As filed with the Securities and Exchange Commission on November 17, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
----------------
ION NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2413505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1551 South Washington Avenue
Piscataway, New Jersey 08854
(732) 529-0100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Ronald C. Sacks, Chief Executive Officer
and Interim Principal Financial Officer
Ion Networks, Inc.
1551 South Washington Avenue
Piscataway, New Jersey 08854
(Name and address of agent for service)
(732) 529-0100
(Telephone number, including area code, of agent for service)
with a copy to:
James Alterbaum, Esq.
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 704-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time
after this Registration Statement becomes effective, as determined by market
conditions.
|_| If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
|X| If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
|_| 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.
<PAGE>
|_| If this Form is a post-effective amendment filed pursuant to rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
|_| If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed Maximum Proposed Maximum Amount of
securities to be registered Aggregate Price Aggregate offering Registration Fee
registered per share(1) price(1)
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<S> <C>
Common Stock, $.001
par value per
share............... 2,857,142 $1.1719 $3,348,284.71 $837.07
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</TABLE>
1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c); based on the average of the high ask and low bid
prices for the Common Stock as reported on the Nasdaq Stock Market on
November 16, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SEEKING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
------------------------------------------
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED NOVEMBER 17, 2000
ION NETWORKS, INC.
2,857,142 SHARES OF COMMON STOCK
--------------------------------
o The shares of our common stock offered by this prospectus are being
sold by the selling stockholders.
o We will not receive any proceeds from the sale of these shares.
o On November 16, 2000, the closing price of our common stock on the
Nasdaq National Market was $1.125.
o Our executive offices are located at Washington Plaza, 1551 South
Washington Avenue, Piscataway, New Jersey 08854, our telephone number
is (732) 529-0100 and our website is at "www.ion-networks.com."
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NASDAQ National Market symbol for our Common Stock:
"IONN"
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THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
--------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 17, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Risk Factors.....................................................................................................3
Where You Can Find More Information About Us.....................................................................9
Incorporation of Certain Documents by Reference..................................................................9
Forward-Looking Statements......................................................................................11
Use of Proceeds.................................................................................................11
Dividend Policy.................................................................................................11
Selling Stockholders ...........................................................................................12
Plan of Distribution ...........................................................................................15
Description of Securities.......................................................................................17
Indemnification for Securities Act Liabilities..................................................................19
Legal Matters...................................................................................................19
Experts ........................................................................................................19
</TABLE>
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<PAGE>
RISK FACTORS
BEFORE YOU BUY SHARES OF OUR COMMON STOCK, YOU SHOULD BE AWARE THAT
THERE ARE VARIOUS RISKS ASSOCIATED WITH SUCH PURCHASE, INCLUDING THOSE DESCRIBED
BELOW. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS, TOGETHER WITH ALL OF
THE OTHER INFORMATION IN THIS PROSPECTUS, AND THE DOCUMENTS WE HAVE INCORPORATED
BY REFERENCE IN THE SECTION "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE VULNERABLE TO TECHNOLOGICAL CHANGES
The markets we serve experience rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
more advanced products produced by our competitors could erode our position in
our existing markets or other markets that we may enter. It is difficult to
estimate the life cycles of our products and services. Our future success will
depend, in part, upon our ability to enhance existing products and services and
to develop new products and services on a timely basis. In addition, our
products and services must keep pace with technological developments and we must
address increasingly sophisticated customer needs. We might experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products and services. New products and
services and enhancements might not meet the requirements of the marketplace and
achieve market acceptance. If these things happen, they would materially and
negatively affect our cash flows, financial condition and results of operations.
WE CANNOT BE CERTAIN ABOUT OUR PRODUCT DEVELOPMENT
Our products are currently being used by a small number of customers
and there can be no assurance that the products will prove to be sufficiently
reliable in widespread commercial use. It is common for hardware and software as
complex and sophisticated as that incorporated in our products to experience
errors or "bugs" both during development and subsequent to commercial
introduction. We cannot assure you that all the potential problems will be
identified, that any bugs that are located can be corrected on a timely basis or
at all, or that additional errors will not be located in existing or future
products at a later time or when usage increases. Any such errors could delay
the commercial introduction or use of existing or new products and require
modifications in systems that have already been installed. Remedying such errors
has been and may continue to be costly and time consuming. Delays in debugging
or modifying our products could materially and adversely affect our competitive
position with respect to existing and new technologies and products offered by
our competitors.
