<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1999
Registration No. 333-58109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post Effective Amendment No. 4
To
FORM SB-2
REGISTRATION STATEMENT
ON FORM S-3 UNDER
THE SECURITIES ACT OF 1933
E-NET, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 52-1929282
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
12800 MIDDLEBROOK ROAD, SUITE 200
GERMANTOWN, MARYLAND 20874
(301) 601-8700
(Address, including zip code, and telephone number, including area code,
of principal executive offices of Registrant)
ROBERT A. VESCHI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
12800 MIDDLEBROOK ROAD, SUITE 200
GERMANTOWN, MARYLAND 20874
(301) 601-8700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
CHARLES A. SWEET, ESQ.
WILLIAMS & CONNOLLY
725 TWELFTH STREET, N.W.
WASHINGTON, D.C. 20005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to rule
434, please check the following box. / /
THE REGISTRATION FEE WAS PREVIOUSLY PAID IN CONNECTION WITH THE FILING
OF THE REGISTRANT'S REGISTRATION STATEMENT ON FORM SB-2, REG. NO. 333-58019,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This registration statement on Form S-3 is a post-effective amendment
to the Registration Statement of Form SB-2, Registration No. 333-58109, filed
with the Securities and Exchange Commission on June 30, 1998. It relates to the
offer and sale by the selling stockholders described herein of the following
securities: (A) 459,400 shares of common stock, par value $.01 per share,
comprised of (i) 84,400 shares of common stock issued in a private placement in
April 1998; and (ii) 75,000 shares of common stock underlying a five-year
warrant issued to Pennsylvania Merchant Group Ltd., the placement agent for the
private placement, with an exercise price of $9.00 per share; and (B) 300,000
shares of common stock underlying: (i) five-year warrants issued at the
direction of Barron Chase Securities, Inc., the underwriter of the e-Net's
initial public offering of securities in April 1997, to purchase 150,000 shares
of common stock, with an exercise price of $8.25 per share; and (ii) five-year
warrants to purchase 150,000 shares of common stock, with an exercise price of
$8.25 per share, which warrants underlie five-year warrants issued at the
direction of Barron Chase to purchase such warrants, with an exercise price of
$0.20625 per underlying warrant.
<PAGE>
PROSPECTUS
E-NET, INC.
459,400 SHARES OF COMMON STOCK
Certain stockholders of e-Net, Inc. are selling up to 459,400 shares of
e-Net's common stock as follows:
- 84,400 shares of common stock issued in a private
placement in April 1998;
- 75,000 shares of common stock underlying a five-year
warrant issued to Pennsylvania Merchant Group Ltd.,
the placement agent for the private placement, with
an exercise price of $9.00 per share;
- 150,000 shares of common stock underlying five-year
warrants issued at the direction of Barron Chase
Securities, Inc., the underwriter of e-Net's initial
public offering in April 1997, to purchase such
shares with an exercise price of $8.25 per share; and
- 150,000 shares of common stock underlying five-year
warrants to purchase 150,000 shares, with an exercise
price of $8.25 per share, underlying five-year
warrants issued at the direction of Barron Chase to
purchase such warrants, with an exercise price of
$0.20625 per warrant.
e-Net's common stock is quoted on the Nasdaq SmallCap Market ("Nasdaq")
under the symbol "ETEL". On September 23, 1999, the closing price of e-Net's
common stock as quoted on the Nasdaq SmallCap Market was $5.75.
------------
AN INVESTMENT IN THESE SECURITIES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGES 5-11.
------------
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") AND STATE SECURITIES
REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING STOCKHOLDERS ARE NOT ALLOWED TO SELL THE COMMON STOCK OFFERED BY
THIS PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC BECOMES
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL E-NET'S COMMON STOCK - AND
DOES NOT SOLICIT AN OFFER TO BUY - IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
The date of this prospectus is September 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking and Cautionary
Statements......................................................iii
Available Information and
Incorporation by Reference......................................iii
Prospectus Summary................................................1
Risk Factors......................................................5
Use of Proceeds..................................................12
Dilution.........................................................12
Selling Holders..................................................13
Plan of Distribution.............................................15
Legal Matters....................................................15
Experts..........................................................15
</TABLE>
ii
<PAGE>
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Certain statements made in this prospectus that are not historical are
forward-looking. The words "estimate," "project," "intend," "expect," "believe,"
and similar expressions are intended to identify forward-looking statements
which involve known and unknown risks and uncertainties. Many factors could
cause e-Net's actual results, performance or achievements to be materially
different from those contemplated by any such future statements. For additional
information regarding these and other risks and uncertainties associated with
e-Net's business, see "Risk Factors" below, as well as e-Net's reports filed
from time to time with the SEC.
AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE
e-Net files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document e-Net files
at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington, DC
20549; at Room 1400, 7 World Trade Center, New York, NY 10048; and at 500 West
Madison Street, Suite 1400, Chicago, IL 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. e-Net's
SEC filings are also available to the public at the SEC's web site at
http://www.sec.gov.
The SEC allows e-Net to "incorporate by reference" the information
e-Net files with them, which means that e-Net can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later information
that e-Net files with the SEC will automatically update and supersede this
information. e-Net incorporates by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until the selling stockholders sell all the
common stock offered by this prospectus.
- e-Net's Annual Report on Form 10-KSB for the year ended March
31, 1999 as filed with the SEC on June 29, 1999;
- The description of e-Net's common stock contained in the
Registration Statement under the Exchange Act on Form 8-A
filed on February 13, 1999;
- e-Net's Quarterly Report on Form 10-QSB for the three months
ended June 30, 1999, as filed with the SEC on August 16, 1999;
and
- e-Net's Current Report on Form 8-K, as filed with the SEC on
September 23, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning e-Net at the following address:
Stockholder Relations, e-Net, Inc.
12800 Middlebrook Road
Germantown, Maryland 20874
(301) 601-8700
iii
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION, FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS. E-NET URGES YOU TO READ THIS ENTIRE PROSPECTUS.
