As filed with the Securities and Exchange Commission on November 6, 1998
Registration No. 333-58967
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OSICOM TECHNOLOGIES, INC.
(exact name of registrant as specified in its charter)
New Jersey 3672 22-2367234
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
2800 28th Street, Suite 100
Santa Monica, California 90405
(310) 581-4030
(Address, including zip code, and telephone number, including
area code, of registrant's principal offices)
PAR CHADHA
Chief Executive Officer
Osicom Technologies, Inc.
2800 28th Street, Suite 100
Santa Monica, California 90405
(310) 581-4030
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
W. RAYMOND FELTON, ESQ.
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP
Metro Corporate Campus I
Post Office Box 5600
Woodbridge, New Jersey 07095
(732) 549-5600
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, 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.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Class of Proposed Maximum
Securities to be Amount to be Offering Price per Aggregate Amount of
Registered Registered 1 Share Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par
value $.30 per share 1,472,600 2 $10.3125 3 $15,186,181 3 $4,479.92 4
Common Stock, par 2,499,485 $ 8.125 5 $20,308,316 5 $5,990.95
value $.30 per share
</TABLE>
- --------------------------
1 Includes an indeterminate number of shares of Common Stock issuable
to prevent dilution resulting from stock splits, stock dividends or similar
transactions pursuant to Rule 416 under the Securities Act of 1933, as amended.
2 Adjusted from previous filing to reflect a 1-for-3 reverse stock
split of the Company's stock on July 24, 1998.
3 Estimated pursuant to Rule 457 based upon the closing price of the
Common Stock on July 8, 1998 as reported on The Nasdaq Small Cap Market solely
for the purpose of computing the registration fee.
4 Previously paid.
5 Estimated pursuant to Rule 457 based upon the closing price of the
Common Stock on November 6, 1998 as reported on The Nasdaq Small Cap Market
solely for the purpose of computing the registration fee.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1998
PROSPECTUS
OSICOM TECHNOLOGIES, INC.
3,972,085 SHARES
COMMON STOCK
This Prospectus relates to an aggregate of 3,972,085 shares of Common
Stock, par value $.30 per share (the "Shares") of Osicom Technologies, Inc., a
New Jersey corporation "Osicom"or the "Company"), which may be offered and sold
hereby from time to time by certain holders thereof ("Selling Shareholders").
The Shares are issuable pursuant to the terms of the Company's Series C
Convertible Preferred Stock (the "Series C Preferred Stock"), which two of the
Selling Shareholders (the "Original Holder Selling Shareholders") acquired from
the Company in May 1998. The number of Shares issuable upon conversion of the
Series C Preferred Stock is presently indeterminate and unlimited and will
depend on the trading price of the Shares during the period prior to conversion;
however, each Original Holder Selling Shareholder is limited by the terms of the
Series C Preferred Stock to convert such securities only to the extent that the
shares of common stock to be received by a holder upon such conversion would
cause such holder to beneficially own no more than 4.99% of the number of
outstanding shares of common stock at the time of the conversion. The number of
Shares registered for resale hereunder has been calculated based on an assumed
conversion price of $2.82188, and the Company is registering for resale
hereunder 140% of the number of Shares issuable upon conversion of the Series C
Preferred Stock based on such assumed price. As of August 12, 1998 (the "Initial
Conversion Date"), each Original Holder Selling Shareholder has the right to
convert all or any part of the Series C Preferred Stock held by an Original
Holder Selling Shareholder into such number of fully paid and non-assessable
shares ("Conversion Shares") of the Company's common stock, par value $.30 per
share (the "Common Stock"), as is determined in accordance with the terms of the
Company's Certificate of Incorporation. The number of Conversion Shares to be
delivered by the Company pursuant to a Conversion shall be determined by
dividing the aggregate Stated Value of the Preferred Shares to be converted by
the Conversion Price (as defined herein) in effect on the applicable Conversion
Date. Subject to adjustment, "Conversion Price" with respect to a share of the
Series C Preferred Stock shall mean (A) for any Conversion occurring prior to
November 10, 1998 (the "Initial Conversion Period"), the lesser of (i)
eighty-six percent (86%) of the average of the three (3) lowest Closing Bid
Prices for the Common Stock occurring during the period of twenty-two (22)
Trading Days (as defined below) immediately prior to (but not including) the
applicable Conversion Date (the "Floating Conversion Price") and (ii) two
hundred percent (200%) of the average Closing Bid Price for the Common Stock
during the period of twenty-two (22) Trading Days immediately prior to (but not
including) May 14, 1998 (or $23.97) relating to the Series C Preferred Stock
(the price determined in accordance with the clause (ii) being referred to
herein as the "Conversion Cap") and (B) for any Conversion occurring after the
Initial Conversion Period, the lesser of the Floating Conversion Price and the
Fixed Conversion Price. "Fixed Conversion Price" shall mean the lesser of (i)
the average Closing Bid Price for the Common Stock during the period of
twenty-two (22) Trading Days immediately prior to (but not including) the last
day of the Initial Conversion Period and (ii) the Conversion Cap (a
"Conversion"). The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Shareholders. See "Selling Shareholders" and "Plan of
Distribution." All selling expenses incurred in connection with this offering
are being borne by the Selling Shareholders.
The Company has been advised by the Selling Shareholders that there are
presently no underwriting arrangements with respect to the sale of the Shares,
however, such arrangements may exist in the future, and that the Selling
Shareholders may sell the Shares to or through broker-dealers from time to time
in the over-the-counter market at then prevailing prices, or in privately
negotiated transactions or otherwise, and that usual and customary brokerage
fees and commissions may be paid by the Selling Shareholders in connection
therewith. See "Selling Shareholders" and "Plan of Distribution."
The Company's Common Stock is quoted on the Nasdaq Market under the symbol
"FIBR." On November 5, 1998, the closing price for the Common Stock was $8.125
as reported by Nasdaq. Potential purchasers of the Shares are advised that an
investment in the Shares is speculative and only those purchasers who can afford
to lose their entire investment should purchase Shares. See "Risk Factors"
beginning on page 7 for factors to be considered in connection with purchasing
Shares.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is November ____, 1998.
<PAGE>
No dealer, salesperson or other person is authorized in connection with
any offering made hereby to give any information or to make any representation
not contained in this Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the Shares to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
500 West Madison Street, Chicago, Illinois 60601 and 7 World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Additionally, such material may be obtained at the
Web Site the SEC maintains at which contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The Company's Common Stock is quoted on Nasdaq, and such reports,
proxy statements and other information can also be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
The Company has filed with the Commission a registration statement on
Form S-3 (copies of which may be obtained from the Commission at its principal
office in Washington, D.C. upon payment of the charges prescribed by the
Commission, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. Statements contained in this
Prospectus as to the contents of any contract or any other documents are not
necessarily complete and, in each such instance, reference is made to the copy
of such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following document filed by the Company with the Commission pursuant to
the Exchange Act (File No. 0-15810) is hereby incorporated by reference in this
Prospectus, except as otherwise superseded or modified herein:
The Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1998.
The Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1998. The Company's Quarterly Report on Form 10-Q for the quarter ended July 31,
1998.
The Company's Current Reports on Forms 8-K filed on each of May 15, 1998,
May 18, 1998, August 6, 1998 and September 30, 1998.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
shall be deemed to be incorporated by reference into this Prospectus.
Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed documents which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person including any
beneficial owner, to whom this Prospectus is delivered, upon his written or oral
request, a copy of any or all of the documents referred to above which have been
incorporated into this Prospectus by reference (other than exhibits to such
documents). Requests for such copies should be directed to:
OSICOM TECHNOLOGIES, INC.
2800 28th Street, Suite 100
Santa Monica, California 90405
Attention: Par Chadha, Chief Executive Officer
(310) 581-4030
<PAGE>
PROSPECTUS SUMMARY
The Company
The Company is a Santa Monica, California-based business which designs,
manufactures and markets integrated networking and bandwidth aggregation
products for enhancing the performance of data and telecommunications networks.
The Company's products are deployed to telephone companies, Internet Service
Providers and corporate/campus environments to provide transport within and
access to their networks. The Company, incorporated in 1981, has primary
facilities in Annapolis Junction, Maryland, Waltham, Massachusetts, Naperville,
Illinois, San Diego, California, and Hong Kong.
The Company's research and development activities are dedicated to
developing products in three main areas: (i) Dense Wavelength Division
Multiplexing, (ii) Embedded Networking Solutions, and (iii) Remote Access. The
Company's products address the growing needs for networked, high bandwidth data
and voice communications. Two significant trends in the data and
telecommunications networking market are driving demand and shaping the terms of
competition among suppliers are the Convergence of data and voice on a single
network and the need for greater Bandwidth.
The Offering
Shares of Common Stock Offered 3,972,085 Shares
Use of Proceeds The shares are not owned by the Company,
accordingly the Company will receive
none of the proceeds from the sale
thereof.
Nasdaq Symbol FIBR
RISK FACTORS
Prospective investors should carefully consider the following risk
factors regarding an investment in Osicom Common Stock, in addition to the other
information contained in this prospectus.
Volatility of Common Stock Prices
There has been significant volatility in the market prices of
securities of companies in the networking industry, including Osicom Common
Stock. Various factors and events, including those relating specifically to
Osicom, its vendors or its competitors and those relating generally to the
industry, may have a significant impact on the trading price of the Osicom
Common Stock.
Dilution
A substantial number of Shares are or will be issuable by the Company
upon the conversion of the Series C Preferred Stock. Under the applicable
conversion formulas, the number of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock is inversely proportional to the
market price of the Common Stock at the time of conversion (i.e., the number of
shares increases as the market price of the Common Stock decreases). Moreover,
there is no limit to the amount of shares of common stock issuable upon
conversion due to the Floating Conversion Price. By way of example, the
Conversion Price pursuant to the terms of the Series C Preferred Stock as of
November 3, 1998 would have been $2.82188 and if the Selling Shareholders were
to have converted all of the Series C Preferred Stock on that date, 2,834,989
shares of common stock would have been issued to such Selling Shareholders,
which would represent 26.3% of the outstanding shares of common stock of the
Company. Issuances upon conversion of Series C Preferred Stock could result in
dilution of a shareholder's percentage ownership interest in the Company and
could adversely affect the market price of the common stock. To the extent the
holders of the Series C Preferred Stock convert and then sell their common
stock, the common stock price may decrease due to the additional shares in the
market, allowing the holders of the Series C Preferred Stock to convert such
stock into greater amounts of common stock, and further depressing the common
stock price. See "Description of Securities".
Shares Eligible for Future Sale
No prediction can be made as to the effect, if any, that future sales
of common stock by the Company, or the availability of common stock for future
sales, will have on the market price of common stock prevailing from time to
time. Sales of a substantial number of shares of common stock in the public
market could adversely affect the market price for the Company's common stock
and reported earnings per share.
Competition
The markets for the products and services of the Company are
intensively competitive, highly fragmented and characterized by rapidly changing
technology, evolving industry standards, price competition and frequent new
product introductions. A number of companies offer products that compete with
one or more of the Company's products. The Company's current and prospective
competitors include OEMs, product manufacturers of internet access and remote
access equipment, and manufacturers of WAN servers and client access and
transmission products. In the internet access and LAN access equipment market,
the Company competes primarily with Cisco, 3Com, Ascend Communications, Lucent,
Cienna, Northern Telecom, Pirelli, NEC, Alcatel, Siemens, IBM, Motorola, Intel
and several other companies. The Company has experienced and expects to continue
to experience increased competition from current and potential competitors, many
of whom have substantially greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and larger customer bases
than the Company. In particular, established companies in the personal computer
industry may seek to expand their product offerings by designing and selling
products using competitive technology that could render the Company's products
obsolete or have a material adverse effect on the Company's sales. The markets
in which the Company competes currently are subject to intense competition and
the Company expects additional price and product competition as other
established and emerging companies enter these markets and new products and
technologies are introduced. Increased competition may result from further price
reductions, reduced gross margins and loss of market share, any of which could
materially and adversely affect the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, or that competitive
factors faced by the Company will not have a material adverse effect on the
Company's business, operating results and financial condition.
New Product Development and Rapid Technological Change; Dependence on LAN
and WAN Technologies
The telecommunications and data networks industry is characterized by
rapidly changing technologies, evolving industry standards, frequent new product
introductions, short product life cycles and rapidly changing customer
requirements. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. The Company's future success will depend on its ability to enhance
its existing products, to introduce new products to meet changing customer
requirements and emerging technologies, and to demonstrate performance and cost
advantages of cost-effectiveness of its products over competing products. As
other technologies such as DWDM, Sonet, Gigabit Ethernet, Fiber Channel, Frame
Relay, Asynchronous Transfer Mode ("ATM"), Asymmetric Digital Subscriber Line
("ASDL") and communication over copper, fiber, wireless networks or all optical
networks ("AON"), are developed and gain market acceptance, the Company will be
required to enhance its connectivity products, or if its current and prospective
future products do not achieve widespread customer acceptance as a result of the
adoption of alternative technologies, the Company's business, operating results
and financial condition would be materially and adversely affected.
The Company has historically derived a substantial majority of its
revenues from the sale of networking products. In the event that current LAN and
WAN technology is modified or replaced and the Company is unable to modify its
products to support new technology, or alternative technologies, or if the
Company's introduction of transmission and system-on-silicon products is
unsuccessful, the Company's business, operating results and financial condition
could be materially and adversely affected. The Company has in the past and may
in the future experience delays in developing and marketing product enhancements
or new products that respond to technological change, evolving industry
standards and changing customer requirements. There can be no assurance that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products or product
enhancements, or that its new products and product enhancements will adequately
meet the requirements of the marketplace and achieve any significant degree of
market acceptance. Failure of the Company, for technological or other reasons,
to develop and introduce new products and product enhancements in a timely
manner and cost-effective manner would have a material adverse effect on the
Company's business, operating results and financial condition. In addition, the
future introductions or even announcement of products by the Company or one of
its competitors embodying new technologies or changes in industry standards or
customer requirements could render the Company's then-existing products obsolete
or unmarketable. There can be no assurance that the introduction or announcement
of new product offerings by the Company or one or more of its competitors will
not cause customers to defer purchase of existing Company products. Such
deferment of purchases could have a material adverse effect on the Company's
business, operating results and financial condition.
Complex products such as those offered by the Company may contain
undetected or unresolved defects when first introduced or as new versions are
released. While the Company has not experienced any material errors in the past,
the occurrence of such errors in the future could, and the inability to correct
such errors would, result in the loss of market share, the delay or loss of
market acceptance of the Company's products, material warranty expense,
diversion of engineering and other resources from the Company's product
development efforts, the loss of credibility with the Company's customers or
product recall. Any of such occurrences could have a material adverse effect
upon the Company's business, operating results or financial condition.