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<PAGE>
THERE IS POTENTIAL FOR FLUCTUATION IN OUR QUARTERLY AND ANNUAL OPERATING RESULTS
In the past, we experienced fluctuations in our quarterly and annual
operating results and we anticipate that such fluctuations will continue. In
addition, we have incurred significant losses and negative cash flows from
operations. We expect that these trends will continue in the foreseeable future.
Our quarterly and annual operating results may vary significantly depending on a
number of factors, including:
o the timing of the introduction or acceptance of new products and
services;
o changes in the mix of products and services provided;
o long sales cycles;
o changes in regulations affecting our business;
o amount of research and development expenditures necessary for new
product development and innovation;
o changes in our operating expenses;
o uneven revenue streams; and
o general economic conditions.
We cannot assure you that our levels of profitability will not vary
significantly among quarterly periods or that in future quarterly periods our
results of operations will not be below prior results or the expectations of
public market analysts and investors. If this occurs, the price of our common
stock could significantly decrease.
WE MAY NEED TO RAISE MORE MONEY IN THE FUTURE
Our business plan and growth strategy are very dependent on our working
capital position which has been strained due to the nature of our business
coupled with the recent expansion of our infrastructure. We require large
outlays of capital for research and product development far in advance of the
revenues earned as a result of sales of our newly developed products. Future new
product revenues are a critical component in determining our financial strength,
market share and market perception, and longevity. To the extent that expected
revenue assumptions are not achieved, we will have to raise additional equity or
debt financing and/or curtail certain current expenditures contained in our
current operating plans.
There can be no assurance that the additional financing will be
available to us on acceptable terms or at all. If we are not able to secure
additional financing on terms we consider acceptable to us, our business may be
negatively impacted and we will not be able to execute on our business and
growth strategies.
These factors are more particularly described in the liquidity
discussion of Management's Discussion and Analysis section of our Form 10-QSB
for the fiscal quarter ended September 30, 2000, which is incorporated herein by
reference.
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<PAGE>
WE CANNOT BE CERTAIN THAT OUR PRODUCTS IN DEVELOPMENT WILL EVER BECOME
COMMERCIALLY VIABLE
We have a variety of products that are in the research and development
stage, including certain incomplete products that we purchased from SolCom
Systems Limited when we acquired SolCom in March 1999. These products have not
yet been introduced into the marketplace and therefore do not contribute to our
revenue. We incurred a charge against earnings of $488,295 in the quarter ended
September 30, 2000 relating to a decision to abandon development of certain
products and technologies acquired from SolCom. If, as a result of the
uncertainties surrounding the successful completion of the balance of these
projects, we are unable to produce commercially viable products, the anticipated
future revenue attributable to the expected sales and profits from such products
will not be realized. This could have a significant negative effect on our
future financial condition, results of operations and cash flows, including the
possibility that similar charges against earnings may be incurred in the future.
WE HAVE SIGNIFICANT COMPETITION
We are subject to significant competition from different sources for
our different products and services. We can not assure you that the market will
continue to accept our hardware and software technology or that we will be able
to compete successfully in the future. We believe that the main factors
affecting competition in the network management business are:
o the products' ability to meet various network management and
security requirements;
o the products' ability to conform to the network and/or
computer systems;
o the products' ability to avoid becoming technologically
outdated;
o the willingness and the ability of distributors to provide
support customization, training and installation; and
o the price.
Although we believe that our present products and services are competitive, we
compete with a number of large computer, electronics and telecommunications
manufacturers which have financial, research and development, marketing and
technical resources far greater than ours. Our competitors include Net Scout
Inc., Bay Networks Inc., Shomiti Systems Inc., Visual Networks, Inc., Concord
Communications, Inc., Applied Innovation, Aprisma, Micromuse, Riversoft and
SMARTS. Such companies may succeed in producing and distributing competitive
products more effectively than we can produce and distribute our products, and
may also develop new products which compete effectively with our products.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES
We hold no patents on any of our technology. Although we do
license some of our technology from third parties, we do not consider any of
these licenses to be material to our operations. We have made a consistent
effort to minimize the ability of competitors to duplicate our software
technology utilized in our products. However, there remains the possibility of
duplication of our products, and competing products have already been
introduced. Any such duplication by our competitors could negatively impact on
our business and operations.