THE COMPANY
e-Net develops, produces, markets and supports open telecommunications
software and related hardware that enable, enhance, and manage telephone
communications over the Internet, private Internet Protocol networks and
"intranets," and other types of digital data networks. e-Net's Telecom
2000/TM/ products provide a user-friendly method of high fidelity telephone
communications through digital data networks. Through the use of Telecom 2000
products, e-Net's enterprise customers can reduce their telephone expenses by
extending their telephone services to remote offices and mobile employees, in
some cases bypassing long distance service charges, while using their
existing internal digital data networks. e-Net's service provider customers
can offer reduced long distance service or enhanced messaging services
combined with Internet Protocol data and telephony services.
e-Net believes that, due to demand for lower cost telephone service,
the market for telephony through digital data networks, while in its early
stages, holds significant potential for growth. Several reports issued by
technology industry analysts forecast the growth of this market for Internet
telephony gateways to be in the multiple billions by 2001. e-Net continues to
believe in the forecast potential. However, neither e-Net nor the industry as a
whole has yet experienced that growth for a variety of reasons. e-Net has
continued to market and sell to service provider customers while the market for
enterprise customers develops and matures.
e-Net owns U.S. Patent No. 5,526,353, "System and Method for
Communicating Audio Data over a Packet-Based Network" (the "353 Patent"). e-Net
believes that the 353 Patent is the first patent that specifically involves
telephony through digital data networks. e-Net believes that the 353 Patent may
provide certain strategic and technological advantages in the emerging market
for telephony through digital data networks. e-Net cannot make any assurances,
however, as to the advantages or protection that may result from the 353 Patent.
e-Net's current and anticipated product line is not wholly dependent on the
validity or applicability of the 353 Patent.
Telecom 2000 products generally provide high fidelity duplex voice and
tele-facsimile through digital data networks, and also generally offer
traditional telephony features like call waiting, call holding, call transfer,
conference calling, billing, voice-mail and the like. e-Net views its products
as offering the following competitive advantages:
- Telecom 2000 products facilitate low-cost digital data network
telephone service with substantially the same operating
features and the voice quality of the traditional telephone
service;
- Telecom 2000 products can be gradually implemented so the user
grows from small installations to large installations while
maintaining high levels of performance and preserving a
substantial amount of its prior technology investment; and
- The distributed architecture of Telecom 2000 products is
designed to avoid certain problems associated with centralized
systems, such as the risk of system-wide telephony loss due to
the malfunction of a single computer or PBX, limitations on
system growth and excessive hardware cost.
There are three classes of Telecom 2000 products:
- SMALL SYSTEMS: The first class comprises the smallest system
with the lowest number of ports, and includes the Telecom 2000
Desktop System and the Telecom 2000 retail system called
"NetConnect", both of which are currently being sold;
- MEDIUM SYSTEMS: The second class, Telecom 2000 Customer
Premises-based Gateway Systems, comprises medium-sized systems
with between 24 and 96 ports in a single chassis, serving as a
"gateway" to digital data networks. These systems consolidate
customer site-originated telephone calling with digital data
network-based transport efficiency and lower cost than
traditional methods. e-Net expects to shift its focus in these
medium-sized systems to market niches consistent with its
"niche strategy" discussed below; and
1
<PAGE>
- LARGE SYSTEMS: The third class, Telecom 2000 Carrier-Class
Gateways, was expected to comprise gateway products with a
large number of ports, which were expected to offer over 1,000
simultaneous call capacity in a single chassis. e-Net intended
these systems to meet interconnection and compression
standards and to be appropriate for sales to telephone
carriers. However, e-Net has indefinitely delayed the
development of these large systems in favor of its "niche
strategy" discussed below.
e-Net has established, and expects to continue to establish, a variety
of strategic relationships that are intended to embed e-Net's telephony-enabling
technology in various digital data network devices. Examples of e-Net's existing
strategic relationships follow:
<TABLE>
<CAPTION>
Strategic Relationship Date Established Purpose
---------------------- ---------------- -------
<S> <C> <C>
Sprint Communications Company, LP March 1996 Main Carrier Internet Services and
voice-over data product planning and
testing
Magellan Network Systems, Inc. August 1997 Carrier-Class Gateway Product
applications software
Summa Four, Inc. (now part of Cisco December 1997 Carrier-Class Gateway Product hardware
Systems, Inc.) resource/programmable switch backplane
Com21, Inc. January 1998 Cable television modem telephony
IDT Corporation April 1998 Retail consumer product telephone
software bundling and network access
Edutek Education Systems, Inc. May 1998 Reseller of wireless voice-over-data
system
IXC Communications, Inc. September 1999 Access to extensive fiber optic network,
network and sales support and co-location
facilities
</TABLE>
Since e-Net's founding in 1995, it has focused on the development of
software-based telecommunications products that enable, enhance or manage
telephone communications. e-Net announced its first Telecom 2000 Products in
April 1996, then it established "beta" test sites for the Telecom 2000 system.
In April 1997, e-Net completed an initial public offering of its common stock
and gained listing on the NASDAQ SmallCap Market under the symbol "ETEL." After
completing "beta" testing for the Telecom 2000 System, in May 1997 e-Net
announced the Internet Protocol version of Telecom 2000.
e-Net began to sell Telecom 2000 products in July 1997 with the
introduction of the Telecom 2000 Desktop System. e-Net announced the Telecom
2000 Customer Premise Equipment Gateway Systems, also known as the Telecom 2000
T1/E1 Digital Trunk Interface, in October 1997; that product became generally
available in February 1998. In December 1997, e-Net announced its development
plan for the Telecom 2000 Carrier-Class Gateway in conjunction with Summa Four,
Inc. e-Net began planning for large-systems development in 1998, although this
project was first delayed due to the acquisition of Summa Four by Cisco Systems,
Inc. in mid-1998 and has since been indefinitely delayed. e-Net announced the
general availability of its Telecom 2000 retail system called "NetConnect" in
May 1998.
In 1998, e-Net expanded the use of its technology by beginning to
develop voice-over-cable-television products in conjunction with Com21, Inc. In
1998, e-Net also delivered its 24 port and 30 port T1/E1 Digital Trunk Interface
product in the medium system range. e-Net also developed customer relationships
with emerging communications services companies in the domestic U.S., Latin
America, and Europe.
In 1998, e-Net recognized that the delay in growth of generally
forecast demand for digital data network telephony meant that e-Net needed to
adopt a "niche strategy" and focus its immediate sales activities in certain
areas. By early 1999, e-Net had identified three such niche markets:
voice-over-cable-television, small-to-mid-sized, new telecommunications
services companies, and World Wide Web-based Internet telephony for internet
commerce and otherwise. To further the voice-over-cable-television niche,
e-Net modified and expanded its Com21 contract to include more telephone
features and to address the Internet Protocol for the product. Also in this
niche, e-Net began to seek additional voice-over-cable-television
2
<PAGE>
product partners. To further the new telecommunications service companies
niche, e-Net completed development of an intelligent module for the
medium-sized Digital Trunk Interface product called the T2000 Gatekeeper.