Dependence on Contract Manufacturers and Limited Source Suppliers
Though the Company manufactures many of its own products, it also
materially relies upon independent contractors to manufacture to specification
certain of its other components, subassemblies, systems and products. The
Company also relies upon limited-source suppliers for a number of components
used in the Company's products, including certain key microprocessors, lasers,
optical filters and other components. There can be no assurance that these
independent contractors and suppliers will be able to meet the Company's future
requirements for manufactured products, components and subassemblies in a timely
fashion. The Company generally purchases limited-source components pursuant to
purchase orders and has no guaranteed supply arrangements with these suppliers.
In addition, the availability of many of these components to the Company is
dependent in part by the Company's ability to provide its suppliers with
accurate forecasts of its future requirements.
The Company believes there are alternative suppliers of alternative
components for all of the components contained in its products. However, any
extended interruption in the supply of any of the key components currently
obtained from a limited source would disrupt its operations and have a material
adverse effect on the Company's business, operating results and financial
condition.
Dependence on Proprietary Rights and Technology
The Company's ability to compete is dependent in part on its propriety rights
and technology. The Company relies primarily on a combination of patent,
copyright and trademark laws, trade secrets, confidentiality procedures and
contract provisions to protect its proprietary rights. The Company generally
enters into confidentiality agreements with its employees, and sometimes with
its customers and potential customers and limits access to the distribution of
its software, hardware designs, documentation and other proprietary information.
There can be no assurance that the steps taken by the Company in this regard
will be adequate to prevent the misappropriation of its technology. Furthermore,
though the Company has been issued patents, there can be no assurance that the
patent application process will be beneficial to the Company. While the Company
has filed various patent applications and will file additional applications in
the future, such applications may be denied. Any patents, once issued, may be
circumvented by competitors of the Company. Furthermore, there can be no
assurance that others will not develop technologies that are superior to the
Company's. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. In addition,
the laws of some foreign countries do not protect the Company's proprietary
rights as fully as do the laws of the United States. There can be no assurance
that the Company's means of protecting its proprietary rights in the United
States or abroad will be adequate or that competing companies will not
independently develop similar technology.
Dependence on Key Personnel
The Company's business and prospects depend to significant degree upon
the continuing contributions of its key personnel. The Company does not have
employment contracts with most of its key personnel and does not maintain any
key person life insurance policies. The loss of key management or technical
personnel, including Par Chadha, the Company's Chief Executive Officer, Xin
Cheng, the Company's President, Ron Mackey the Company's Executive Vice
President - Technology and William Peisel, the Chief Technology Officer of the
Company's NETsilicon subsidiary, could materially and adversely affect the
Company's business, operating results and financial condition. These individuals
have in the past, and continue to significantly contribute to the creation and
development of the Company's products. The Company believes that is prospects
depend in large part upon its ability to attract and retain highly-skilled
engineering, managerial, sales, marketing and administrative personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting and retaining such personnel.
Failure to attract and retain key personnel could have a material adverse effect
on the Company's business, operating results and financial condition.
Regulations and Evolving Industry Standards; Non-Compliance
The market for the Company's products is characterized by the need to
meet a significant number of communications regulations and industry standards,
some of which are evolving as new technologies are deployed. In the United
States, the Company's products must comply with various regulations defined by
the Federal Communications Commission and standards established Underwriters
Laboratories. In addition, there are industry standards established by various
organizations such as Bell Communications Research, American National Standards
Institute and Internet Engineering Task Force. The Company designs its products
to comply with those industry standards necessary for each particular product to
be accepted by its intended customers. To the extent non-compliance with such
standards has a detrimental effect on customer acceptance, the Company must
address such non-compliance in the design of its products. Standards for new
services and network management are still evolving. The Company is a member of
several standards committees in order that the Company may participate in the
development of standards for emerging technologies. However, as the standards
evolve, the Company will be required to modify its products or develop and
support new versions of its products. The failure of the Company's products to
comply or delays in compliance, with the various existing and evolving industry
standards could delay introduction of the Company's products, which could
materially and adversely affect the Company's business, operating results and
financial condition.
Government regulatory policies are likely to continue to have a major
impact on the pricing of existing as well as new public network services and
therefore are expected to affect demand for such services and the
telecommunications products that support such services. Tariff rates, whether
determined by network service providers or in respondent regulatory directives,
may affect the cost-effectiveness of deploying communication services. Such
policies also affect the demand for telecommunications equipment, including the
Company's current and planned products.
In foreign countries, the Company's products are subject to a wide
variety of governmental review and certification requirements. Any future
inability to obtain on a timely basis foreign regulatory approvals could
materially and adversely affect the Company's business, operating results and
financial condition.
Potential Fluctuations in Operating Results
The Company's revenue and operating results could fluctuate
substantially from quarter to quarter and from year to year. This could result
from any one or a combination of factors such as the cancellation or
postponement of orders, the timing and amount of significant orders from the
Company's largest customers, and the Company's success in developing,
introducing and shipping product enhancements and new products, the product mix
sold by the Company, new product introductions by competitors, pricing actions
by the Company or its competitors, the timing of delivery and availability of
components from suppliers, changes in material costs and general economic
conditions.
The Company's backlog at the beginning of each quarter typically is not
sufficient to achieve expected sales for the quarter. To achieve its sales
objective the Company is dependent upon obtaining orders during each quarter for
shipment that quarter. Furthermore, the Company's agreements with its customers
typically provide that they may change delivery schedules and cancel orders
within specified time frames, typically 30 days or more prior to the scheduled
shipment date, without significant penalty. The Company's customers have in the
past built, and may in the future build, significant inventory in order to
facilitate more repaid deployment of anticipated major projects for other
reasons. Decisions by such customers to reduce their inventory levels have led
and could lead to reductions in purchases from the Company. These reductions, in
turn, have and could cause fluctuations in the Company's operating results and
have had and could have an adverse effect on the Company's business, financial
condition and results of operations in periods in which the inventory is
reduced.
Delays or lost sales have and can be caused by other factors beyond the
Company's control, including late deliveries by vendors of components, changes
in implementation priorities, slower than anticipated growth in demand for the
services that the Company's products support and delays in obtaining regulatory
approvals for new services. Delays and lost sales have occurred in the past and
may occur in the future. Operating results in recent periods have been adversely
affected by delays in receipt of significant purchase orders from customers. In
addition, the Company has in the past experienced delays as a result of the need
to modify its products to comply with unique customer specifications. Net sales
of the Company for the quarter ended July 31, 1998 declined as compared to the
quarter ended July 31, 1997. The decline in net sales was attributable to the
Company's Far East Division which had a reduction in net sales resulting from
both the recent unfavorable economic conditions in Asia and the Pacific Rim as
well as the reliance on a single customer in the past. The Company is managing
its Far East Division's transition away from reliance on this single customer by
actively pursuing a broader customer base and extending the Far East Division's
business into the development of new, proprietary product lines. These and
similar delays or lost sales could materially and adversely affect the Company's
business, operating results and financial condition.
