<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 1997.
REGISTRATION NO. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FIRST PACIFIC NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 3577 77-0174188
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
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871 FOX LANE
SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
---------------------
JAMES R. HIRSCHY
CHIEF EXECUTIVE OFFICER
FIRST PACIFIC NETWORKS, INC.
871 FOX LANE, SAN JOSE, CALIFORNIA 95131
(408) 943-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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>
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PROPOSED
PROPOSED MAXIMUM
AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value).................... 6,456,882 shares $.39 $2,518,184 $763
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee and
based on the average of the high and low prices of the Common Stock of First
Pacific Networks, Inc. as reported on the Nasdaq SmallCap Market on January 24,
1997.
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 SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE>
6,456,882 SHARES
FIRST PACIFIC NETWORKS, INC.
COMMON STOCK
The 6,456,882 shares of Common Stock of First Pacific Networks, Inc. ("FPN"
or the "Company") offered by this Prospectus are 5,346,695 shares of Common
Stock issued upon conversion of Series G Preferred Stock, and shares of
Common Stock issuable or potentially issuable upon (i) conversion of 175
shares of Series G Preferred Stock of FPN (the "Series G Preferred Shares") and
(ii) exercise of warrants to purchase 350,000 shares of FPN's Common Stock that
may be sold from time to time by or on behalf of certain stockholders or
warrantholders (collectively the "Selling Stockholders") of the Company
described in this Prospectus under "Selling Stockholders."
The Selling Stockholders acquired the Series G Preferred Shares from the
Company in a private offering made in reliance upon Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"). The Company had
agreed to initially register under the Securities Act a number of shares of
Common Stock equal to at least 150% of the number of shares of Common Stock that
would be issuable if all the Series G Preferred Shares were converted at the
conversion rate in effect (as defined herein under "Risk Factors -- Need for
Additional Funds and No Assurance of Available Financing") on October 31, 1996,
the date of filing of the initial Registration Statement (the "Initial
Registration Statement"), and to register an additional number of shares of
Common Stock if the number of shares of Common Stock initially registered is
insufficient to cover all of the Common Stock issued or issuable upon conversion
of the Series G Preferred Shares in accordance with the terms thereof.
The Company issued a warrant to purchase 350,000 shares of the Company's
Common Stock to a placement agent in connection with the Series G Preferred
Share financing (the "Series G Warrants"). The warrant agreement also provided
for certain registration rights. Pursuant to these rights the holders have
elected to include the shares issuable upon exercise of the Series G Warrant in
this Registration Statement.
The Initial Registration Statement registering 10,237,005 shares of the
Company's Common Stock became effective on December 20, 1996 and as a result of
Common Stock issuances pursuant to conversions of Series G Preferred Shares the
number of shares of Common Stock initially registered is insufficient to cover
5,346,695 shares of Common Stock issued upon conversion of Series G Preferred
Shares, the shares of Common Stock issuable upon conversion of the remaining 175
shares of Series G Preferred Shares and the Series G Warrants. Accordingly, the
Company is registering in this Registration Statement of which this Prospectus
is a part (the "Registration Statement"), additional shares of Common Stock
including 5,346,695 shares of Common Stock issued in connection with Conversion
of Series G Preferred Shares and shares which may become issuable upon
conversion of the remaining Series G Preferred Shares and exercise of Series G
Warrants. The Company intends to file an additional registration statement
should the shares to be registered hereby are insufficient to cover any
remaining shares issuable pursuant to conversions of Series G Preferred Shares
and exercise of Series G Warrants.
The number of shares of Common Stock initially registered and any
additional shares of Common Stock registered are hereinafter collectively
referred to as the "Shares". The Company has agreed to use its best efforts to
cause the registration statement(s) covering the Shares to be declared effective
and to remain effective for twelve (12) months from the date of effectiveness of
the Initial Registration Statement. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders.
The Company has been advised by the Selling Stockholders that they intend
to sell all or a portion of the Shares from time to time in the Nasdaq SmallCap
Market, in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of any of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company and the Selling
Stockholders have agreed to certain indemnification arrangements. See "Plan of
Distribution."
The Company will bear all costs and expenses incident to the offering and
sale of the Shares to the public, including without limitation, registration,
filing and qualification fees, printers' and accounting fees and fees and
disbursements of counsel for the Company. All discounts or commissions will be
borne by the Selling Stockholders.
<PAGE>
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is listed on the Nasdaq SmallCap Market. On
January , 1997, the last sales price of the Company's Common Stock as reported
on the Nasdaq SmallCap Market was $ .
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational 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 filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The Commissions Web site can be accessed at http://www.sec.gov.
