certificate of incorporation is not approved, the dividend rate on the
preferred stock will increase by 1% per month and the exercise price of the
warrants will decrease by 1% per month until this amendment is approved,
commencing April 1, 2001. We further agreed with the purchasers of the preferred
stock that if we have not increased our authorized capital stock to at least
65.0 million shares by September 30, 2001, then we will offer to repurchase all
of the preferred stock for a purchase price equal to the liquidation amount plus
110% of the amount, if any, by which the market price of the common stock on
that date exceeds the conversion price of the common stock, and we will redeem
the warrants at a purchase price equal to 110% of the amount, if any, by which
the exercise price of the warrants exceeds the market price of the common stock
on that date.
On January 17, 2001, we raised approximately $2.5 million from the sale
15,400 shares of preferred stock. The preferred stock bears a dividend of 8% per
annum, which we can elect to pay in cash or shares of common stock, and the
preferred stock has a liquidation preference equal to the purchase price per
share plus the amount of any accrued but unpaid dividends. The preferred stock
will become convertible into 1,540,000 shares of common stock, if and when the
amendment to our restated certificate of incorporation to increase our
authorized number of shares of common stock is approved by our stockholders. The
conversion price of the preferred stock is $1.625 per share. If the amendment to
our restated certificate of incorporation is not approved, the dividend rate on
the preferred stock will increase by 1% per month until this amendment is
approved, commencing April 1, 2001. We further agreed with the purchasers of the
preferred stock that if we have not increased our authorized capital stock to at
least 65.0 million shares by September 30, 2001, then we will offer to
repurchase all of the preferred stock for a purchase price equal to the
liquidation amount plus 110% of the amount, if any, by which the market price of
the common stock on that date exceeds the conversion price of the common stock.
AETHERWORKS STOCK ISSUE
At the end of October 2000, we became obligated to issue to the former
owners of AetherWorks Corporation shares of our common stock as a contractual
adjustment to the number of shares we issued to them at the closing of the
acquisition in March 2000. The adjustment was based upon a formula, and based
upon our interpretation of the formula we announced in November 2000 that we
would issue approximately 3.5 million additional shares of our common stock as
the full adjustment, including actual shares and shares underlying warrants and
non-compensatory options, but excluding options issued as compensation to
employees. Based on our interpretation of the formula, we also announced that we
expected to issue approximately 750,000 additional options as compensation to
our employees who had been AetherWorks employees.
After our announcement, we were contacted by the representatives of the
former AetherWorks owners, and they informed us that they disagreed with our
calculation of the adjustment. After discussion and negotiations, we reached an
agreement to settle our dispute. Under the new agreement, we agreed to issue as
the adjustment 4,777,973 shares of our common stock and options and warrants to
acquire an additional approximately 654,000 shares of our common stock,
excluding options issued as compensation to our employees. However, in order to
comply with the listing requirements of the Nasdaq Stock Market, on which our
common stock is listed, approximately 1.75 million of these shares can be issued
only if our stockholders approve the issuance. In addition to these shares, we
agreed to issue options to acquire an additional approximately 1,311,000 shares
as compensation to our employees who had been AetherWorks employees. Pursuant to
our agreement with the former owners of AetherWorks, we also agreed to reprice
all of the options and warrants to have an exercise price of $1.60 per share,
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except for one warrant for approximately 70,000 shares that we repriced to $1.33
per share.
If our stockholders do not approve the issuance of the 1.75 million
shares, then instead of issuing the 1.75 million shares, we will pay to the
former AetherWorks owners the cash value of the shares. The cash value of the
shares will be the greater of $2.93 or the average closing price of the common
stock for the five trading days preceding the Special Meeting.