-5-
<PAGE>
WE RELY ON SEVERAL KEY CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR BUSINESS
Our business is dependent to a great extent on several key customer
relationships, including Rhythms NetConnections, Lucent Technologies,
KPN-Telecom BV, Hewlett-Packard, AT&T, Crown Castle International, Siemens USA
and MCI WorldCom. Our sales to these customers represented approximately 56% of
our revenue for the fiscal year 2000. We also have significant "original
equipment manufacturer" relationships which accounted for approximately 32% of
our revenues for fiscal year 2000. The loss of and slow-down of orderning by any
of these customers would likely significantly decrease our revenues and future
prospects.
WE DEPEND UPON KEY MEMBERS OF OUR EMPLOYEES AND MANAGEMENT
Our business is greatly dependent on the efforts of our executive
officers and key employees, and on our ability to attract key personnel. Our
success depends in large part on the continued services of our key management,
sales, engineering, research and development and operational personnel and on
our ability to continue to attract, motivate and retain highly qualified
employees and independent contractors in those areas. Competition for such
personnel is intense and we cannot assure you that we will successfully attract,
motivate and retain key personnel. The inability to hire and retain qualified
personnel or the loss of the services of key personnel could have a material
adverse effect upon our business, financial condition and results of operations.
Currently, we do not maintain "key man" insurance policies with respect to any
of our employees.
WE MAY HAVE DIFFICULTY COMPLYING WITH GOVERNMENT REGULATION
Due to the sophistication of the technology employed in our devices,
export of our products is subject to governmental regulation. As required by law
or demanded by customer contract, we routinely obtain approval of our products
by Underwriters' Laboratories. Additionally, because many of our products
interface with telecommunications networks, our products are subject to several
key Federal Communications Commission ("FCC") rules and thus FCC approval is
necessary as well.
Part 68 of the FCC rules contains the majority of the technical
requirements with which telephone systems must comply to qualify for FCC
registration for interconnection to the public telephone network. Part 68
registration represents a determination by the FCC that telecommunication
equipment interfacing with the public telephone network complies with certain
interference parameters and we intend to apply for FCC Part 68 registration for
all of our new products.
Part 15 of the FCC rules requires equipment classified as containing a
Class A computing device to meet certain radio and television interference
requirements, especially as such requirements relate to operations of such
equipment in a residential area. Certain of our products are subject to Part 15.
The European Community is developing a similar set of requirements for
its members and we have begun the process of compliance for Europe.
-6-
<PAGE>
THERE ARE LIMITATIONS ON THE LIABILITY OF OUR DIRECTORS AND OFFICERS
Our Certificate of Incorporation, as amended, and our Bylaws contain
provisions limiting the liability of our directors for monetary damages to the
fullest extent permissible under Delaware law. This is intended to eliminate the
personal liability of a director for monetary damages on an action brought by or
in our right for breach of a director's duties to us or to our stockholders
except in certain limited circumstances. In addition, our Certificate of
Incorporation, as amended, and our Bylaws contain provisions requiring us to
indemnify our directors, officers, employees and agents serving at our request,
against expenses, judgments (including derivative actions), fines and amounts
paid in settlement. This indemnification is limited to actions taken in good
faith in the reasonable belief that the conduct was lawful and in or not opposed
to our best interests. The Certificate of Incorporation and the Bylaws provide
for the indemnification of directors and officers in connection with civil,
criminal, administrative or investigative proceedings when acting in their
capacities as agents for us. These provisions may reduce the likelihood of
derivative litigation against directors and executive officers and may
discourage or deter stockholders or management from suing directors or executive
officers for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise benefit us and our stockholders.
MANAGEMENT MAY CHANGE OUR STRATEGIC DIRECTION
Our management is in the process of performing an evaluation of our
strategic direction. This evaluation includes an assessment of our business plan
and other alternatives in an effort to stabilize our operating performance. Our
plans, when completed and if approved by our Board of Directors, may result in
the impairment of certain of our assets including inventory, capitalized
software, and other purchased intangibles, as well as a reduction in costs. The
amount of assets on the balance sheet as of September 30, 2000 that may be
impaired upon completion and approval of the plans approximate $925,000. As the
plans mature and are approved, additional assets may be determined to be
impaired, which may require future adjustment and future recognition of loss in
our statement of operations.
-7-
<PAGE>
RISKS ASSOCIATED WITH OUR SECURITIES
WE DO NOT ANTICIPATE THE PAYMENT OF DIVIDENDS
We have never declared or paid cash dividends on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. Thus, we do not anticipate paying any cash dividends
on our common stock in the foreseeable future.