Also in this niche, e-Net developed the capability to use its products on
wireless digital data networks, offering this customer base a low
infrastructure cost system alternative and e-Net contracted with Edutek
Education Systems, Inc. to sell the wireless product to school systems. To
further the World Wide Web-based internet telephony niche, e-Net developed
and enhanced its software-only T2000 product, T2000 TS Express. As a
distribution strategy for this niche, e-Net created a wholly-owned
subsidiary, ZeroPlus.com, Inc. e-Net believes that this "niche strategy" will
allow it to exploit markets that pose fewer competitive risks. In 1999, in an
effort to develop and market the services of ZeroPlus.com, Inc. to consumers,
e-Net entered a two-year agreement with IXC Communications, Inc. that allows
e-Net access to IXC's 13,000-mile fiber optic Gemini2000 network, network
support, co-location facilities, as well as marketing and sales support. The
agreement also allows IXC to acquire new common shares of e-Net at a 25%
premium over the closing price when exercised, and to acquire up to just
under 20% of e-Net's outstanding shares.
e-Net maintains principal executive offices at 12800 Middlebrook Road,
Germantown, Maryland, 20874, telephone number 301-601-8700. See "Risk Factors"
for a discussion of certain factors that you should consider in evaluating e-Net
and its business.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................459,400 shares of common stock, comprised of:
- 84,400 shares of common stock
issued in the April 1998 private
placement;
- 75,000 shares of common stock
underlying a five-year warrant
issued to the placement agent for
the April 1998 private placement,
with an exercise price of $9.00 per
share;
- 150,000 shares of common stock
underlying five-year warrants to
purchase such common stock issued
at the direction of the underwriter
of e-Net's initial public offering,
with an exercise price of $8.25 per
share; and
- 150,000 share of common stock
underlying five-year warrants to
purchase such shares, with an
exercise price of $8.25 per share,
underlying five-year warrants to
purchase such warrants, with an
exercise price of $0.20625 per
warrant.
Selling Stockholders........................The common stock may be offered and
sold by the selling stockholders
described under "Selling Holders."
Common Stock Outstanding As Of
September 23, 1999..........................8,449,660 shares (1)
Warrants Outstanding As Of
September 23, 1999..........................375,000
Warrants Exercised As Of
September 23, 1999..........................-0-
Common Stock Outstanding If All Warrants
Are Exercised...............................8,824,660
Estimated Gross Proceeds If All Warrants
Are Exercised...............................$3,150,000 (2)
Use Of Proceeds.............................e-Net will not receive any proceeds
from the sale of common stock by the
selling stockholders. See "Use of
Proceeds."
NASDAQ Small Cap Market Symbol..............common stock: ETEL
</TABLE>
- --------------
(1) Excludes an aggregate of 1,500,000 shares of common stock reserved for
issuance upon exercise of outstanding options granted pursuant to
e-Net's 1997 Non-Qualified Stock Option Plan and 1998 Stock
Compensation Plan.
(2) Assumes the exercise of all warrants at exercise prices of $8.25 and
$9.00 before the deduction of expenses payable by e-Net estimated at
$25,000.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS. IF ANY OF THE FOLLOWING
RISKS OR OTHER RISKS PRESENTLY UNKNOWN TO E-NET OR CURRENTLY DEEMED IMMATERIAL
BY E-NET OCCUR, E-NET'S BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS
COULD BE MATERIALLY ADVERSELY AFFECTED.
THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS. THESE STATEMENTS REFER TO E-NET'S FUTURE PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. YOU CAN IDENTIFY THESE STATEMENTS BY THE USE OF
WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS" AND SIMILAR
EXPRESSIONS. E-NET'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS.
E-NET HAS A HISTORY OF
OPERATING LOSSES AND
ANTICIPATES FUTURE
LOSSES e-Net has never recorded an operating profit and had
an accumulated deficit of approximately $24,200,000
as of June 30, 1999. Whether e-Net will be profitable
in the future largely depends on its ability to
generate revenues from its products and services.
Given its focus on markets that are subject to rapid
technological change, and its intention to continue
to expend resources on research and development,
revenues must increase commensurately for e-Net to
achieve profitability. In the quarter ended June 30,
1999, e-Net expended approximately $391,000 on
research and development and, although no assurance
can be given, e-Net expects this expenditure rate to
increase in the future. In view of its operating
history, e-Net cannot assure you that it will be able
to generate sufficient revenue to achieve
profitability, to maintain profitability on a
quarterly or annual basis or to sustain or increase
revenue growth in future periods. e-Net's limited
capitalization may adversely affect its ability to
raise additional capital in the future and could
impair its ability to invest in research and
development, sales and marketing programs and other
operations, any of which could have a material
adverse effect on its business, financial condition
and results of operations.
E-NET HAS A LIMITED
OPERATING
HISTORY e-Net was incorporated in Delaware on January 9,
1995. As such, e-Net faces the risks and problems
associated with businesses in their early stages of
development and has a limited operating history upon
which to base an evaluation of its prospects. You
should consider its prospects in light of the risks,
expenses and difficulties frequently encountered in
the expansion of a business in an industry
characterized by a substantial number of market
entrants and intense competition.
E-NET CAN MAKE NO
ASSURANCE OF FUTURE
PROFITABILITY NOR CAN
E-NET ASSURE FUTURE
PAYMENT OF DIVIDENDS e-Net cannot assure you that its future operations
will result in additional revenues or will be
profitable. Nevertheless, should this occur, e-Net
likely would retain much or all of its earnings in
order to finance future growth and expansion.
Therefore, e-Net does not presently intend to pay
dividends, and it is not likely that any dividends
will be paid in the foreseeable future.
YOU WILL SUFFER IMMEDIATE
AND SUBSTANTIAL DILUTION You will experience immediate and substantial
dilution. As of June 30, 1999, e-Net had a net
tangible book value of approximately $4,535,000 or
approximately $.54 per share which reflects the
effect of a private placement of common stock and
warrants in April 1998 and the redemption and
exercise of certain warrants in June 1998. After
giving effect to the exercise of the warrants
(300,000 shares at $8.25; and 75,000 shares at $9.00)
and subsequent resale of underlying common stock and
after deducting estimated offering expenses, net
tangible book value would have been $7,660,000 or
$.88 per share. The result will be an immediate
dilution to you of $7.37 and $8.12, respectively.
5
<PAGE>
E-NET MAY NEED TO SEEK
ADDITIONAL FINANCING IN
THE FUTURE e-Net expects to continue to make significant
investments in the future to support its overall
growth. Currently, e-Net anticipates that ongoing
operations in the near term will be financed
primarily from net proceeds of the April 1998 private
placement, warrant exercises, a $1,000,000 line of
credit facility, and from internally generated funds.
e-Net presently has the line of credit, investments,
and cash and cash equivalents on hand and believes
that these will be sufficient to meet near-term cash
requirements. e-Net expects that these cash
requirements will decrease somewhat as a result of
its restructuring efforts and "niche strategy",
primarily as a result of decreases in development
costs. However, to the extent e-Net experiences
greater than expected growth, its operating and
product development activities may require more cash
than e-Net has available. Consequently, such growth
may require e-Net to obtain additional sources of
financing. In any event, e-Net can make no assurances
that it will not require more working capital than it
currently has at its disposal or that such financing
will be available on acceptable terms.