CLAIMS AND PROCEEDINGS
In November 2000, we were served with complaints in purported class
action proceedings captioned TRACY REESE AND CHRISTINE JOYCE V. BRYAN HOLLEY,
STEVEN T. FRANCESCO AND NX NETWORKS, INC., Civil Action No. 00-CV-11850-JLT, and
MARC JACOBSEN V. BRYAN HOLLEY, STEVEN T. FRANCESCO AND NX NETWORKS, INC.,
Civil Action No. 00-CV-11999-JLT. Each complaint was originally filed September
2000 in the United States District Court for the District of Massachusetts. The
complaints allege violation of the federal securities laws in connection with
statements and disclosures made by the named defendants between December 8, 1999
and April 24, 2000. The complaints seek unspecified damages. We believe the
allegations in the complaints are without merit, and we intend to vigorously
defend ourselves in this litigation.
In November 2000, we were served with a complaint in a purported class
action proceeding captioned ROY WERBOWSKI V. NX NETWORKS, INC., STEVEN FRANCESCO
AND PETER KENDRICK, Civil Case No. 00-1967-A. The complaint was originally filed
in November 2000 in the United States District Court, Eastern District of
Virginia. The complaint alleges that between July 27 and November 2, 2000 we
breached securities laws in connection with the circumstances that led us to
restate our financial statements for the quarter ended June 30, 2000. The
complaint seeks unspecified damages. We believe we have meritorious defenses in
this litigation, and we intend to vigorously defend ourselves.
We have been advised that the plaintiffs are planning to consolidate
their claims into a single complaint and a single action. Pending this event, we
have not filed responses with the courts addressing the substantive allegations
of the complaints. We believe that the outcome of the foregoing actions will not
result in liability that would have a material adverse effect on our financial
condition or results of operations.
On November 8, 2000, the Enforcement Division of the SEC requested us
to voluntarily provide documents related to the restatement of our financial
statements for the quarter ended June 30, 2000. The SEC request advised us that
the fact the SEC has made a request should not be taken as an indication that
the SEC believes there has been a violation of law. We responded to the SEC
request on November 20, 2000 and we have not been subsequently contacted.
YEAR-END AND QUARTER-END REVENUE GUIDANCE
On January 4, 2001, we announced that our revenues for 2000 would be
approximately $27 million and our revenue for the quarter ended December 31,
2000 would be approximately $3.0 million. These unaudited results were lower
than we expected. We believe these results reflect the general market conditions
in our industry and also resulted from slippage of expected orders from the
fourth quarter into 2001. The slippage of orders did not occur as a result of
competitive pressure and therefore we expect these orders will be received in
2001.
-10-
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act.
As required by the Exchange Act, we file reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at regional offices of the SEC at Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New
York, New York 10048. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, we are required to file
electronic versions of these documents through the SEC's Electronic Data
Gathering, Analysis and Retrieval System (EDGAR). The SEC maintains a World Wide
Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. Our common stock is quoted on the Nasdaq National Market.
Information regarding the trading of our common stock on the Nasdaq National
Market can be obtained from the Nasdaq National Market, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878 ((202) 496-2500).
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement contains more information than this
prospectus regarding us and our common stock, including certain exhibits. You
can get a copy of the registration statement from the sources listed above.
The SEC allows us to "incorporate by reference" into this document the
information that we have on file with the SEC. This means that we may disclose
important information to you by referring you to other documents. The
information incorporated by reference is considered to be part of this
prospectus. In addition, any later information we file with the SEC and
incorporated by reference will update and supersede the information referred to
or contained in this prospectus. We incorporate by reference the documents
listed below and any future filings we make with the SEC under section 13a,
13(c), 14 or 15(d) of the Exchange Act until this offering has been completed:
o Our Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 1999;
o Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2000, June 30, 2000, and September 30, 2000, as amended;
o Our Current Reports on Form 8-K dated January 14, 2000,
February 23, 2000, March 31, 2000 and September 19, 2000 and on
Form 8-K/A dated February 7, 2000 and May 30, 2000; and
o The description of our common stock contained in our Registration
Statement of Form 8-A filed August 5, 1992.