The Company's industry is characterized by declining prices of existing
products, therefore continual improvements of manufacturing efficiencies and
introduction of new products and enhancements to existing products are required
to maintain gross margins. In response to customer demands or competitive
pressures, or to pursue new product or market opportunities, the Company may
take certain pricing or marketing actions, such as price reductions, volume
discounts, or provisions of services at below market rates. These actions could
materially and adversely affect the Company's business, operating results and
financial condition.
Management of Growth
The Company has experienced significant growth through acquisitions as
well as internal growth. This growth has placed a significant strain on the
Company's financial and management personnel and information systems and
controls, and the Company must implement new and enhance existing financial and
management information systems and controls and must add and train personnel to
operate such systems effectively. The Company's intention to continue to pursue
its growth strategy through efforts to increase sales of existing products and
new products can be expected to place even greater pressure on the Company's
existing personnel and compound the need for increased personnel, expanded
information systems, and additional financial and administrative control
procedures. There can be no assurance that the Company will be able to
successfully manage expanding operations.
The future near-term success of the Company will depend upon achieving
harmonious relations among key employees, continuing to combine operations to
realize efficiencies in manufacturing, marketing and sales, and implementing
product strategies which allow the benefits of research and development advances
in individual subsidiaries to be utilized throughout the Company as a whole. The
Company's ability to achieve these objectives will materially affect its
business, prospects and financial condition.
Recent Acquisitions and Potential Future Acquisitions
As described more fully in Note A to the Consolidated Financial
Statements contained in the Company's annual report on Form 10-KSB for the year
ended January 31, 1998 the Company has made several major acquisitions during
the two years ended January 31, 1997. The Company has incurred significant
charges for purchased technologies, restructuring, and valuation allowances in
connection with the assets acquired in these acquisitions. There can be no
assurance that any future acquisitions will not result in similar charges.
The Company's strategy is to review acquisition prospects that would
complement the Company's existing products, augment its market coverage and
distribution ability or enhance its technological capabilities. While the
Company has no current agreements or negotiations underway with respect to any
new acquisitions, the Company may acquire additional businesses, products or
technologies in the future. Future acquisitions by the Company could result in
charges similar to those incurred in connection with prior acquisitions,
issuance of potentially dilutive equity securities, the incurrence of debt and
contingent liabilities and amortization expenses related to goodwill and other
intangible assets, any of which could materially and adversely affect the
Company's business, results of operations, financial condition, and the price of
the Company's common stock. Acquisitions entail numerous risks, including the
assimilation of the acquired operations, technologies and products, diversion of
management's attention to other business concerns, risks of entering markets in
which the Company has no or limited prior experience and potential loss of key
employees of acquired organizations. There can be no assurance as to the ability
of the Company to successfully integrate the products, technologies or personnel
of any business that may be acquired in the future, and the failure of the
Company to do so could have a material and adverse effect on the Company's
business, financial condition and results of operations.
Year 2000 Problem
The Company is aware of the issues associated with the programming code
in existing computer systems as the Year 2000 approaches. The "Year 2000"
problem is pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the latter two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company (i) has completed a review of its internal information
programs and has identified those systems that are not compliant, (ii) has
completed a review of its products lines and has ascertained that its products
are year 2000 compliant, and (iii) is surveying all vendors and customers for
year 2000 compliance and the results are not yet complete. The Company has
implemented a project to ensure all internal systems are compliant by the end of
fiscal 1999. However, although the Company believes that its systems will be
Year 2000 compliant, the Company utilizes third-party equipment and software
that may not be Year 2000 compliant. Failure of such third party equipment or
software to properly process dates for the year 2000 and thereafter could
require the Company to incur unanticipated expenses to remedy any problems,
which could have a material adverse effect on the Company's business, results of
operations and financial condition.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Shareholders.
DESCRIPTION OF SECURITIES
The Shares being registered are shares of common stock of the Company
which will be issued upon conversion by the holders of Series C Preferred Stock
issued by the Company on May 14, 1998. The number of shares of common stock
being registered are stated at 140% of the currently estimated shares issuable
upon conversion, however, the actual number of such shares may be lesser or
greater than the indicated amount as a result of the application of the floating
conversion price to be calculated in accordance with the terms of the Series C
Preferred Stock as follows: (A) for any conversion occurring prior to November
10, 1998 (the "Initial Conversion Period"), the lesser of (i) eighty six percent
(86%) of the average of the three (3) lowest Closing Bid Prices for the Common
Stock occurring during the period of twenty-two (22) Trading Days (as defined in
the Securities Purchase Agreement) immediately prior to (but not including) the
applicable Conversion Date (the "Floating Conversion Price") and (ii) two
hundred percent (200%) of the average Closing Bid Price for the common Stock
during the period of twenty-two (22) Trading Days immediately prior to (but not
including) May 14, 1998 (or $23.97) (the price determined in accordance with
this clause (ii) being referred to herein as the "Conversion Cap") and (B) for
any Conversion occurring after the Initial Conversion Period, the lesser of the
Floating Conversion Price and the Fixed Conversion Price. "Fixed Conversion
Price" shall mean the lesser of (i) the average Closing Bid Price of the Common
Stock during the period of twenty-two (22) Trading Days immediately prior to
(but not including) the last day of the Initial Conversion Period and (ii) the
Conversion Cap.
Conversion of the Series C Preferred Stock by the holders is limited to
(i) 19.99% of the number of outstanding shares of common stock on May 18, 1998
and (ii) beneficial ownership of not more than 4.99% of the number of
outstanding shares of common stock by the holder converting shares of Series C
Preferred Stock at the time of the conversion. Additionally, the holders of the
Series C Preferred Stock, under certain circumstances, have the right to require
the Company to prepare and file a proxy statement to seek the approval of
shareholders to approve the conversion of the Series C Preferred Stock in excess
of 19.99%.
The holders of the Series C Preferred Stock have a mandatory redemption
option upon the occurrence of certain events. These events include (i) the
failure of the Company to issue the shares of common stock upon conversion of
the Series C Preferred Stock, (ii) the Company breaches any material term of the
Series C Preferred Stock, the Securities Purchase Agreement between the Company
and the Selling Shareholders, or the Registration Rights Agreement between the
Company and the Selling Shareholders, (iii) any material representation in any
of the aforementioned agreements, (iv) this Registration Statement is not
declared effective by September 11, 1998 or if declared effective, such
effectiveness does not lapse, provided that the failure of the Registration
Statement to be declared effective or the lapse thereof is due to voluntary
action by the Company or failure by the Company to take action, and (v) the
common stock is not quoted on the Nasdaq SmallCap Market or Nasdaq National
Market or listed on the New York State Exchange or American Stock Exchange or
trading in the common stock on any such exchange is suspended for more than 5
Trading Days. The redemption price is the greater of (i) Liquidation Preference
of the Series C Preferred Stock being redeemed multiplied by 125% and (ii) an
amount determined by dividing the Liquidation Preference of the Series C
Preferred Shares being redeemed by the Conversion Price in effect on the
redemption date and multiplying the resulting quotient by the average Closing
Bid Price for the common stock on the five Trading Days immediately preceding
the redemption date.
Additionally, the Company has the option to redeem the Series C
Preferred Stock if, during any period of ten Trading Days, the average Closing
Bid Price for the common stock is less than $3.50 ($10.50 post-reverse split) at
a redemption price equal to the aggregate Liquidation Preference of the Series C
Preferred Stock then held by such holder multiplied by 116.28%.