E-NET DEPENDS ON KEY
PERSONNEL e-Net is principally dependent on its current
management personnel for the operation of its
business. In particular, Robert A. Veschi, e-Net's
president and chief executive officer, has played a
substantial role in the development and management of
e-Net, although e-Net can make no assurance that
additional managerial assistance will not be
required. e-Net has entered into an employment
agreement with Mr. Veschi which is terminable at will
by Mr. Veschi without penalty. Accordingly, if Mr.
Veschi's employment terminates, or he is unable to
perform his duties, e-Net may be materially and
adversely affected. e-Net has purchased key-man life
insurance on Mr. Veschi in the amount of $2 million.
e-Net is the owner and beneficiary of this insurance
policy.
E-NET DEPENDS ON HIGHLY
QUALIFIED TECHNICAL
PERSONNEL e-Net believes that its future success will depend in
large part upon its continued ability to recruit and
retain highly qualified technical personnel.
Competition for highly qualified technical personnel
is significant, particularly in the geographic area
where e-Net's operations are located. e-Net can make
no assurances that its relationship with its
employees will remain favorable.
E-NET MUST RESPOND TO
RAPID TECHNOLOGICAL
CHANGE The markets e-Net serves are subject to rapid
technological change, changing customer requirements,
frequent new product introductions and evolving
industry standards that may render existing services
and products obsolete. As a result, e-Net's position
in its existing markets or other markets that it may
enter could be eroded rapidly by product advancements
by competitors. The life cycles of e-Net's services
and products are difficult to estimate. Broad
acceptance of e-Net's products and services by
customers is critical to its future success, as is
its ability to design, develop, test and support new
software products and enhancements on a timely basis
that meet changing customer needs and respond to
technological developments and emerging industry
standards, particularly client/server and Internet
communications and security protocols. e-Net cannot
assure you that it will not experience difficulties
that could delay or prevent the successful
development, introduction and marketing of services
and products, or that new services and products and
enhancements will meet the requirements of the
marketplace and achieve market acceptance. Further,
e-Net can make no assurances that, despite testing by
e-Net and current and potential customers, errors
will not be found in its products, or, if discovered,
successfully corrected
in a timely manner. If e-Net is unable to develop and
introduce services and products in a timely manner in
response to changing market conditions or customer
requirements, its business, financial condition and
results of operations would be materially and
adversely affected.
6
<PAGE>
E-NET CANNOT ASSURE YOU
THAT IT CAN PROTECT ITS
INTELLECTUAL PROPERTY
AND OTHER PROPRIETARY
RIGHTS FROM INFRINGEMENT In March 1996, e-Net acquired all right, title and
interest in and to the 353 Patent. e-Net believes
that the 353 Patent is the first patent that
specifically involves telephony through digital data
networks. e-Net also believes that the 353 Patent may
provide certain strategic and technological
advantages in the emerging market for telephony
through digital data networks. e-Net can make no
assurances, however, as to the extent of the
advantages or protection, if any, that may be granted
as a result of the 353 Patent.
e-Net currently has other patent and trademark
applications pending; however, it can make no
assurances that these applications will be granted,
or, if granted, will result in substantial value to
e-Net. e-Net may file additional patent, trademark
and copyright applications relating to certain of its
products and technologies. If patents, trademarks or
copyrights are granted, e-Net can make no assurances
as to the extent of the protection that will be
granted as a result of having such patents,
trademarks or copyrights or that e-Net will be able
to afford the expenses of any litigation which may be
necessary to enforce its proprietary rights. Although
its products have never been the subject of
infringement claims, e-Net can make no assurances
that third parties will not assert infringement
claims against e-Net in the future or that any such
assertion will not require e-Net to enter into
royalty arrangements or result in costly litigation
and liability. Failure of e-Net's patents, trademark
and copyright applications may have a material
adverse effect on its business. Except as may be
required by the filing of patent, trademark and
copyright applications, e-Net will attempt to keep
all other proprietary information secret and to take
such actions as may be necessary to prevent the
disclosure of the results of e-Net's development
activities and protect its trade secrets under
applicable law. e-Net expects such steps to include
the execution of nondisclosure agreements by key
personnel and may also include the imposition of
restrictive agreements on purchasers of its products
and services. e-Net can make no assurances that the
execution of such agreements will be effective to
protect it, that e-Net will be able to enforce the
provisions of such nondisclosure agreements or that
technology and other information acquired by e-Net
pursuant to its development activities will be deemed
to constitute trade secrets by any court of competent
jurisdiction.
THE INTERNET TELEPHONY
MARKET IS HIGHLY
COMPETITIVE Businesses in the United States and abroad that are
engaged in Internet technologies, products and
services are substantial in number and highly
competitive, particularly in the field of Internet
and IP network telephony. Many of the companies with
which e-Net intends to compete are substantially
larger and have substantially greater resources than
e-Net. It is also likely that other competitors will
emerge in the future. e-Net will compete with
companies that have greater market recognition,
greater resources and broader capabilities than
e-Net. As a consequence, e-Net can make no assurances
that it will be able to successfully compete in the
marketplace.
E-NET RELIES ON MAJOR
CUSTOMERS AND LARGE
CONTRACTS Historically, substantially all of e-Net's revenue
has been derived from sales to a relatively small
number of customers. Approximately 78% of its
accounts receivable balance at June 30, 1999 was from
one customer, and approximately 94% of its sales for
the quarter ended June 30, 1999 were from two
customers. Similar or greater concentration of
e-Net's net sales among a limited number of
customers may occur in the future. In such event,
any material decrease in net sales to any one
of its largest customers that is not matched by
corresponding increases in net sales to new or
existing customers could have a material adverse
effect on its financial condition and results of
operations. e-Net can make no assurances that it
will receive orders from any existing customers or
from new customers.
7
<PAGE>
ADDITIONAL AUTHORIZED
SHARES AND SHARES
ELIGIBLE FOR FUTURE SALE
MAY ADVERSELY AFFECT THE
MARKET e-Net is authorized to issue 50,000,000 shares of
common stock. If all of the warrants are exercised
there will be a total of approximately 8,824,660
shares of common stock issued and outstanding. e-Net
will have approximately 41,175,340 shares of
authorized but unissued capital stock available for
issuance without further shareholder approval. Any
issuance of additional shares of common stock may
cause current stockholders to suffer significant
dilution, which may adversely affect the market for
its common stock.