You may request a copy of these documents, at no cost, by writing or
telephoning us at the following address: Nx Networks, Inc., 13595 Dulles
Technology Drive, Herndon, Virginia 20171, Attention: Felicia Crawley;
(703) 742-6000.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the information set forth in this prospectus includes "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. In addition, from time to time, we may publish
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act or make oral statements that constitute
forward-looking statements. These forward-looking statements may relate to
matters such as anticipated financial performance, future revenues or earnings,
business prospectus, projected ventures, new products, anticipated market
performance and similar matters. The words "budgeted," "anticipate," "project,"
"estimate," "expect," "may," "believe," "potential" and similar statements are
-11
intended to be among the statements that are forward looking statements. Because
these statements reflect the reality of risks and uncertainties that is inherent
in our business, actual results may differ materially from those expressed or
implied by the forward-looking statements. These risks and uncertainties, many
of which are beyond our control, include, but are not limited to those set forth
under the caption "Risk Factors" on page 2 and in our filings with the SEC. You
are cautioned not to place undue reliance on these forward looking statements,
which are made as of the date of this prospectus.
We undertake no obligation to release publicly any revisions to the
forward looking statements to reflect events or circumstances after the date of
this prospectus or to reflect unanticipated events or developments.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholder. The 354,742 shares of our common stock included in this
prospectus are issuable only upon the exercise of options held by the selling
stockholder. If these options are exercised, we will be paid approximately
$266,056, reflecting the aggregate exercise price. We would apply these funds to
general working capital purposes.
SELLING SECURITY HOLDERS
This prospectus relates to the resale of 354,742 shares of common
stock. The following table sets forth, to our knowledge:
o the number of shares of common stock beneficially owned by the
selling stockholder;
o the number of shares of common stock to be offered and sold by the
selling stockholder; and
o the number of shares of common stock and percentage of outstanding
shares of common stock to be beneficially owned by the selling
stockholder after the offer and sale contemplated by this
prospectus, assuming that all the shares offered by the selling
stockholder are in fact sold.
To our knowledge, the selling stockholder has sole investment and
voting power with respect to the securities set forth in the following table.
As of February 13, 2001, we had approximately 41,721,000 shares of
common stock issued and outstanding.
BENEFICIAL OWNERSHIP
AFTER THE OFFERING (1)
--------------------------------
NUMBER OF SHARES NUMBER OF
BENEFICIALLY OWNED SHARES TO NUMBER
NAME AND ADDRESS PRIOR TO THE OFFERING (2) BE SOLD OF SHARES PERCENTAGE
---------------- ------------------------- -------- --------- ----------
Sachs, Jonathan A. 2,092,048 354,742 2,026,074(3) 4.8%
445 Minnesota Street
Suite 2400
St. Paul, MN 55101 (3)
- ------------------------------------
* Less than 1 percent
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes consideration of voting
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or investment power with respect to the securities at issue.
Information with respect to beneficial ownership is based upon
information as of February 13, 2001 and assumes that there is
outstanding an aggregate of 41,721,000 shares of common stock, not
including treasury shares. Of the shares offered hereby, 65,974 are
beneficially owned as of the date hereof. This assumes that the other
131,250 shares underlying options held by Mr. Sachs do not become
beneficially owned prior to the end of this offering.
(2) Includes 84,724 shares that may be acquired upon exercise of options.
(3) Mr. Sachs has served as our Executive Vice President of Technology and
Chief Technology Officer since March 2000.
-13-
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the our "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements,
including the notes thereto, and our other financial data contained in this
prospectus and incorporated into this prospectus. The statement of operations
data and balance sheet data as of and for the years ended December 31, 1995,
1996, 1997, 1998 and 1999 are derived from the consolidated financial statements
of Nx Networks and the notes related thereto, which were audited by our
independent public accountants. The selected consolidated statement of
operations data and balance sheet data as of and for the nine month periods
ended September 30, 1999 and 2000 are derived from our unaudited consolidated
financial statements which, in the opinion of management, include all
adjustments necessary for a fair presentation of our financial condition and
results of operations for such periods. The results of operations for interim
periods are not necessarily indicative of a full year's operations. Net loss per
share is computed on the basis described in the notes to our consolidated
financial statements.