SELLING SHAREHOLDERS
The Shares are being registered pursuant to registration rights
obligations the Company has to Marshall Capital Management, Inc. and CC
Investments, LDC pursuant to a Securities Purchase Agreement with the Company
dated as of April 30, 1998. In addition, 250,000 shares are being registered for
sale by Charles K. Stewart, which acquired such shares in a private transaction
from CC Investments, LDC. Other than the Shares offered hereby, neither of the
Selling Shareholders holds more than one percent (1%) or more of the Company's
common stock nor have the Selling Shareholders ever held any position or office
with the Company.
The Company has been advised that such Selling Shareholders intend to
sell such Shares at unspecified times on a delayed or continuous basis depending
upon, among other things, favorable market conditions.
The following table sets forth certain information as of November 1,
1998 with respect to the beneficial ownership of the Shares by the Selling
Shareholders, subject to the assumptions in notes 2 and 3 following the table.
<TABLE>
<CAPTION>
Beneficial Ownership Number of Shares of Ownership of Shares of
Name of Selling of Shares of Common Common Stock Common Stock
Shareholder Stock Prior to to be Offered2, 3 After Offering
Offering
- ---------------------- -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Marshall Capital 457,849 2, 4 2,000,793 2,4
Management, Inc.1 0
CC Investments, 457,849 3, 4 1,721,292 3, 4 0
LDC1
Charles K. Stewart 250,000 250,000 0
</TABLE>
- ----------------------
1 Marshall Capital Management, Inc. is an indirect, wholly owned subsidiary
of Credit Suisse First Boston Group which is a public Swiss financial services
company. The parent companies of Marshall Capital Management, Inc. disclaim any
beneficial ownership of any securities owned by Marshall Capital Management,
Inc. Castle Creek Partners, LLC is the investment advisor to CC Investments, LDC
and consequently may be deemed to have voting and investment discretion over the
securities held by CC Investments, LDC. Castle Creek Partners LLC disclaims
beneficial ownership of all securities held by CC Investments, LDC.
2 Includes 165,137 shares of Common Stock held of record and beneficially
and 292,712 shares of common stock issuable upon conversion of the shares of
Series C Preferred Stock held by Marshall Capital Managment, Inc. calculated
using an assumed conversion price of $2.82188 per share. The shares of Series C
Preferred Stock were issued pursuant to a Securities Purchase Agreement, dated
as of April 30, 1998 and are convertible at variable rates into shares of Common
Stock. See "Description of Securities." Pursuant to the terms of the Series C
Preferred Stock, no holder thereof can convert any portion of such Series C
Preferred Stock if such conversion would increase such holder's beneficial
ownership of shares of Common Stock to in excess of 4.99% of the shares
outstanding upon such conversion. Absent such limitation, at the $2.82188 per
share conversion price the shares of Series C Preferred Stock held by Marshall
Capital Management, Inc. would have been convertible into 1,311,183 shares of
Common Stock, which, together with the 165,137 shares currently held, would have
represented 14.5% of the Common Stock.
3 Includes 351,993 shares of Common Stock held of record and beneficially
and 105,856 shares of common stock issuable upon conversion of the shares of
Series C Preferred Stock held by CC Investments, LDC calculated using an assumed
conversion price of $2.82188 per share. The shares of Series C Preferred Stock
were issued pursuant to a Securities Purchase Agreement, dated as of April 30,
1998 and are convertible at variable rates into shares of Common Stock. See
"Description of Securities." Pursuant to the terms of the Series C Preferred
Stock, no holder thereof can convert any portion of such Series C Preferred
Stock if such conversion would increase such holder's beneficial ownership of
shares of Common Stock to in excess of 4.99% of the shares outstanding upon such
conversion. Absent such limitation, at the $2.82188 per share conversion price
the shares of Series C Preferred Stock held by CC Investments, LDC would have
been convertible into 978,071 shares of Common Stock, which, together with the
351,993 shares currently held, would have represented 13.3% of the Common Stock,
which excludes 250,000 shares of Common Stock issued to CC Investments from
conversion of Series C Preferred Stock which was sold by CC Investments in a
private transaction.
4 The number of Common Shares registered pursuant to the registration
statement on behalf of the Selling Shareholders and the number of shares of
Common Stock offered hereby by such holders have been determined by agreement
between the Company and such Selling Shareholders. Because the number of Common
Shares that will ultimately be issued upon conversion of the Series C Preferred
Stock is dependent, subject to certain limitations, upon the average of certain
closing bid prices of the Common Stock prior to conversion, as described in
"Description of Securities," such number of shares of Common Stock (and
therefore the number of shares of Common Stock to ultimately be offered hereby)
cannot be determined at this time. Moreover, pursuant to Nasdaq Small Cap
regulations, the Company may be subject to a limitation that, in the absence of
shareholder approval, the aggregate number of shares of Common Stock issuable to
the Selling Shareholders at a discount from market price upon conversion of the
Series C Preferred Stock may not exceed 20% of the outstanding shares of Common
Stock. Unless shareholder approval is obtained to issue Common Shares to the
Selling Shareholders in excess of such maximum amount, neither of the Selling
Shareholders will be entitled to acquire more than its proportionate share of
such maximum amount. The Selling Shareholders have the right to cause the
Company to seek such approval if it is necessary to permit their conversion of
shares of Series C Preferred Stock.
PLAN OF DISTRIBUTION
The Selling Shareholders have advised the Company that there are presently
no underwriting arrangements with respect to the sale of the Shares, however,
such arrangements may exist in the future. The Selling Shareholders, or their
pledges, donees, transferees or other successors in interest, may choose to sell
all or a portion of the Shares from time to time as market conditions permit in
the over-the-counter market, or otherwise, at prices and terms then prevailing
or at prices related to the then-current market price, or at negotiated prices.
The Shares may also be sold by one or more of the following methods, without
limitation: (a) block trades in which a broker or dealer so engaged will attempt
to sell the Shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; (b) purchases by a broker or dealer
as principal and resale by such broker and dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions (which may include long or
short sales) and transactions in which the broker solicits purchases; (d) "at
the market" to or through market makers and into an existing market for the
Shares; (e) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents;
(f) through transactions in options, swaps or other derivatives (including
transactions with broker-dealers or other financial institutions that require
the delivery by such broker-dealers or institutions of the Shares, which Shares
may be resold thereafter pursuant to this Prospectus); or (g) any combination of
the foregoing, or by any other legally available means. In effecting sales,
brokers or dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Such broker or dealers may receive
commissions or discounts from Selling Shareholders in amounts to be negotiated.
Such brokers and dealers and any other participating brokers or dealers may be
deemed to be "underwriters" within the meaning of the 1933 Act in connection
with such sales.
The Selling Shareholders may sell shares of Common Stock pursuant to
Rule 144 under the 1933 Act, where applicable.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 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 express in the Act and
will be governed by the final adjudication of such issue.
FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENT
When used anywhere in this Form S-3, in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive officer of
the Company, the words or phrases, "will likely result," "are expected to," "is
anticipated," "estimated," "project," or "outlook" or similar expressions made
by a third party with respect to the Company) are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements include the
Company's plans to develop new products, expand its sales force, expand its
customer base, make acquisitions, establish strategic relationships and expand
within international markets. Such forward-looking statements also include the
Company's expectations concerning factors affecting the markets for its
products, such as demand for increased bandwidth, the migration from private to
public networks, growth in corporate use of the Internet, expansion of switches
between LANs, remote access for corporate networks, deregulation and increased
competition, the introduction of a wide range of new communication services and
technologies and growth in the domestic and international market for network
access solutions.