FPN's Common Stock is traded on the Nasdaq SmallCap Market. Reports and other
information concerning FPN can also be inspected at the offices of the National
Association of Securities Dealers, Inc., Market Listing Section, 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A;
2. Form 10-K for the fiscal year ended March 31, 1996; and
3. Form 10-Q for the period ended June 30, 1996.
4. Form 8-K filed on October 31, 1996.
5. Form 10-Q for the period ended September 30, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to First
Pacific Networks, Inc. at 871 Fox Lane, San Jose, California 95131, Attention:
Chief Financial Officer.
3
<PAGE>
THE COMPANY
First Pacific Networks, Inc. has developed a patented telecommunications
technology that enables telephone, data and video communications to be
transmitted simultaneously over a single wiring system to a large number of
users on a cost-effective basis. The Company's strategy is to use a
combination of strategic alliances with network system integrators, network
infrastructure builders, major communications service and equipment
providers, distributors and licensees as well as direct product sales to
telephone service and cable television operators and utilities worldwide to
gain market penetration of its products.
The Company believes that worldwide market and regulatory developments and
technological advancements are contributing to the increased demand by both the
telephone and cable television industries for telecommunications systems capable
of providing multiple and integrated communications services to their
subscribers at a cost below or competitive with that necessary to build
conventional communication systems. In addition, electric utility companies and
municipalities are seeking to develop systems capable of implementing energy
management programs as well as providing other communication services such as
voice and data. The implementation of these systems requires upgrading of the
broadband networks of the cable television industry and replacement and/or
re-engineering of the switched voice and low-speed data networks operated by the
telephone companies and/or, in certain instances, the deployment of new
distribution networks. The Company believes that its technology can provide a
cost-effective means of implementing such re-engineering. The Company's
technology enables multiple communications services to be provided over upgraded
network distribution systems or new hybrid fiber/coaxial cable (HFC) networks on
an incremental user basis. To implement the Company's strategy, the Company is
adapting and incorporating its core technology and family of products into
systems designed to address specific market applications. The Company's current
marketing activities are targeted primarily to cable telephony systems
internationally and to selected domestic telephone markets, and domestic energy
management applications for utility companies.
The Company is conducting ongoing product development and testing to adapt
its technology and products for specific market requirement applications and
evaluate products under operating conditions and to reduce product costs. To
date, no system wide first or commercial deployments of the Company's technology
have been implemented, although field trials and pilot systems that include
Company products are currently ongoing. Revenues have not been material and the
Company has incurred substantial operating losses.
In July 1992, the Company completed its initial public offering. The
Company was incorporated under the laws of the State of Delaware in 1987. In
August 1988, the Company changed its name to First Pacific Networks, Inc.
The principal executive offices of FPN are currently located at 871 Fox
Lane, San Jose, California 95131 and its telephone number is (408) 943-7600.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INCLUDE A HIGH DEGREE OF RISK, AND
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS AND RISK FACTORS IN
CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN
THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS.
4
<PAGE>
NEED FOR ADDITIONAL FUNDS AND NO ASSURANCE OF AVAILABLE FINANCING. The
Company is experiencing negative cash flow from operations and it is expected
that the Company will continue to experience negative cash flow through the end
of fiscal 1997 and potentially thereafter. There can be no assurances that
adequate revenue growth and reduction of operating losses will be achieved, and
even if they are, management may choose to supplement the Company's cash
position.
The Company believes based on its current operating levels that it has
sufficient cash resources at January 24 1997, for operating activities
through approximately the second week of February 1997, at which time it will
require additional funds from other sources unless and until it obtains
sufficient revenues from product sales or license fees. The Company is
actively seeking additional funding for both near-term and long-term
requirements from private equity or debt financings and from funding by
strategic partners of various operational activities. To the extent the
Company raises additional funding by issuing equity securities or securities
convertible into equity securities ownership dilution to stockholders will
result. The Company may issue an additional series of preferred stock with
rights, preferences or privileges senior to those of the Company's Common
Stock. The Company's Certificate of Incorporation authorizes 90 million
shares of Common Stock. The Company currently has outstanding 65,472,794
shares of Common Stock and based upon its stock price of $0.41 per share has
reserved 11,936,000 shares for issuance upon conversion of Series G Preferred
Stock and Series H Preferred Stock. In addition, the Company has reserved
approximately 5,478,000 shares of Common Stock related to outstanding
warrants and stock options and shares issuable under its employee stock
purchase plan. The Company believes it will be necessary to obtain
stockholder approval to amend its Certificate of Incorporation to increase
the number of authorized shares of Common Stock available for issuance in
future financings. There can be no assurance that the Company will attain
such approval or that an increase of authorized shares will be sufficient to
fulfill all of the Company's future financing requirements. The Company
does not have any commitments or arrangements to obtain any funding and there
can be no assurance that any required financing of the Company will be
available or if available will be obtainable on terms favorable to the
Company or its stockholders. The unavailability of any required financing,
could prevent or delay the continued development and marketing of the
Company's products, may require curtailment of the Company's operations and
could result in the bankruptcy or insolvency of the Company.