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-----------------------------------------------------------------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Total revenues $48,891 $43,635 $33,087 $31,482 $31,245 $21,388 $24,072
Gross profit 25,225 21,572 14,647 15,388 14,710 10,238 7,897
Operating expenses:
Sales and marketing 14,162 11,632 10,120 9,292 6,468 4,521 10,957
Research and 10,776 11,079 8,323 6,771 7,043 5,337 12,862
Development
General and administrative 4,787 4,266 4,002 4,324 5,202 3,485 6,383
Stock compensation expense - - - - 18,778 763 12,765
In-process research and - - - - - - 30,800
development
Amortization of acquired - - - - 371 198 21,483
intangibles
Restructuring charge - 900 875 - 900 900 427
Bad debt expense - - 100 1,489 540 100 1,174
------------ ----------- ----------- ---------- ---------- ---------- -----------
Loss from operations (4,500) (6,305) (8,773) (6,488) (24,592) (5,066) (88,954)
Net loss (3,795) (5,968) (8,577) (6,517) (26,169) (5,858) (88,459)
Basic and diluted net loss
per share (0.40) (0.63) (0.90) (0.60) (2.17) (0.51) (2.62)
BALANCE SHEET DATA (END OF PERIOD):
Working capital 21,790 17,782 10,271 7,600 8,020 8,676 3,390
Total assets 41,985 34,493 24,024 20,241 95,253 20,269 132,522
Total long-term liabilities 943 614 97 - 352 - 330
Stockholders' equity 30,396 24,847 16,840 12,117 82,459 12,170 114,975
-14-
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Statement of
Operations of Nx Networks for the nine months ended September 30, 2000 and the
year ended December 31, 1999 illustrate the effect of the mergers with OpenRoute
and AetherWorks. The Unaudited Pro Forma Condensed Consolidated Statements of
Operations assume that the mergers with OpenRoute and AetherWorks were completed
as of the beginning of the period presented. Certain reclassifications have been
made to OpenRoute's and AetherWorks' financial statements to conform with Nx
Networks presentation.
Under the terms of the OpenRoute transaction, the holders of OpenRoute
common stock and stock options received one share of Nx Networks common stock
for each OpenRoute share converted. Under the terms of the AetherWorks
transaction, it is assumed the holders of AetherWorks common stock, warrants,
and stock options received an aggregate of 1.36 shares of Nx Networks Common
Stock.
ACCOUNTING TREATMENT
Nx Networks recorded the OpenRoute and Aetherworks mergers as purchase
transactions. For accounting purposes, Nx Networks is deemed to be the acquiring
corporation in each merger.
The pro forma adjustments are based upon currently available
information and assumptions that Nx Networks management believes are reasonable
and certain information provided by OpenRoute management and AetherWorks
management. Nx Networks accounted for each 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 final
determination of these adjustments based upon available information. Nx Networks
cannot assure you that the actual values will not differ significantly from the
pro forma adjustments reflected in the Unaudited Pro Forma Condensed
Consolidated Financial Statements.
For illustrative purposes, Nx Networks has made a preliminary
allocation of excess cost over estimated net assets acquired to goodwill as
AetherWorks' assets and liabilities are estimated to approximate fair value. For
purposes of this Pro Forma Financial Information, Nx Networks assumed the price
per share to be $22.50, as guaranteed in the merger agreement. Nx Networks
engaged an independent third party to determine the amount of the excess
purchase price related to purchased in-process research and development. 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 AetherWorks at the closing date, Nx Networks will
undertake a study to determine the fair values of assets and liabilities
acquired and will allocate the purchase price accordingly. Nx Networks 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, in-process research and development,
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 mergers with OpenRoute and AetherWorks 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 Nx Networks, OpenRoute and AetherWorks,
together with the related notes thereto, which are incorporated by reference
into this registration statement.