THERE IS POTENTIAL FOR FLUCTUATION IN THE MARKET PRICE OF OUR SECURITIES
Because of the nature of the industry in which we operate, the market
price of our securities has been, and can be expected to continue to be, highly
volatile. Factors such as announcements by us or others of technological
innovations, new commercial products, regulatory approvals or proprietary rights
developments, and competitive developments all may have a significant impact on
our future business prospects and market price of our securities.
SHARES THAT ARE ELIGIBLE FOR SALE IN THE FUTURE MAY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK
As of November 8, 2000, an aggregate of 4,634,722 of the outstanding
shares of our common stock are "restricted securities" as that term is defined
in Rule 144 under the federal securities laws. These restricted shares may be
sold pursuant only to an effective registration statement under the securities
laws or in compliance with the exemption provisions of Rule 144 or other
securities law provisions. Rule 144 permits sales of restricted securities by
any person (whether or not an affiliate) after one year, at which time sales can
be made subject to the Rule's existing volume and other limitations. Rule 144
also permits sales of restricted securities by non-affiliates without adhering
to Rule 144's existing volume or other limitations after two years. In general,
an "affiliate" is a person with the power to manage and direct our policies. The
SEC has stated that generally, executive officers and directors of an entity are
deemed affiliates of the entity. In addition, 1,304,449 shares are issuable
pursuant to currently exercisable options, and 386,250 shares are issuable
pursuant to currently exercisable warrants, which may be exercised for shares
that may be restricted or registered, further adding to the number of
outstanding shares. Future sales of substantial amounts of shares in the public
market, or the perception that such sales could occur, could negatively affect
the price of our common stock.
-8-
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
over the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the shares being offered. This Prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to us and our common stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of that registration
statement, as well as the documents we have incorporated by reference which are
discussed below. You can review and copy the registration statement, its
exhibits and schedules, as well as the documents we have incorporated by
reference, at the public reference facilities maintained by the SEC as described
above. The registration statement, including its exhibits and schedules, are
also available on the SEC's web site.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this Prospectus, and information that we file later
with the SEC will automatically update or supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 10-KSB for the year ended March 31,
2000;
o Proxy Statement on Schedule 14A filed on October 23, 2000;
o Quarterly Report on Form 10-QSB for the quarter ended June 30,
2000;
o Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2000;
o Current Report on Form 8-K dated (date of earliest event
reported) June 29, 2000 (as filed on June 29, 2000); and
o The description of our Common Stock contained in the
Registration Statement on Form 8-A filed with the SEC on
January 23, 1985.
You may request a copy of these filings, at no cost, by
writing or telephoning us at Washington Plaza, 1551 South Washington Avenue,
Piscataway, New Jersey 08854, telephone (732) 529-0100. Attention: Mr. Ronald C.
Sacks, Chief Executive Officer and Interim Principal Financial Officer.
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<PAGE>
------------------------------
This Prospectus contains certain forward-looking statements which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified because the context of the statement includes words
such as "may," "will," "expect," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
Prospectus.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO
GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS.
YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT
OFFER TO SELL OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF NOVEMBER 17, 2000.
-------------------------
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<PAGE>
FORWARD - LOOKING STATEMENTS
In this prospectus, we make statements about our future financial
condition, results of operations and business. These are based on estimates and
assumptions made from information currently available to us. Although we believe
these estimates and assumptions are reasonable, they are uncertain. These
forward-looking statements can generally be identified because the context of
the statement includes words such as may, will, expect, anticipate, intend,
estimate, continue, believe or other similar words. Similarly, statements that
describe our future expectations, objectives and goals or contain projections of
our future results of operations or financial condition are also forward-looking
statements. Our future results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements,
including those listed under the heading "Risk Factors" and other cautionary
statements in this prospectus. Unless otherwise required by applicable
securities laws, we assume no obligation to update any such forward-looking
statements, or to update the reasons why actual results could differ from those
projected in the forward-looking statements.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our Common
Stock registered by the Registration Statement, of which this Prospectus is a
part. All such proceeds will be paid to the Selling Stockholders specified under
the heading, "Selling Stockholders."
DIVIDEND POLICY
We have never declared or paid cash dividends on our Common Stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. As such, we do not anticipate paying any cash
dividends on our Common Stock in the foreseeable future.