The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. The Company specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements, or to update the
reasons why actual results could differ from those projected in the
forward-looking statements.
BUSINESS
The Company
The Company is a Santa Monica, California-based business which designs,
manufactures and markets integrated networking and bandwidth aggregation
products for enhancing the performance of data and telecommunications networks.
The Company's products are deployed to telephone companies, Internet Service
Providers and corporate/campus environments to provide transport within and
access to their networks. The Company, incorporated in 1981 has primary
facilities in Annapolis Junction, Maryland, Waltham, Massachusetts, Naperville,
Illinois, San Diego, California, and Hong Kong. On May 18, 1998, the Company
announced that it planned an initial public offering ("IPO") of its embedded
networking ("EN") business unit, which includes the NET+ARM family of networking
system-on-silicon products. The IPO would be fully effected through a
distribution of common stock purchase rights to the holders of the Company's
securities the right to purchase shares of the EN business unit in proportion to
their ownership in the Company's common stock on a fully diluted basis. Any
distribution will be subject to a registration statement to be filed with the
U.S. Securities and Exchange Commission ("SEC"). Such registration statement was
filed with the SEC on August 26, 1998. The offering will be made only by means
of a prospectus. Following the IPO, the Company intends to distribute its EN
shares to Osicom's shareholders.
The Company's research and development activities are dedicated to
developing products in three main areas:
Dense Wavelength Division Multiplexing - The Company utilizes its
combination of more than 25 years of research and development in photonic
networking and its parallel expertise in data communications to offer
state-of-the-art products which employ dense wavelength division multiplexing
("DWDM"). A DWDM product, when connected to an optical fiber, increases that
fiber's capacity to transmit information and enhance the flexibility with which
that transmission is accomplished. The growth in utilization of the Internet and
the rapid expansion of private networks have placed the capacity and flexibility
of the world's already-laid fiber at a premium. To meet these increased demands,
telephone companies and other owners and lessors of existing fiber have turned
to DWDM and other technology solutions as an alternative to paying the high cost
of laying new fiber. According to a 1997 study by Ryan Hankin Kent, Inc., a
leading telecommunications industry analyst, the intra-city metropolitan
installation costs for fiber are estimated at $330,000 per kilometer. This cost
is affected by a variety of factors including geology, geography, environmental
concerns and right-of-way agreements. The installation of the Company's DWDM
product to double the capacity of a single fiber can offer 27% to 70% cost
savings over the installation of a single one kilometer fiber in an urban area
with greater savings achievable with 12, 16, or 32 channel installations.
The Company's competitors in the DWDM arena have historically designed
their products for use in city-to-city or "long haul" applications, operating
under the apparent assumption that this would be the only, or only significant
market for DWDM products. By contrast, the Company has designed its DWDM
products specifically for intra-city networks, also known as "short-haul" or
"metropolitan" networks. This strategy reflects the Company's expectation that
the need for DWDM in the "metro" arena will be significant and perhaps even
greater than the need for DWDM in the "long haul" arena. The Company's DWDM
technology, for which it currently has five patents pending, is designed
specifically for the "metro" market. The Company's DWDM product is GigaMuxTM, a
32 channel DWDM system with the capacity to carry data at 80 Gbps over a single
fiber. Even more versatile is the Company's optical add/drop DWDM, an electronic
to photonics concentrator ("EPC(TM)") and a line of optical amplifiers round out
the current product family.
Embedded Networking Solutions - The Company has significant experience
in the design and sale of chip-level products to address the networking
requirements of its customers. The growth in utilization of the Internet and
various private networks for business, institutional and other uses has created
an opportunity for the Company to exploit this expertise. A wide variety of new
devices, from printers to cameras to industrial controls and domestic appliances
may now be managed or controlled over the Internet (or other networks). The
manufacturers of these products must therefore design them to be network-ready
or face the loss of market share to competitors whose products are
network-ready. Manufacturers, however, generally lack the in-house expertise or
resources to offer affordable, state-of-the-art network connectivity. The
Company's newly-launched NET+ARMTM product solves this dilemma for
manufacturers. NET+ARMTM is a single chip that, when designed into the
manufacture of a product, makes it network-ready. This network-readiness
includes facilitating Internet/intranet connectivity, network administration via
a Web browser, and (for printers) embedded HTTP/HTML and e-mailprinting.
Remote Access - A facet of growing Internet and other private network
utilization has been the growth in the need for network users to "dial in" to an
Internet Service Provider (ISP) in order to gain access to the Internet, or, for
example, corporate users to dial into their corporate network. These connections
are accepted by products generally know as "remote access" equipment. The
Company has based its product offerings in this area in response to a variety of
basic and perhaps under appreciated facts about the marketplace. For example,
rarely do all users dialing into an ISP or network do so via an identical device
or connection. One user may wish to connect using an analog modem, which has one
data transfer rate, while another may wish to dial in across an ISDN line, which
has a different data transfer rate. The ISP or corporate network is therefore
faced with the costly (and space consuming) alternative of buying two separate
devices or turning down potential connections from one or the other user. The
Company's new remote access product, the IQX-200TM, accepts a variety of network
connections in a single device, and thus resolves this dilemma in a cost- and
space-effective manner. Another key dilemma facing ISPs and others offering
network connections has been the need to match their capacity for accepting
those connections with the current and future demand from users. The Company's
competitors do not offer devices, in the same price range as the Company, that
have the same flexible capacity for concurrently accepting multiple types of
connections. The IQX-200TM is scalable from 8 to 168 connections. This
scalability allows growing ISPs and networks to economically match capacity to
current demand, and then grow their capacity as that demand builds over time.
The Company believes that these and other features of IQX-200TM make it an
attractive remote access solution.
The Company wishes to caution readers not to place undue reliance on
any forward-looking statements regarding the Company's expectations concerning
factors affecting demand for increased bandwidth, growth in corporate use of the
Internet, remote access for corporate networks, the introduction of a wide range
of new communication services and technologies and growth in the domestic and
international market for network access solutions. Such statements speak only as
of the date made and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those presently anticipated or
projected.
Markets For The Company's Products
The Company's products address the growing needs for networked, high
bandwidth data and voice communications. The networking industry has experienced
dramatic growth since the early 1990's as corporations discovered increasing
value in connecting desktop devices through local area networks. The emergence
of the Internet and the cultural movement toward mobile and home computing in
the early to mid-1990's further accelerated this trend, pushing annual industry
growth rates above the 50% level. Today, two significant trends in the
networking market are driving demand and shaping the terms of competition among
suppliers:
Convergence - As data traffic has taken on a greater importance in the
overall telecommunications infrastructure, the Company believes the next
significant growth driver in the networking industry will be the integration of
voice and data on a single network. This convergence - of enterprise data
networks (i.e. local area networks, "LANs", and wide area networks, "WANs") and
access networks (i.e., telecommunications networks and cable TV) - is hastened
by recent changes in telecommunications regulation and the adoption of common
standards.
Bandwidth - The increased power of conventional applications, the
proliferation of graphics intensive applications such as multimedia and video
conferencing, as well as the rise of the Internet/intranets, are resulting in
increased demand for solutions that enhance the speed, capacity and efficiency
of existing networks.