-15-
NX NETWORKS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
AETHER PRO NX NETWORKS
NX NETWORKS AETHER FORMA PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS COMBINED
--------------- ---------------- ---------------- ------------
Revenues:
Product $ 18,539 $ - $ - $ 18,539
Service and other 5,533 - - 5,533
--------------- ---------------- ---------------- ------------
Total revenues 24,072 - - 24,072
--------------- ---------------- ---------------- ------------
Cost of revenues:
Product 12,475 - - 12,475
Service and other 3,700 - - 3,700
--------------- ---------------- ---------------- ------------
Total cost of revenues 16,175 - - 16,175
--------------- ---------------- ---------------- ------------
--------------- ---------------- ---------------- ------------
Gross profit 7,897 - - 7,897
--------------- ---------------- ---------------- ------------
Operating expenses
Sales and marketing 10,957 - - 10,957
General and administrative 6,383 478 - 6,861
Amortization of intangibles 21,483 - 3,035 (3) 24,518
IPRD 30,800 - (30,800) (4) -
Research and development 12,862 950 - 13,812
Stock compensation expense 12,765 - (323) (5) 12,442
Bad debt expense 1,174 - - 1,174
Restructuring reserve 427 - - 427
--------------- ---------------- ---------------- ------------
Loss from operations (88,954) (1,428) 28,088 (62,294)
Interest and other income, net 495 38 - 533
--------------- ---------------- ---------------- ------------
Loss before income taxes (88,459) (1,390) 28,088 (61,761)
Provision for income taxes - - - -
--------------- ---------------- ---------------- ------------
Net loss $ (88,459) $ (1,390) $ 28,088 $(61,761)
=============== ================ ================ ============
Basic and diluted loss per common share ($2.62) ($1.50)
=============== ============
Weighted average common shares outstanding,
basic and diluted 33,795 41,195 (11)
=============== ============
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial statement.
-16-
NX NETWORKS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
OPEN PRO AETHER NX NETWORKS
NX NETWORKS OPEN AETHER FORMA PRO FORMA PRO FORMA
HISTORICAL(6) HISTORICAL(7) HISTORICAL (8) ADJUSTMENTS ADJUSTMENTS(4) COMBINED
------------- ------------- ---------- ----------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues:
Product $24,505 $9,802 $ - $ - $ - $34,307
Service and other 6,740 2,577 - - - 9,317
-------------- ------------- -------------- -------------- -------------- --------
Total revenues 31,245 12,379 - - - 43,624
-------------- ------------- -------------- -------------- -------------- --------
Cost of revenues:
Product 11,758 7,965 - - - 19,723
Service and other 4,777 2,059 - - - 6,836
-------------- ------------- -------------- -------------- -------------- -------
Total cost of revenues 16,535 10,024 - - - 26,559
------------- -------------- -------------- -------------- -------------- -------
Gross profit 14,710 2,355 - - - 17,065
-------------- ------------- -------------- -------------- -------------- -------
Operating expenses
Sales and marketing 6,468 4,349 - - - 10,817
General and administrative 5,202 4,298 1,730 - - 11,230
Amortization of intangibles 371 5,593 - 17,184 (9) 14,016(3) 37,164
Research and development 7,043 3,933 5,928 - - 16,904
Stock compensation expense 18,778 6,590 - - 7,043(10) 32,411
Bad debt expense 540 351 - - - 891
Restructuring reserve 900 - - - - 900
-------------- ------------- -------------- -------------- -------------- ---------
Loss from operations (24,592) (22,759) (7,658) (17,184) (21,059) (93,252)
Interest and other income,
net (178) 136 221 - - 179
-------------- ------------- -------------- -------------- -------------- ---------
Loss before income
taxes (24,770) (22,623) (7,437) (17,184) (21,059) (93,073)
Provision for income taxes - (10) - - - (10)
-------------- ------------- -------------- -------------- -------------- ---------
Net loss (24,770) (22,633) (7,437) (17,184) (21,059) (93,083)
Dividends and accretion of
preferred stock (1,399) - - - - (1,399)
-------------- ------------- -------------- -------------- -------------- ---------
Net loss attributable to
common stockholders $(26,169) $(22,633) $(7,437) $(17,184) $(21,029) $(94,482)
============== ============= ============== ============== =============== =========
Basic and diluted loss per
common share ($2.17) ($2.69)
============== ========
Weighted average common
shares outstanding,
basic and diluted 12,074 35,070(11)
============== ==========
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial statement.