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<PAGE>
SELLING STOCKHOLDERS
This Prospectus covers the resale by the Selling Stockholders of up to
2,857,142 shares (the "Shares") of common stock, par value $.001 per share, of
the Company (the "Common Stock"). The Shares were issued by the Company pursuant
to transactions consummated in August 2000. For more details regarding such
transactions, see "Description of Securities -- The Transactions" and
"Description of Securities -- Common Stock".
The following table lists certain information regarding the Selling
Stockholders' ownership of shares of Common Stock as of November 8, 2000, and as
adjusted to reflect the sale of the Shares. Information concerning the Selling
Stockholders may change from time to time. The information in the table
concerning the Selling Stockholders who may offer Shares hereunder from time to
time is based on information provided to us by such stockholders.
<TABLE>
<CAPTION>
Shares of Shares of Common Stock Owned
Common after Offering (1)
Stock Owned Shares of -------------------------
Name of Selling Prior to Common Stock
Stockholder Offering to be Sold Number Percent of Class
--------------------------- -------- ---------- ------ ----------------
<S> <C> <C> <C>
Special Situations Private
Equity Fund, L.P. 315,566 315,000 566 *
Special Situations Fund III,
L.P. (2) 345,850 345,000 850 *
Special Situations Cayman Fund,
L.P. 122,217 120,000 2,217 *
Special Situations Technology
Fund, L.P. 90,653 89,565 1,088 *
City of Milford Pension &
Retirement Fund 216,000 166,000 50,000 *
NFIB Corporate Account 93,000 43,000 50,000 *
Norwalk Employees' Pension Plan 131,000 131,000 0 *
Public Employee Retirement
System of Idaho 714,000 314,000 400,000 2.2
City of Stamford Firemen's
Pension Fund 128,000 78,000 50,000 *
</TABLE>
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<TABLE>
<CAPTION>
Shares of Shares of Common Stock Owned
Common after Offering (1)
Stock Owned Shares of -------------------------
Name of Selling Prior to Common Stock
Stockholder Offering to be Sold Number Percent of Class
--------------------------- -------- ---------- ------ ----------------
<S> <C> <C> <C>
The Jenifer Altman Foundation 43,000 43,000 0 *
Dean Witter Foundation 87,000 87,000 0 *
Roanoke College 91,000 66,000 25,000 *
Butler Family LLC 26,000 26,000 0 *
David Zesiger 14,000 14,000 0 *
The Ferris Hamilton
Family Trust 35,000 35,000 0 *
Mary Ann S. Hamilton
Trust for Self 43,000 43,000 0 *
HBL Charitable Unitrust 17,000 17,000 0 *
Andrew Heiskell 66,000 66,000 0 *
Jeanne L. Morency 17,000 17,000 0 *
Peter Looram 17,000 17,000 0 *
Mary C. Anderson 26,000 26,000 0 *
Murray Capital, LLC 30,000 30,000 0 *
William M. and Miriam F.
Meehan Foundation, Inc. 26,000 26,000 0 *
Domenic J. Mizio 70,000 70,000 0 *
Morgan Trust Co. of the
Bahamas Ltd. as Trustee
U/A/D 11/30/93 111,000 91,000 20,000 *
Susan Uris Halpern 43,000 43,000 0 *
William B. Lazar 22,000 22,000 0 *
Wells Family LLC 138,000 78,000 60,000 *
</TABLE>
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<TABLE>
<CAPTION>
Shares of Shares of Common Stock Owned
Common after Offering (1)
Stock Owned Shares of -------------------------
Name of Selling Prior to Common Stock
Stockholder Offering to be Sold Number Percent of Class
--------------------------- -------- ---------- ------ ----------------
<S> <C> <C> <C>
Harold & Grace Willens
JTWROS 17,000 17,000 0 *
Albert L. Zesiger 117,000 87,000 30,000 *
Barrie Ramsay Zesiger 62,630 42,630 20,000 *
Wolfson Investment
Partners LP 58,500 43,500 15,000 *
21st Century Digital
Industries, Fund, L.P. 248,447 248,447 0 *
Total 3,581,863 2,857,142 724,721 4.0
---------------------
</TABLE>
* Represents less than one (1%) percent of the issued and outstanding Common
Stock.
(1) Assumes that all of the Shares are sold and no other shares of Common
Stock are sold by the Selling Stockholders during the offering period.