As of September 23, 1999, e-Net had outstanding
767,074 options to purchase shares of common stock
granted under its 1997 Non-Qualified Stock Option
Plan and 1998 Stock Compensation Plan. e-Net has
reserved 500,000 shares of common stock for issuance
upon exercise of options under the 1997 Plan and has
reserved 1,000,000 shares of common stock for
issuance upon exercise of options under the 1998
Plan. All of the options granted under the 1997 and
1998 Plans have exercise prices which were at fair
market value on the date of grant or commitment, as
determined by a moving average to trading activity
prior to the grant date. On July 22, 1998, e-Net
filed with the SEC a registration statement on Form
S-8 covering up to a total of 500,000 option shares
issuable under the 1997 Plan. On February 25, 1999,
e-Net filed with the SEC a registration statement on
Form S-8 covering up to a total of 1,000,000 option
shares issuable under the 1998 Plan. To the extent
that any options are exercised or converted, this may
dilute the interests of e-Net's stockholders.
Exercise or conversion of these options, or even the
potential of their exercise or conversion, may have
an adverse effect on the trading price and market for
e-Net's common stock. The stockholders of such
options are likely to exercise or convert them at
times when the market price of the shares of common
stock exceeds their exercise price. Accordingly, the
issuance of shares of common stock upon exercise of
the options may result in dilution of the equity
represented by the then outstanding shares of common
stock held by other stockholders.
Although e-Net has no current plans to issue any
additional shares of common stock other than pursuant
to the 1997 Plan and the 1998 Plan, pursuant to an
agreement with IXC Communications, Inc. (which gives
IXC an option to acquire up to just under 20% of
e-Net's outstanding shares of common stock) or upon
exercise of any of the outstanding warrants, e-Net
can make no assurances that its Board of Directors
will not decide to do so in the future. In addition,
e-Net must comply with the Nasdaq marketplace rules
that require, among other things, shareholder
approval prior to the issuance of common stock
representing 20% or more of the common stock or 20%
or more of the voting power prior to the issuance at
a price less than the greater of book or market value
of the stock.
1,665,000 of e-Net's 8,333,124 outstanding shares of
common stock as of June 30, 1999 and all 452,400
shares of common stock offered by this prospectus are
(or will be, upon issuance), "restricted securities"
which may be resold to the public either upon
registration or upon compliance with Rule 144 under
the Securities Act of 1933. Assuming that all of the
warrants are exercised but that there is no exercise
of any other issued and outstanding options, a total
of 2,124,400 of e-Net's issued and outstanding shares
of common stock will be restricted securities. The
registration statement of which this prospectus forms
a part will enable all of the common stock registered
thereby to be resold without compliance with Rule
144. However, with regard to the remaining
outstanding restricted securities, Rule 144 provides,
in essence, that, if there is adequate current public
information available concerning e-Net, an affiliate,
or a person holding "restricted securities" for a
period of one year, may sell only an amount
every three months equal to the greater of (a) one
percent of e-Net's issued and outstanding shares, or
(b) the average weekly volume of sales of its common
8
<PAGE>
stock during the four calendar weeks preceding the
sale. Nonaffiliates, however, may sell "restricted
securities" without such volume limitation if they
have held their shares for two years. Based on these
assumptions, a holder of "restricted securities" who
has held them for at least one year may sell under
Rule 144 at least up to 84,500 shares during each
three-month period.
You should be aware that future sales may have a
depressive effect on the price of e-Net's common
stock and, therefore, your ability to market your
shares may directly depend upon the number of shares
that are offered and sold.
THE MARKET PRICE FOR
E-NET'S COMMON STOCK IS
POTENTIALLY VOLATILE The current market price for e-Net's common stock
does not appear to bear any relationship to any
established valuation criteria such as assets, book
value, or current earnings. e-Net attributes the
current market price of its common stock to
anticipated benefits upon execution of its business
plan. Market prices for securities of small-cap
emerging companies have historically been quite
volatile. General economic, industry and market
conditions, as well as future announcements
concerning e-Net or its competitors, including
technological innovations or new products,
developments concerning proprietary rights,
litigation involving e-Net, or other factors may have
a significant impact on the market price of its
common stock.
YEAR 2000 PROBLEMS MAY
AFFECT E-NET'S BUSINESS The Year 2000 Issue is the result of computer
programs being written using two digits rather than
four to define the applicable year. Consequently, in
the Year 2000 those systems may be unable to
accurately process certain date-based information.
e-Net potentially could be affected by this issue due
to the internal computer applications it relies on,
as well as the software that it develops and sells.
e-Net is in the process of reviewing all of its
significant third party applications and obtaining
documentation from the manufacturers that certify
Year 2000 compliance or provide appropriate
assurances of future compliance. e-Net is also in the
process of examining the architecture of its
products, as well as documentation on the third party
components that are integrated into its software
products.
At this time, e-Net does not anticipate that Year
2000 compliance activities will have a material
effect on its business, product development,
financial position or results of operations. However,
e-Net can make no assurances that its systems and
products are Year 2000 compliant. Additionally,
despite the testing and review undertaken by e-Net,
it can make no assurances that the systems of other
companies on which e-Net relies will be Year 2000
compliant. Either of these unfavorable results could
result in a material adverse effect on e-Net's
business, financial condition and results of
operations.
IF THE INTERNET DOES NOT
CONTINUE
<PAGE>
TO GROW AS A MEDIUM FOR
VOICE AND FAX
COMMUNICATIONS, E-NET'S
BUSINESS WILL SUFFER The technology that allows voice and fax
communications over the Internet, and the delivery of
other value-added services, is still in its early
stages of development. Historically, the sound
quality of calls placed over the Internet was poor.
As the Internet telephony industry has grown, sound
quality has improved, but the technology requires
further refinement. Additionally, as a result of the
Internet's capacity constraints, callers could
experience delays, errors in transmissions or other
interruptions in service. Transmitting telephone
calls over the Internet must also be accepted as an
alternative to traditional voice and fax service by
communications service providers. Because the
Internet telephony market is new and evolving,
predicting the size of this market and its growth
rate is difficult. If e-Net's market fails to
develop, then it will be unable to grow its
customer base and its results of operations will
be adversely affected.
9
<PAGE>
E-NET DEPENDS ON THE
CONTINUED DEVELOPMENT OF
THE INTERNET
INFRASTRUCTURE e-Net's success also depends in large part upon the
development and maintenance of the Internet
infrastructure, such as:
- A reliable network backbone with
the necessary speed, data capacity
and security; and
- The timely development of
complementary products, such as
high speed modems, for providing
reliable and convenient Internet
access and services.