The Company's products address both the demand for converged solutions
and the increased requirements for bandwidth in the traditional data networking,
fiber optic, and system-on-silicon embedded solutions markets:
Traditional Data Networking Markets
The market for traditional data networking equipment, consisting of LAN
Switch, ATM LAN Switch, ATM WAN Switch, Remote Access, Routers, Frame Relay,
Network Interface Cards and Shared Media Hubs, comprised an estimated $22.8
billion in revenues in 1997. While results varied by segment, unit/port
shipments climbed an average of 55% over 1996 levels.
Industry estimates indicate that networking sales may climb to over $36
billion in 2001, driven by the upgrading of corporate LAN/WAN networks, further
investments to extend the reach of corporate networks via remote access
solutions, and the continued build-out of Internet-enabled networking
capabilities including remote access, network routing and WAN access.
Fiber Optic Transmission
The market for fiber optic communications systems, comprised mainly of
SONET transport, digital cross-connect and optical digital loop carrier
equipment, is estimated at over $7 billion in annual worldwide sales. Since its
introduction in the 1970's, optical fiber communications technology has gained
widespread adoption among network operators. Transmission over optical fiber
offers key advantages over electrical signals on traditional copper cabling,
including: higher capacity; superior transmission distance; higher reliability;
and lower maintenance costs. Initially the cost to implement fiber optic
circuits and their associated opto-electronic equipment was high, but that cost
has dropped significantly in recent years, leading to a broadened adoption of
the technology throughout public switched telephone networks. Today, fiber
networks are installed across most interexchange networks, interoffice networks,
and metropolitan rings.
To keep up with ever increasing traffic levels, brought on by increased
Internet traffic, video conferencing, mass data transfers, telemedicine,
distance learning, and "plain old telephone service" ("POTS") usage, carriers
are now looking to increase existing network throughput without incurring the
expense of laying new fiber. To meet this need, new fiber optic markets are
emerging. One such market is the market for Wave Division Multiplexing, a
technique that allows network operators to make the most of their currently
installed fiber networks by combining multiple signals into separate wavelengths
on the same fiber. The market for WDM and higher capacity DWDM (dense wavelength
division multiplexing systems that transmit eight or more wavelengths) equipment
is estimated by Ryan Hankin Kent, Inc., a telecommunications industry analyst,
to grow from $1.6 billion in 1997 to $4.4 billion by 2001, driven by continued
competitive pressure on carriers to reduce their infrastructure costs and
improve network performance while supporting ever increasing traffic levels.
The Company's DWDM products specifically address the requirements of
metropolitan and interoffice networks. To date, adoption of DWDM technology has
been most rapid amongst long-haul interexchange carriers, whose backbone
networks concentrate an immense amount of traffic for transport between major
metro areas and across the country. More recently, the market needs of local
exchange carriers, the growth of business campuses, and the desire for business
access rings have caused local carriers to test and install DWDM technology. As
with the long-haul network, both short-haul point-to-point links and
metropolitan fiber access rings today are primarily based on TDM SONET
technology at the OC-48 level and below. As more bandwidth accumulates in these
networks, carriers and network operators may look to DWDM to upgrade capacity
without moving to higher-line-rate SONET multiplexers. According to certain
scenarios, then, the market for short-haul DWDM equipment may surpass the
long-haul market.
Embedded Networking Solutions
The Company's NET+ARM(TM) products fall under the broad umbrella market
for system-on-silicon technology, including Application Specific Integrated
Circuit ("ASIC") hardware/software solutions. These solutions reduce system
complexity by combining multiple hardware/software functions onto one chip.
ASICs continue to gain rapid acceptance by manufacturers and designers of a wide
variety of products and equipment, driven primarily by the following factors:
Time - by combining several functions onto the same chip, ASICs
minimize the processing delays inherent in sending electrical signals between
chips.
Space - in consolidating functionality at one location, ASICs free up
valuable space on a sponsoring motherboard.
Efficiency - fewer components translate to lower power consumption.
Cost - lower production and operating costs result from all of the
above.
One recent industry study by Cowan & Co. sized the market for custom
logic products at $19 billion in annual revenues and forecasts compound annual
growth of 19% through the year 2000. The Company's Embedded Solutions products
fall within the Standard Cell, or Cell Based Integrated Circuit segment of this
market. Standard Cell Solutions currently represent a $7 billion market and,
according to that recent industry study, may be expected to grow 28% annually
through the year 2000 according to a November 1997 study by Cowan & Co.
As ASICs continue to gain acceptance, it is expected that the
technology will be applied in new vertical markets where the benefits of open
networking -- distributed access, scalability, low operating cost -- will become
increasingly important. Future demand for ASIC solutions is expected to be
particularly strong in the area of industrial measurement, control and sensing
devices. As monitoring functions are increasingly performed remotely, via
Internet/Ethernet network connections, ASICs are expected to emerge as
cost-effective and energy efficient means for delivering network/web
functionality within industrial devices. Indicative of this trend, an industry
leader, Hewlett-Packard, recently integrated Ethernet-based management
capabilities into a third party's industrial sensor product family.
The Company's Technology Approach
The Company believes that, as network operator needs become more
sophisticated, opportunities may be available for those who are able to provide
flexible, comprehensive networking solutions at attractive entry price points.
The Company seeks to offer products that address four significant requirements
within carrier and enterprise networks:
Bandwidth - providing scaleable bandwidth within local and distributed
environments remains the number one network challenge. New applications and
climbing usage rates suggest bandwidth demands will continue to plague operators
in the future. The Company's aggregation and transmission products support
bandwidth solutions across T-1 through OC-48 environments.
Integration - increasingly, carriers and large enterprise customers
seek converged, single product solutions capable of addressing their full range
of voice, data and video communications requirements. Point solutions from
legacy providers may therefore no longer be sufficient. The Company's converged
solutions, with multiple application profiles co-resident within the same rack,
offer space and ease-of-use advantages and support cost effective migration as
needs evolve.
Intelligent Management - bandwidth alone does not reduce network
complexity or increase reliability. Today's managers want a complete view of how
traffic flows within their networks. The Company offers policy-based management
models, creating intelligent networks that can guarantee service quality and
bandwidth levels, allocate costs appropriately, and can filter, correlate and
prioritize network events.
Reduced Total Cost of Ownership - operating costs have increased as
networks have grown and technologies have become more complex. Cost sensitivity
is inversely proportional to size, with smaller network operators frequently
overburdened by heavy up-front investments, follow-on maintenance requirements,
and integration costs. The Company's products are designed to feature attractive
entry price points and end-to-end product designs that meaningfully reduce total
cost of ownership.
Historically, the Company's products have fallen within traditional,
distinct market segments including diversified LAN / WAN networking equipment,
broadband cable and fiber optic equipment, and network print servers. Recent
product introductions will meaningfully change the Company's revenue mix in
fiscal year 1999 and beyond and diversify the Company's customer base to
include--or include to a greater extent than in years past--competitive local
exchange carriers, local exchange carriers, competitive access providers,
inter-exchange carriers, corporate and college campuses, ISPs and remotely
located businesses.
The Company wishes to caution readers not to place undue reliance on
any forward-looking statements including the Company's plans to develop new
products, expand its sales force, expand its customer base, establish strategic
relationships and expand within international markets, and the Company's
expectations concerning factors affecting the markets for its products. Such
statements speak only as of the date made and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
presently anticipated or projected.
LEGAL MATTERS
The legality of the Shares offered by this Prospectus has been passed
upon by Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP, Woodbridge, New
Jersey.