(2) Special Situations Fund III, L.P. has been granted the right to
nominate a director to the Board of Directors, such right to continue
until November 1, 2002, so long as Special Situations Fund III, L.P.,
together with its affiliated funds, own at least two (2%) percent of
the Company's total outstanding and issued Common Stock.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may offer their shares of Common Stock at
various times in one or more of the following transactions:
o on any U.S. securities exchange on which the Common Stock may
be listed at the time of such sale;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in connection with short sales; or
o in a combination of any of the above transactions.
The Selling Stockholders may offer their shares of Common Stock at
prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices.
The Selling Stockholders may also sell the shares under Rule 144
instead of under this prospectus, if Rule 144 is available for those sales.
The Selling Stockholders may use broker-dealers to sell their shares of
Common Stock. If this happens, broker-dealers will either receive discounts or
commissions from the Selling Stockholder, or they will receive commissions from
purchasers of shares of Common Stock for whom they acted as agents. Such brokers
may act as dealers by purchasing any and all of the Shares covered by this
Prospectus either as agents for others or as principals for their own accounts
and reselling such securities pursuant to this Prospectus.
The transactions in the shares covered by this prospectus may be
effected by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases by a broker or dealer as principal, and the resale
by that broker or dealer for its account under this
prospectus, including resale to another broker or dealer;
o block trades in which the broker or dealer will attempt to
sell the shares as agent but may position and resell a portion
of the block as principal in order to facilitate the
transaction; or
o negotiated transactions between the Selling Stockholders and
purchasers without a broker or dealer.
The Selling Stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be deemed to be underwriters. As such, any commissions or profits they receive
on the resale of the shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
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<PAGE>
As of the date of this Prospectus, the Company is not aware of any
agreement, arrangement or understanding between any broker or dealer and any of
the Selling Stockholders with respect to the offer or sale of Shares pursuant to
this Prospectus.
In the stock purchase agreement we executed with the Selling
Stockholders, we agreed to indemnify and hold harmless the Selling Stockholders
against liabilities under the Securities Act, which may be based upon, among
other things, any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact, unless made or
omitted in reliance upon written information provided to us by the Selling
Stockholders.
We have agreed to bear the expenses incident to the registration of the
shares, other than selling discounts and commissions.
The Selling Stockholders are selling all of the shares covered by this
Prospectus for their own account. Accordingly, the Company will not receive any
proceeds from the resale of these shares.
We agreed in the stock purchase agreement to use our best efforts to
keep the registration statement of which this prospectus is a part effective
until the earliest of:
o two years from the effective date of the registration
statement; or
o the date the Selling Stockholders may sell all the shares
under the provisions of Rule 144 without limitations or delay.
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<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The total amount of authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and 1,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"). As of November 8, 2000, there were 18,133,435 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and
outstanding.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on
all matters that are submitted to the stockholders for their approval and have
no cumulative voting rights. The holders of the Common Stock are entitled to
receive dividends, if any, as may be declared by the Board of Directors from
funds legally available from time to time for this purpose. Upon liquidation or
dissolution of the Company, the remainder of the Company's assets will be
distributed ratably among the holders of Common Stock, after the payment of all
liabilities and payment on any preferential amounts to which the holders of any
Preferred Stock may be entitled. All of the outstanding shares of Common Stock
are fully-paid and non-assessable.
PREFERRED STOCK
The Company's Preferred Stock may be issued from time to time by the
Company's Board of Directors without the approval of the Company's stockholders.
The Board of Directors is authorized to issue these shares in different classes
and series and, with respect to each class or series, to determine the dividend
rights, the redemption provisions, conversion provisions, liquidation
preferences and other rights and preferences not in conflict with the Company's
Certificate of Incorporation or with Delaware law.
THE TRANSACTION
Pursuant to a stock purchase agreement dated as of August 11, 2000, the
Selling Stockholders purchased an aggregate of 2,857,142 shares of Common Stock
for an aggregate consideration of $5,000,000.
TRANSFER AGENT AND WARRANT AGENT
American Stock Transfer & Trust Company, New York, New York is the
transfer agent and registrar for the Common Stock.