-17-
NOTES TO NX NETWORKS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
AND THE YEAR ENDED DECEMBER 31, 1999
(1) Information obtained from the historical unaudited consolidated
statement of operations of Nx Networks.
(2) Information obtained from the historical unaudited consolidated
statement of operations of Aetherworks.
(3) Reflects the amortization expense of goodwill and intangibles acquired
in the merger of Aetherworks by use of the straight-line method over
4 years.
(4) AetherWorks pro-forma adjustments excludes the one-time in-process
research and development charges of $30.8 million in connection with
the AetherWorks acquisition.
(5) Reflects a reduction in amortization of stock compensation expense for
immediately vested options issued to Aetherworks employees.
(6) Information obtained from the historical consolidated statement of
operation of Nx Networks which includes OpenRoute from the date of
acquisition, December 22, 1999.
(7) Information obtained from the historical unaudited consolidated
statement of operations of OpenROUTE from January 1, 1999 through the
date of acquisition, December 22, 1999.
(8) Information obtained from the historical statement of operations of
AetherWorks for the year ended September 30, 1999 less the historical
unaudited statement of operations of AetherWorks for the three months
ended December 31, 1998 plus the historical statement of operations of
AetherWorks for the three months ended December 31, 1999.
(9) Reflects the amortization expense of the excess of cost over historical
net assets acquired in the merger of OpenROUTE by use of the
straight-line method over 4 years.
(10) Reflects the amortization of $15.8 million of compensation expense for
the assumed intrinsic value of stock options granted to AetherWorks'
employees immediately subsequent to closing to acquire 1,000,000 shares
of Nx Networks common stock at an exercise price of $6.81 per share
plus an immediate charge of $0.3 million. The compensation expense will
be recognized over the options vesting period generally two to three
years. The compensation expense reflected does not include the effects
of the future issuance of options to acquire an additional 1,311,000
shares to the employees of Nx Networks who had been AetherWorks
employees. In addition, the compensation expense does not reflect the
repricing of the options negotiated in November 2000.
PLAN OF DISTRIBUTION
The common stock may be offered and sold from time to time by the
selling stockholder, or by his pledgees, donees, transferees or other successors
in interest. The selling stockholder is not required to offer or sell any of his
common stock. Sales may be made in one or more transactions on the Nasdaq Stock
Market or in negotiated transactions, or both. The selling stockholder may sell
at marker prices at the time of sale, at prices related to the market price or
negotiated prices. The selling stockholder may sell shares to or through
broker-dealers, and the broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or the
purchasers of shares. The selling stockholder and any broker-dealers that
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participate in the sale of the common stock offered hereby may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commissions and any profit on the resale of the shares they receive may be
deemed to be underwriting discounts and commissions under the Securities Act. We
have agreed to indemnify the selling stockholder against some liabilities,
including under the Securities Act.
All proceeds from the sale of the common stock will be paid directly to
the selling stockholder and will not be deposited in an escrow, trust or other
similar arrangement. We will not receive any of the proceeds from the sales of
the common stock by the selling stockholder. However, we will receive proceeds
from the exercise of the options, and these proceeds will be approximately
$266,056 if all of the options are exercised.
We will pay the legal, accounting and other fees and expenses related
to the offer and sale of the common stock contemplated by this prospectus,
excluding commissions charged by any broker or dealer acting on behalf of the
selling stockholder.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for us by Kelley Drye & Warren LLP.