For the Internet to be commercially viable in the
long-term, it will need to continually address the
size of its network infrastructure, its enabling
technologies, necessary performance improvements and
user security. To the extent that the Internet
continues to experience an increased number of users,
frequency of use or increased bandwidth requirements,
e-Net cannot assure you that the performance or
reliability of the Internet will not be adversely
affected. Furthermore, the Internet has experienced a
variety of outages and other delays as a result of
damage to portions of its infrastructure, and could
face such outages and delays in the future.
e-Net cannot assure you that the infrastructure or
complementary products or services necessary to make
the Internet a viable commercial marketplace for the
long term will be developed. If not, its business,
financial condition and operating results will be
materially adversely affected.
INTERNATIONAL
GOVERNMENTAL REGULATION
AND LEGAL UNCERTAINTIES
COULD MATERIALLY
ADVERSELY AFFECT E-NET'S
BUSINESS The regulatory treatment of Internet telephony
outside of the United States varies widely from
country to country. A number of countries currently
prohibit or limit competition in the provision of
traditional voice telephony services. Some countries
prohibit, limit or regulate how companies provide
Internet telephony. Some countries have indicated
they will evaluate proposed Internet telephony
service on a case-by-case basis and determine whether
to regulate it as a voice service or as another
telecommunications service, and in doing so
potentially imposing settlement rates on Internet
telephony providers. Finally, many countries have not
yet addressed Internet telephony in their legislation
or regulations. Increased regulation of the Internet
and/or Internet telephony providers, or the
prohibition of Internet telephony one or more
countries, could materially adversely affect e-Net's
business, financial condition and results of
operations.
Additionally, it is possible that laws may be applied
by the United States and/or other countries to
transport services provided over the Internet,
including laws governing:
- Sales and other taxes;
- User privacy;
- Pricing controls;
- Characteristics and quality of
products and services;
- Consumer protections;
10
<PAGE>
- Cross-border commerce, including
laws that would impose tariffs,
duties and other import
restrictions;
- Copyright, trademark and patent
infringement; and
- Claims based on the nature and
content of Internet materials,
including defamation, negligence
and the failure to meet necessary
obligations.
If foreign governments or other bodies begin to
regulate or prohibit Internet telephony, this
regulation could have a material adverse effect on
e-Net's business, financial condition and results of
operations.
11
<PAGE>
USE OF PROCEEDS
e-Net will receive no proceeds from the sale of the common stock by the
selling stockholders. e-Net will receive net proceeds of approximately
$3,125,000 if all the warrants are exercised.
e-Net intends to use the net proceeds from the exercise of the warrants
for the following purposes:
- To fund the sales and marketing of Telecom 2000 products;
- For research and development of other telecommunications
products; and
- For other working capital and general corporate purposes.
e-Net may also use a portion of the net proceeds for the acquisition of
businesses, products and technologies that are complementary to its products and
business. While e-Net from time to time has engaged, and expects to continue to
engage, in preliminary discussions with other businesses with regard to the
possibility of such acquisitions, no such discussions have resulted in any
definitive acquisition agreement. e-Net can make no assurances that it will be
able to reach a definitive agreement on or consummate any acquisition.
DILUTION
The difference between the per share exercise price of the warrants per
share of common stock and the pro forma net tangible book value per share of
common stock after this offering constitutes the dilution per share of common
stock to investors in this offering.
As of June 30, 1999, e-Net had net tangible book value of $4,535,000 or
$.54 per share. Net tangible book value per share means the tangible assets of
e-Net, less all liabilities, divided by the number of shares of common stock
outstanding. After giving effect to the exercise of the warrants and the sale of
the common stock by e-Net at assumed prices of $8.25 and $9.00 per share and
estimated offering expenses, net tangible book value would have been $7,660,000
or $.88 per share. The result will be an immediate increase in net tangible book
value per share of $.34 (62%) to existing stockholders and an immediate dilution
to new investors of $7.37 (89%), and $8.12 (90%) per share, respectively. As a
result, public investors will bear most of the risk of loss since their shares
are being purchased at a cost substantially above the price that existing
stockholders acquired their shares. The following table illustrates this
dilution:
<TABLE>
<S> <C> <C>
Public offering prices of the common stock $ 8.25 $ 9.00
Pro forma net tangible book value per share, before the offering $ .54
Increase per share attributable to the sale by e-Net of the
common stock .34
--------
Pro forma net tangible book value per share, after the offering .88 .88
-------- --------
Dilution per share to new investors $ 7.37 $ 8.12
-------- --------
-------- --------
</TABLE>
The following table summarizes the investments of all existing
stockholders and new investors after giving effect to the exercise of warrants
and sale of common stock offered by this prospectus.
<TABLE>
<CAPTION>
Percent Percent Average
Shares if Total Aggregate of Total Price Per
Purchased Shares Consideration Invested Share
--------- -------- ------------- -------- -----
<S> <C> <C> <C> <C> <C>
Existing Stockholders (Pro Forma) 8,333,124 96% $28,658,000 90% $ 3.44
Investors in This Offering 375,000 4% 3,125,000 10% 8.33
----------- ---------- ----------- -------- --------
Total 8,708,124 100% $31,783,000 100% $ 3.65
----------- ---------- ----------- -------- --------
----------- ---------- ----------- -------- --------
</TABLE>
e-Net can give no assurances as to the timing of the exercise of the
warrants or whether any or all of the warrants will be exercised. The foregoing
analysis assumes exercise of no other options or warrants. In the event any such
options or warrants are exercised, the percentage ownership of the investors in
this offering will be reduced and the dilution per share of common stock to
purchasers in this offering will increase.
12
<PAGE>
SELLING HOLDERS
This prospectus relates to the offer and sale by the following selling
stockholders of the common stock issued in the April 1998 private placement and
common stock underlying a warrant issued to the placement agent of the private
placement. The following table sets forth certain information about the selling
stockholders for whom e-Net is registering such common stock for resale to the
public. To the best of e-Net's knowledge, none of the selling stockholders has
any plan, arrangement, understanding, agreement or commitment to sell their
securities. None of the following individuals or entities has held any position
or office within e-Net nor has had any other material relationship with it other
than in connection with the private placement.