DELAWARE TAKEOVER STATUTE AND CERTAIN CHARTER PROVISIONS
The Company is subject to Section 203 of the Delaware General
Corporation Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that
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<PAGE>
such stockholder became an interested stockholder, unless: (i) prior to such
date, the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
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<PAGE>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law provides, in
general, that a corporation incorporated under the laws of the State of
Delaware, such as the Company, 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 (other than a derivative action by or in the right of the
corporation) by reason of the fact that such person 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
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person 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 such person's conduct was
unlawful. In the case of a derivative action, a Delaware corporation may
indemnify any such person against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
The Certificate of Incorporation, as amended, provides that the
liability of the Company's directors shall be limited to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the Certificate
of Incorporation provides that the Company shall indemnify directors, officers,
employees and agents of the Company acting in such capacity to the fullest
extent permitted by such law.
Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the securities being offered hereby was passed upon by
Parker Chapin LLP, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-KSB of Ion Networks, Inc for the
year ended March 31, 2000, have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------ ------------------------
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN
THIS PROSPECTUS. YOU MUST NOT RELY ON ANY ION NETWORKS, INC.
UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT
OFFER TO SELL OR BUY ANY SHARES IN ANY JURISDICTION
WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF NOVEMBER 17, 2000.
2,857,142 SHARES OF
COMMON STOCK
TABLE OF CONTENTS
Page
----
Risk Factors........................................3
Where You Can Find More Information About Us........9
Incorporation of Certain Documents by Reference.....9
Forward-Looking Statements.........................11
Use of Proceeds....................................11
Dividend Policy....................................11
Selling Stockholders ..............................12
Description of Securities..........................15 PROSPECTUS
Plan of Distribution ..............................17
Indemnification for Securities Act Liabilities.....19
Legal Matters......................................19
Experts............................................19
November 17, 2000
------------------------------------------------------ ------------------------
</TABLE>
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets for the various expenses payable by us in
connection with the offering of our Common Stock being registered hereby. All
amounts shown are estimates.
Filing fee for registration statement...............$ 837.07
Legal fees and expenses.............................$ 25,000.00
Accounting fees and expenses........................$ 2,500.00
Miscellaneous expenses..............................$ 662.93
-------------
Total......................................$ 29,000.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 ("Section 145") of the General Corporation Law of the State
of Delaware ("DGCL") provides, in general, that a corporation incorporated under
the laws of the State of Delaware, such as the Company, 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 (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person 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 enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person 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 such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Article Tenth of the Company's Certificate of Incorporation, as
amended, provides that the Company shall indemnify all persons whom the Company
shall have the power to indemnify under Section 145 to the fullest extent
permitted by such Section 145. In addition, Article Ninth of the Company's
Certificate of Incorporation provides, in general, that the liability of the
directors of the Company shall be limited to the fullest extent permitted by the
DGCL. The DGCL generally permits the limitation of a director's liability,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or
II-1
<PAGE>
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL (which provides that,
under certain circumstances, directors may be jointly and severally liable for
willful or negligent violations of the DGCL's provisions regarding the payment
of dividends or stock repurchases or redemptions), or (iv) for any transaction
from which the director derived an improper personal benefit.
II-2
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Number Description of Exhibit
------ ----------------------
<S> <C>
4.1 Stock Purchase Agreement by and among the Company and the Selling
Stockholders among the Companyand the Selling Stockholders dated as of August
11, 2000.
5.1 Opinion of Parker Chapin LLP
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Parker Chapin LLP (included in Exhibit 5.1 hereto).
24.1 Power of Attorney (included on Signature Page hereto).
</TABLE>
---------------------
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference 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.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report
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<PAGE>
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Piscataway, State of New Jersey, on the 17th day of
November, 2000.
ION NETWORKS, INC.
By: /s/ Ronald C. Sacks
----------------------------------------
Ronald C. Sacks, Chief Executive Officer
and Interim Principal Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Ronald C. Sacks and Stephen M.
Deixler and each of them with power of substitution, as his attorney-in-fact, in
all capacities, to sign any amendments to this registration statement (including
post-effective amendments) and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-facts or their
substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 17th day of November, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Ronald C. Sacks Chief Executive Officer
-------------------------------------------------- and Interim Principal Financial Officer
Ronald C. Sacks
/s/ Stephen M. Deixler Chairman of the Board of Directors
--------------------------------------------------
Stephen M. Deixler
/s/ Alexander C. Stark Director
--------------------------------------------------
Alexander C. Stark
Director
--------------------------------------------------
Martin Ritchie
Director
--------------------------------------------------
Alan Hardie
/s/ Baruch Halpern Director
--------------------------------------------------
Baruch Halpern
</TABLE>