EXPERTS
The consolidated financial statements and schedule of Nx Networks, Inc.
and its subsidiaries as of December 31, 1998 and 1999 and for each of the three
years in the period ended December 31, 1999 incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of OpenRoute Networks, Inc. and
its subsidiaries as of and for the year ended December 31, 1998 incorporated by
reference in the registration statement have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the period set
forth in their report (which contains an explanatory paragraph regarding the
Company's ability to continue as a going concern) and are incorporated by
reference in reliance upon such report having been given upon the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and schedule of OpenRoute
Networks, Inc. and its subsidiaries as of December 31, 1996 and 1997, and for
each year in the two year period ended December 31, 1997, (except as to the
segment information for the years ended December 31, 1996 and 1997 presented in
Note 8), have been included herein and in the registration statement in reliance
upon the report of PricewaterhouseCoopers, LLP, independent certified public
accountants appearing elsewhere herein, and upon the authority of such firm as
experts in accounting and auditing.
The financial statements of AetherWorks Corporation at September 30,
1999 and 1998, and for the years then ended and the period from February 24,
1993 (inception) to September 30, 1999, incorporated by reference in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as indicated in their reports with respect thereto, and
are incorporated by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
-19-
No dealer, sales person or other person has been authorized
to give any information or to make any representation not
contained in this prospectus, and, if given or made, that
information or representation must not be relied upon as Nx NETWORKS, INC.
having been authorized by us. This prospectus does not
constitute an offer to sell or a solicitation of an offer to 354,742
buy any of the securities in any jurisdiction to any person Shares of
to whom it is unlawful to make an offer. Neither the Common Stock
delivery of this prospectus nor any sale made pursuant to
this prospectus shall, under any circumstances, create any ______________
implication that there has been no change in our affairs
since the date of this prospectus or that the information PROSPECTUS
contained in this prospectus is correct as of any time _____________
subsequent to its date.
----------------
TABLE OF CONTENTS
PAGE
Summary...............................................2 February 15, 2001
Risk Factors..........................................2
Recent Developments ..................................8
Where You Can Find More Information..................11
Special Note Regarding Forward Looking Statements....11
Use of Proceeds......................................12
Selling Security Holders.............................12
Selected Consolidated Financial Data.................14
Unaudited Pro Forma Condensed Consolidated Financial
Statements.......................................15
Plan of Distribution.................................18
Legal Matters........................................19
Experts..............................................19
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange
Commission (the "Commission") by Nx Networks, Inc. (the "Registrant") are hereby
incorporated by reference in this Registration Statement:
(a) The Registrant's Annual Report on Form 10-K and Form
10-K/A for the fiscal year ended December 31, 1999;
(b) The Registrant's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2000, June 30, 2000 and September 30, 2000 and Form
10-Q/A for the quarter ended June 30, 2000;
(c) The Registrant's Current Reports on Form 8-K dated
January 14, 2000, February 23, 2000, March 31, 2000 and September 19, 2000 and
on Form 8-K/A dated February 7, 2000 and May 30, 2000; and
(d) The description of the Registrant's common stock, $.05 par
value per share (the "Common Stock"), contained in the Registrant's Registration
Statement on Form 8-A, as filed with the Commission under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on August 5,
1992, including any amendments or reports filed for the purpose of updating such
descriptions.