<TABLE>
<CAPTION>
Amount of
Securities Percentage
Amount of Owned After of
Amount of Securities Being Offering Securities
Securities Owned Registered (2)(3) Owned (3)
---------------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Pennsylvania Merchant Group F/B/O 1,580 Shares of 1,580 Shares of 0 *
Peter Bodenheimer 401(K) Common Stock Common Stock
Frank Campbell 7,000 Shares of 7,000 Shares of 0 *
Common Stock Common Stock
Pennsylvania Merchant Group F/B/O 3,849 Shares of 3,849 Shares of 0 *
Frank J. Campbell, III 401(K) Common Stock Common Stock
Donaldson, Lufkin & Jenrette 10,000 Shares of 10,000 Shares of 0 *
Securities Corporation Custodian F/B/O Common Stock Common Stock
Frank J. Campbell III Account #
698-101714
Pennsylvania Merchant Group F/B/O 4,571 Shares of 4,571 Shares of 0 *
Richard A. Hansen 401(K) Common Stock Common Stock
Ronald B. Mandell 2,000 Shares of 2,000 Shares of 0 *
Common Stock Common Stock
Irving L. Mazer, Esq. 10,000 Shares of 10,000 Shares of 0 *
Common Stock Common Stock
James F. Meara, Jr.(1) 5,000 Shares of 5,000 Shares of 0 *
Common Stock Common Stock
Felix S. Miksis 1,000 Shares of 1,000 Shares of 0 *
Common Stock Common Stock
Harry Mittelman Revocable Trust(1) 10,000 Shares of 10,000 Shares of 0 *
Common Stock Common Stock
Leonid S. Roytman and Alla S.(1) 5,000 Shares of 5,000 Shares of 0 *
Roytman JTTEN Common Stock Common Stock
Perry D. Snavely, Jr.(1) 20,000 Shares of 20,000 Shares of 0 *
Common Stock Common Stock
Dr. Gershon Stern(1) 650 Shares of 650 Shares of 0 *
Common Stock Common Stock
Robert M. Stern(1) 1,250 Shares of 1,250 Shares of 0 *
Common Stock Common Stock
Talmor Capital Management Inc. 2,500 Shares of 2,500 Shares of 0 *
Common Stock Common Stock
SUBTOTAL 84,400 84,400
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Amount of
Securities Percentage
Amount of Owned After of
Amount of Securities Being Offering Securities
Securities Owned Registered (2)(3) Owned (3)
---------------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Pennsylvania Merchant Group Ltd. 75,000 Shares of 75,000 Shares of 0 *
Common Stock Common Stock
TOTAL 159,400 159,400
* Less than 1%.
</TABLE>
(1) To the best of e-Net's knowledge, this information is accurate, based
on the records of its transfer agent. These selling stockholders,
however, have not responded to e-Net's request to update this
information, so e-Net can give no assurances as to its accuracy as of
the date of this prospectus.
(2) Assumes exercise of all warrants.
(3) Assumes sale of all common stock being registered.
This prospectus relates to the offer and sale by the following selling
stockholders of the common stock underlying certain warrants issued at the
direction of the underwriter of e-Net's April 1997 initial public offering. The
following table sets forth certain information about the selling stockholders
for whom e-Net is registering such common stock for resale to the public. To the
best of e-Net's knowledge, none of the selling stockholders has any plan,
arrangement, understanding, agreement or commitment to sell their securities.
None of the following individuals or entities has held any position or office
within e-Net nor has had any other material relationship with e-Net other than
in connection with the initial public offering.
<TABLE>
<CAPTION>
Amount of
Securities
Amount of Owned After Percentage
Amount of Securities Being Offering of Securities Owned
Recipient Securities Owned Registered (2)(3) (2)
--------- ---------------- ---------------- ------------ -------------------
<S> <C> <C> <C> <C>
Robert T. Kirk(1) 240,000 Shares of 240,000 Shares of 0 2.72
Common Stock Common Stock
Michael Morrisett(1) 15,000 Shares of 15,000 Shares of 0 *
Common Stock Common Stock
Marie Lima(1) 15,000 Shares of 15,000 Shares of 0 *
Common Stock Common Stock
David A. Carter(1) 15,000 Shares of 15,000 Shares of 0 *
Common Stock Common Stock
Wendy Tand Gusrae(1) 15,000 Shares of 15,000 Shares of 0 *
Common Stock Common Stock
Total 300,000 Shares of 300,000 Shares of
Common Stock Common Stock
</TABLE>
* Less than 1%.
(1) To the best of e-Net's knowledge, this information is accurate, based
on the records of its transfer agent. These selling stockholders,
however, have not responded to e-Net's request to update this
information, so e-Net can give no assurances as to its accuracy as of
the date of this prospectus.
(2) Assumes exercise of all warrants.
(3) Assumes sale of all common stock being registered.
14
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders or their pledgees, donees, transferees or
other successors-in interest may sell their common stock from time to time in
transactions on the Nasdaq SmallCap Market, in privately negotiated
transactions, through the writing of options on the shares, or a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of the sale, at prices related to such prevailing market
prices or at negotiated prices. The selling stockholders may effect such
transactions by the sale of the common stock to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders and/or the purchasers
for whom such broker-dealers may act as agent or to whom they may sell as
principal, or both. Usual and customary or specifically negotiated brokerage
fees or commissions may be paid by the selling stockholders in connection with
sales of the common stock. The selling stockholders have not entered into any
underwriting arrangements.
The selling stockholders and intermediaries through whom the common
stock is sold may be deemed "underwriters," within the meaning of the Securities
Act of 1933, with respect to the common stock and any profits realized or
commissions received may be deemed underwriting compensation.
The selling stockholders may also pledge the common stock to a
broker-dealer and upon default under such pledge the broker-dealer may effect
sales of the common stock pledged pursuant to this prospectus. In addition, the
common stock covered by this prospectus may be sold in private transactions or
under Rule 144, rather than pursuant to this prospectus.
In order to comply with the securities laws of certain states, if
applicable, the common stock will be sold in such jurisdictions, if required,
only through registered or licensed brokers or dealers.
e-Net will not receive any of the proceeds from the sale of the common
stock by the selling stockholders. e-Net has agreed to bear the expenses of
registration of the common stock under federal and state securities laws, other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents, and to indemnify the selling holders against certain liabilities,
including liabilities under the Securities Act of 1933.
LEGAL MATTERS
The validity of the common stock being offered hereby has been passed
upon for e-Net by Williams & Connolly, Washington D.C.
EXPERTS
The financial statements of e-Net, Inc. as of March 31, 1999 and 1998
and for the years ended March 31, 1999 and 1998, incorporated by reference in
this prospectus, have been incorporated herein in reliance on the reports dated
June 10, 1999 of Grant Thornton LLP, Independent Certified Public Accountants,
and upon the authority of said firm as experts in accounting and auditing.
15
<PAGE>
-----------------------
Neither e-Net nor any selling stockholder
has authorized any person to make a
statement that differs from what is in this E-NET, INC.
prospectus. If any person does make a
statement that differs from what is in this 459,400 SHARES
prospectus, you should not rely on it. This OF COMMON STOCK
prospectus is not an offer to sell, nor is
it seeking an offer to buy, those securities
in any state where the offer or sale is not
permitted. The information in this
prospectus is complete and accurate as of
its date, but the information may change PROSPECTUS
after that date.