EXPERTS
The financial statements incorporated by reference in this Prospectus
have been audited by BDO Seidman, LLP and Arthur Anderson & Co., independent
certified public accountants, to the extent and for the periods set forth in
their reports incorporated herein in reliance upon such report given upon the
authority of said firms as experts in auditing and accounting.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by anyone in any jurisdiction in which such
offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication there has not been any change in the affairs of the Company since
the date hereof.
<PAGE>
PROSPECTUS
OSICOM TECHNOLOGIES, INC.
3,972,085 Shares of Common Stock
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Available Information 5
Incorporation of Certain Information by Reference 5
Prospectus Summary 7 November , 1998
Risk Factors 7
Use of Proceeds 14
Description of Securities 14
Selling Shareholders 15
Plan of Distribution 17
Indemnification 18
Business 19
Legal Matters 24
Experts 24
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The registrant estimates expenses in connection with the offering
described in this Registration Statement will be as follows:
Item Amount
Securities and Exchange Commission Registration Fee $ 10,470.87
Printing and Engraving Expenses 1,000.00
Accountants' Fees and Expenses 6,800.00
Legal Fees and Expenses 45,000.00
NASDAQ Listing Fees 7,500.00
Miscellaneous 229.13
---------------
Total $51,217.59
Item 15. Indemnification of Directors and Officers.
The description set forth under the caption "Indemnification of
Directors and Officers" in the Company's Registration Statement on Form S-4,
filed September 6, 1996, No. 33-10667, is incorporated herein by reference.
Item 16. Exhibits.
Exhibit Number Description of Document
2. Stock Purchase Agreement dated as of June 1, 1996 between
Osicom and BWAI (A).
3.1 Restated Certificate of Incorporation dated June 14, 1988 (B).
3.2 Amended and Restated By-Laws of the Registrant, dated April 13,
1988 (C).
3.3 Series A Preferred Stock Certificate of Designation (E).
3.4 Series B Preferred Stock Certificate of Designation (A).
3.5 Series C Preferred Stock Certificate of Designation (A).
3.6 Series D Preferred Stock Certificate of Designation (F).
3.7 Series E Preferred Stock Certificate of Designation (G).
3.8 Series B Preferred Stock Certificate of Designation (G).
3.9 Certificate of Amendment to the Certificate of Incorporation
dated January 16, 1998 (H).
3.10 Amendment to the By-Laws dated January 30, 1998 (H).
3.11 Amended Certificate of Designation of Series C Convertible
Preferred Stock (I).
4.1 Stock Option Agreement by and between the Registrant and United
Jersey Bank dated as of February 28, 1991 (D).
4.2 Incentive Stock Option Plan, as amended (J).
4.3 1988 Stock Option Plan (K).
4.4 1997 Incentive and Non-Qualified Stock Option Plan (L).
4.5 1997 Directors Stock Option Plan (L).
*5. Opinion of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP
10.1 Line of Credit Agreement with Coast Business Credit dated May
28, 1995 and Modification dated January 1996 (M).
10.2 Acquisition Agreement of Dynair Electronics, Inc. dated June
8, 1995 (M).
10.3 Acquisition Agreement of Rockwell Network Systems, Inc. dated
January 31, 1996 (M).
10.4 Acquisition Agreement of Digital Products, Inc. - US (N).
10.5 Acquisition Agreement of Cray Communications, Inc.(O).
10.6 Share Purchase Agreement of Asia Broadcasting and
Communications Network, Ltd. dated as of March 20, 1997 (P).
10.7 Cooperation and Supply Agreement with Asia Broadcasting
and Communications Network, Ltd. dated as of March 20, 1997 (P)
10.8 Securities Purchase Agreement dated as of April 30, 1998 (I).
21. Subsidiaries of the Registrant (H).
23.1 Consent of BDO Seidman LLP - Page 25.
23.2 Consent of Arthur Andersen & Co., L.L.P.- Page 26.
<PAGE>
*23.3 Consent of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP
(included in opinion filed as Exhibit 5).
* Previously filed.
The foregoing are incorporated by reference from the Registrant's filings
indicated:
<PAGE>
(A) Form S-4 dated September 6, 1996,
(B) Form 10QSB for quarter ended July 31, 1988,
(C) Form 10K for the year ended January 31, 1988,
(D) Form 10K for year ended January 31, 1993,
(E) Form 10K/A for year ended January 31, 1994,
(F) Form S-3 dated February 25, 1997,
(G) Form 10-KSB for year ended January 31, 1997,
(H) Form 10-KSB for year ended January 31, 1998,
(I) Form 8-K dated May 14, 1998,
(J) Proxy Statement dated August 18, 1989,
(K) Proxy Statement dated May 13, 1988,
(L) Proxy Statement dated November 21, 1997,
(M) Form10-KSB for year ended January 31, 1996,
(N) Form 8-K dated September 12, 1996,
(O) Form 8-K dated September 23, 1996,
(P) Form 8-K dated April 10, 1997.
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 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 express in the Act and
will be governed by the final adjudication of such issue. The undersigned
registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, 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 the undertakings set forth in paragraphs (i) and (ii) above do
not apply if the Registration Statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable ground to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Monica, State of California, on
the 6th day of November, 1998.
OSICOM TECHNOLOGIES, INC.
By: /s/ Par Chadha
-------------------------
Par Chadha,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chief Executive November 6, 1998
/s/ Par Chadha Officer, Director
- -----------------------
PAR CHADHA
November 6, 1998
/s/ Christopher E. Sue Vice President - Finance (Principal
- ----------------------- Financial and Accounting Officer) November 6, 1998
CHRISTOPHER E. SUE
/s/ Humbert Powell Director November 6, 1998
- -----------------------
HUMBERT POWELL
/s/ Xin Cheng, Ph.D Director November 6, 1998
- -----------------------
XIN CHENG, Ph.D
/s/ Leonard Hecht Director November 6, 1998
- -----------------------
LEONARD HECHT
/s/ Renn Zaphiropoulos Director November 6, 1998
- ----------------------
RENN ZAPHIROPOULOS
</TABLE>
<PAGE>
Exhibit 23.1
BDO Seidman, LLP
1900 Avenue of the Stars, 11th Floor
Los Angeles, CA 90067
Consent of Independent Certified Public Accountants
Osicom Technologies, Inc.
Santa Monica, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated March 5, 1998, accompanying the financial statements of Osicom
Technologies, Inc. (the "Company") as of January 31, 1998 and 1997, and for each
of the years then ended, as included in the Company's Annual Report on Form
10-KSB for the year ended January 31, 1998, and to the reference to us under the
heading "Experts" in the Prospectus which is part of such Registration
Statement.
BDO SEIDMAN, LLP
Los Angeles, California
November 6, 1998
<PAGE>
Exhibit 23.2
ARTHUR ANDERSEN & CO.
Certified Public Accountants
25/F., Wing On Centre
111 Connaught Road Central
Hong Kong
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference of our report dated March
4, 1998, relating to the financial statements of Uni Precision Industrial
Limited, appearing in Form 10-KSB for the year ended January 31, 1998 and 1997,
on the financial statements of Osicom Technologies, Inc. in the Registration
Statement on Form S-3 for Osicom Technologies, Inc. and to the reference to us
under the heading as "Experts" in the Prospectus which is part of such
Registration Statement.
ARTHUR ANDERSEN & CO.
Independent Public Accountants
November 6, 1998