All documents filed by the Registrant pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date hereof and prior
to the filing of a post-effective amendment to this Registration Statement,
which indicates that all securities offered hereby have been sold, or which
deregisters all such securities then remaining unsold, shall also be deemed to
be incorporated by reference in this Registration Statement and to be a part
hereof commencing on the respective dates on which such reports and documents
are filed with the Commission. Any statement incorporated by reference herein
shall also be deemed to be modified or superseded for the purposes of this
Registration Statement and any amendment or supplement hereto to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
Registration Statement or any such amendment or supplement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
II-1
ITEM 6. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with that action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A Delaware corporation may indemnify any person under
Section 145 who was, is or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure judgment in its favor, by reason of such fact as provided in the
preceding sentence, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of that
action or suit, except that no indemnification shall be made in respect of the
an action or suit if he did not act in good faith and in a manner he reasonably
believed to be in or not opposed to our best interests and unless, and then only
to the extent that, a court of competent jurisdiction shall determine upon
application that he is fairly and reasonably entitled to indemnity for those
expenses as the court shall deem proper. A Delaware corporation must indemnify
any person who was successful on the merits or otherwise in defense of any
action, suit or proceeding or in defense of any claim, issue or matter in any
proceeding, by reason of such fact as provided in the preceding two sentences
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection the indemnified claim. A Delaware corporation may pay for the
expenses (including attorneys' fees) incurred by an officer or director in
defending a proceeding in advance of the final disposition to repay the amount
advances if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 102(b)(7) of the DGCL permits a corporation to provide
in its certificate of incorporation that a director shall not be personally
liable to the corporation 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 corporation or its stockholders; (ii) for any
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) in respect of certain unlawful dividend payments
or stock redemptions or repurchases; or (iv) for any transaction from which the
director derived an improper personal benefit. The DGCL permits the purchase of
insurance on behalf of directors and officers against any liability asserted
against directors and officers and incurred by them in their capacity as an
officer or director, or arising out of their status as an officer or director,
whether or not the corporation would have the power to indemnify directors and
officers against that liability. The Registrant has acquired officers' and
directors' liability insurance of $1 million for members of our Board of
Directors and executive officers.
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The Registrant's Certificate of Incorporation provides that
the Registrant will indemnify all persons it is permitted to indemnify under the
DGCL, and that this indemnification will be to the fullest extent permitted the
DGCL. The Registrant's Certificate of Incorporation also provides for the
elimination of personal liability of a director for breach of fiduciary duty, as
permitted by Section 102(b)(7) of the DGCL.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
EXHIBIT NO. DESCRIPTION
---------- -----------
5* Opinion of Kelley Drye & Warren LLP regarding the legality
of the Common Stock being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Ernst & Young LLP.
23.5* Consent of Kelley Drye & Warren LLP (included in their
opinion filed as Exhibit 5 hereto).
24* Power of Attorney (included in the signature page of this
Registration Statement).
- ---------------------
* Previously filed.
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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
the requirements for filing on Form S-8 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Herndon, State of
Virginia, on this 14th day of February 2001.
NX NETWORKS, INC.
By: /s/ John Dubois
----------------------------------
Name: John DuBois
Title: Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
John DuBois and Jay Schifferli, and each of them, as attorneys-in-fact, with
full power of substitution, to execute in the name and on behalf of such person,
individually and in each capacity stated below, and to file any and all
amendments to this Registration Statement, including any and all post-effective
amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John Dubois Chief Executive Officer and Director February 14, 2001
- -------------------------------------------- (Principal Executive Officer
John DuBois
/s/ Peter Kendrick* Vice President of Finance and Chief February 14, 2001
- --------------------------------------------- Financial Officer
Peter J. Kendrick (Principal Financial and Accounting
Officer)
/s/ Steven Francesco* Chairman of the Board of Directors February 14, 2001
- ---------------------------------------------
Steven T. Francesco
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/s/ Douglas J. Mello* Director February 14, 2001
- ---------------------------------------------
Douglas J. Mello
/s/ Richard Yalen* Director February 14, 2001
- ---------------------------------------------
Richard Yalen
/s/ Robert Glorioso* Director February 14, 2001
- ---------------------------------------------
Robert Glorioso
/s/ Thomas Liebermann* Director February 14, 2001
- ---------------------------------------------
Thomas Liebermann
/s/ William H. Yundt* Director February 14, 2001
- ---------------------------------------------
William H. Yundt
- ---------------------------------------------
Heidi Heiden Director February 14, 2001
By: /s/ Jay R. Schifferli
- ---------------------------------------------
Jay R. Schifferli
Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
5* Opinion of Kelley Drye & Warren LLP regarding the legality
of the Common Stock being registered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Ernst & Young LLP.
23.5* Consent of Kelley Drye & Warren LLP (included in their
opinion filed as Exhibit 5 hereto).
24* Power of Attorney (included in the signature page of this
Registration Statement).
- ---------------------
* Previously filed.
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