No action is being taken in any jurisdiction
outside the United States to permit a public
offering of the common stock or possession
or distribution of this prospectus in any
jurisdiction. Persons who come into
possession of this prospectus in
jurisdictions outside the United States and
Canada are required to inform themselves September 30, 1999
about and to observe any restrictions as to
this offering and the distribution of this
prospectus applicable in that jurisdiction.
Until (40 days after the
effective date of this prospectus), all
broker-dealers effecting transactions in the
registered securities, whether or not
participating in this distribution, may be
required to deliver a prospectus. This is in
addition to the obligation of dealers to
deliver a prospectus when acting as
underwriters and for their unsold allotments
or subscriptions.
<PAGE>
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemization of expenses payable by the registrant
from the net proceeds of the offering, incurred by the registrant in connection
with the issuance and distribution of the common stock. All expenses are
estimated.
<TABLE>
<S> <C>
SEC Registration and Filing Fee $-0-
Nasdaq Registration and Filing Fee -0-
Financial Printing 3,500
Transfer Agent Fee -0-
Accounting Fees and Expenses 5,000
Legal Fees and Expenses 6,500
Blue Sky Fees and Expenses 5,000
Miscellaneous 5,000
-------
Total $25,000
-------
-------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, the registrant's Restated Certificate of
Incorporation includes a provision that provides that the registrant will, to
the fullest extent permitted by applicable law, defend and hold harmless any
person who was or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding") by reason of the fact that he,
or a person for whom he is a legal representative, is or was a director or
officer of the registrant or is or was serving at the request of the registrant
as a director or officer of another corporation or of a partnership, joint
venture, trust enterprise or nonprofit entity, including services with respect
to employee benefit plans, against all liability and loss suffered and expenses
(including attorney's fees) reasonably incurred by such person. The registrant
shall be required to indemnify a person in connection with a Proceeding (or part
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the registrant. To the fullest extent
permitted by the Delaware General Corporation Law ("DGCL") the same exists or
may hereafter be amended, a director of the registrant shall not be liable to
the registrant or its stockholders for monetary damages for the breach of
fiduciary duty as a director.
The provisions are intended to afford directors protection against, and
to limit their potential liability for, monetary damages resulting from suits
alleging a breach of the duty of care by a director; they also diminish the
potential rights of action which might otherwise be available to stockholders by
limiting the liability of directors to the maximum extent allowable under
Delaware law and by affording indemnification against most damages and
settlement amounts paid by a director of the registrant in connection with any
stockholders derivative action. As a consequence of these provisions,
stockholders of the registrant will be unable to recover monetary damages
against directors for action taken by them that may constitute negligence or
gross negligence in performance of their duties unless such conduct falls within
an exception under DGCL or under Delaware case law. The provision, however, does
not alter the applicable standards governing a director's fiduciary duty and
does not eliminate or limit the right of the registrant or any stockholder to
obtain an injunction or any other type of equitable relief in the event of a
breach of fiduciary duty. Management of the registrant believes these provisions
will assist the registrant in securing and retaining qualified persons to serve
as directors. Except as previously disclosed, the registrant is unaware of any
pending or threatened litigation against the registrant or its directors that
would result in any liability for which such director would seek indemnification
or similar protection.
The registrant believes that the substantial increase in the number of
lawsuits being threatened or filed against corporations and their directors has
resulted in a growing reluctance on the part of capable persons to serve as
members of boards of directors of public companies. The registrant also believes
that the increased risk of personal liability without adequate insurance or
other indemnity protection for its directors could result in overcautious and
less effective direction and management of the registrant. The limitation on
liability and indemnification provisions are intended to increase the protection
provided directors and, thus, increase the registrant's ability to attract and
retain qualified persons to serve as directors. Additionally, the registrant has
procured directors liability insurance coverage, but there is no assurance that
it will provide coverage to the extent of the director's claims for
indemnification. In such event, the registrant may be forced to bear a portion
or all of the cost of the director's claims for indemnification and, the value
of the registrant stock may be adversely affected as a result. There is also no
assurance that the registrant will be able to continue to procure directors
liability insurance. It is uncertain whether the registrant's directors would
continue to serve in such capacities if improved protection from liability were
not provided.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
No. Document
--- --------
<S> <C>
4.0 Specimen Copy of Common Stock Certificate.*
4.1 Form of Warrant Certificate.*
4.2 Form of Representative's Warrant Agreement.*
4.3 Form of Warrant Agreement.*
4.4 Consent and Amendment No. 1 to Representative's Warrant Agreement.**
5.1 Opinion of Williams & Connolly **
23.0 Consent of Grant Thornton LLP.***
23.1 Consent of Williams & Connolly (included in Exhibit 5.1)**
24.0 Power of Attorney **
</TABLE>
- --------------------
* Incorporated by reference from the registrant's Registration Statement
on Form SB-2, Registration No. 333-3860, as amended and declared
effective on April 7, 1997 (the "IPO Registration Statement").
** Previously filed.
*** Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to
participating broker-dealers, at the closing, certificates in such denominations
and registered in such names as required by the participating broker-dealers, to
permit prompt delivery to each purchaser.
The undersigned registrant also undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Post
Effective Amendment on Form S-3 to its Registration Statement on Form SB-2 to be
signed on its behalf by the undersigned, in the County of Montgomery, State of
Maryland, on September 30, 1999.
e-NET, INC.
By: /s/ Robert A. Veschi
-------------------------
Robert A. Veschi
President
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
* Chairman of the Board September 30, 1999
- --------------------------------------------
Alonzo E. Short, Jr., Lt. Gen., USA (ret.)
/s/ Robert A. Veschi President, Chief Executive September 30, 1999
- -------------------------------------------- Officer, Director
Robert A. Veschi
/s/ Donald J. Shoff Chief Financial Officer (Chief September 30, 1999
- --------------------------------------------
Donald J. Shoff Accounting Officer)
* Director September 30, 1999
- --------------------------------------------
William L. Hooton
* Director September 30, 1999
- --------------------------------------------
Clive Whittenbury, Ph.D.
* Director September 30, 1999
- --------------------------------------------
William W. Rogers, Jr.
</TABLE>
* Attorney-in-Fact
/s/ Robert A. Veschi
-----------------------------------
Robert A. Veschi
II-3
<PAGE>
Exhibit 23.0
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated June 10, 1999 accompanying the financial
statements of e-Net, Inc., appearing in the 1999 Annual Report of the Company
to its shareholders and accompanying the schedules included in the Annual
Report on Form 10-KSB for the year ended March 31, 1999 which are
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the
aforementioned reports and to the use of our name as it appears under the
caption "Experts."
/s/ Grant Thornton LLP
Vienna, Virginia
September 30, 1999