On May 31, 1996, the Company completed the sale of an aggregate of 5,000
shares of Series E Preferred Stock (the "Series E Preferred Shares") at
$1,000 per share or an aggregate purchase price of $5,000,000 (net proceeds
of $4,900,000 after the payment of placement fees) in a private placement.
The Series E Preferred Shares were offered and sold in reliance on Regulation
S promulgated under the Securities Act of 1933. In August 1996, one investor
converted 2,500 shares of the Series E Preferred Shares into 3,138,000 shares
of the Company's Common Stock and in October and November 1996 the remaining
holder converted 1,650 shares of the Series E Preferred Shares into an
aggregate 3,233,292 shares of the Company's Common Stock. In December 1996
and January 1997 the remaining 850 Series E Preferred Shares were converted
into 4,250,000 shares of the Company's Common Stock. As the result of an
agreement (the "Series E Agreement") with the remaining holder of Series E
Preferred Shares the Company filed a registration statement with the
Commission related to certain outstanding Series E Preferred Shares. The
registration statement became effective in October 1996. As a result of the
conversions the shares initially registered were insufficient and an
additional registration statement was filed with the Commission and became
effective on December 24, 1996. In connection with the Series E Agreement
the Company issued warrants to purchase up to 50,000 shares of Common Stock
to the remaining holder of Series E Preferred Shares. The warrants become
exercisable over a three year term and have an exercise price of $1.52 per
share. A registration statement related to the shares issuable upon exercise
has been filed with the Commission in October, 1996. If the Series E
Warrants are exercised they will result in additional dilution to the
stockholders. There are no shares of Series E Preferred Stock outstanding at
January 16, 1997.
On August 27, 1996, the Company completed the sale of an aggregate of 1,500
shares of Series F Preferred Stock (the "Series F Preferred Shares") at $1,000
per share or an aggregate purchase price of $1,500,000 in a private placement.
The Series F Preferred Shares were offered and sold in reliance on the exemption
from registration under the Securities Act set forth in Regulation D under the
Securities Act. In November 1996 the Company issued 2,364,000 shares of Common
Stock upon conversion of 1,182 shares of Series F Preferred Shares and in
January 1997 the Company issued 1,090,104 shares of Common Stock pursuant to
conversion of the remaining 318 Series F Preferred Shares. In accordance with
the subscription agreement between the Company
5
<PAGE>
and the holder of the Series F Preferred Shares the Company filed a
registration statement, which became effective in October 1996, registering
the Common Stock issuable upon conversion of the Series F Preferred Shares.
As a result of the conversions the shares initially registered were
insufficient and an additional registration statement was filed with the
Commission and became effective on December 24, 1996. In connection with the
issuance of the Series F Preferred Shares the Company has agreed to issue
warrants to purchase up to 100,000 shares of the Company's Common stock to an
individual as finder compensation. The warrants become exercisable over a
three year term and have an exercise price of $1.52 per share. A
registration statement related to the shares issuable upon exercise has been
filed with the Commission in October, 1996. If the Series F Warrants are
exercised they will result in additional dilution to the stockholders.
On September 26, 1996, the Company entered into stock purchase agreements
with a group of investors for the sale of an aggregate of 3,500 shares of
Series G Preferred Stock (the "Series G Preferred Shares") at $1,000 per share
or an aggregate purchase price of $3,500,000 (net proceeds of $3,325,000) in a
private placement. The sale of the shares closed on October 1 and 2, 1996. The
Series G Preferred Shares were offered and sold in reliance on the exemption
from registration under the Securities Act set forth in Regulation D under the
Securities Act. In January 1997, the Company issued an aggregate 15,583,700
shares of Common Stock upon conversion of 3,325 Series G Preferred Shares. In
connection with the issuance of the Series G Preferred Shares, the Company has
agreed to issue warrants to purchase up to 350,000 shares of the Company's
Common stock to the placement agent. The warrants become exercisable over a
three year term and have an exercise price of $1.34 per share. In accordance
with the registration rights agreements between the Company and the purchasers
of the Series G Preferred Shares the Company is obligated to use its best
efforts to effect a "shelf" registration of the Common Stock issuable upon
conversion of the Series G Preferred Shares and to keep the registration
statement registering such shares effective for up to one year. A registration
statement registering 10,237,005 shares of common stock issuable upon
conversion of the Series G Preferred Shares and exercise of the warrants has
been filed with the Commission and became effective December 20, 1996. When the
remaining 175 Series G Preferred Shares are converted and if the Series G
Warrants are exercised they will result in additional dilution to the
stockholders.
The Series G Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $1.34 (the "Series G Fixed
Conversion Price"), or (ii) 85% of the average closing bid price for the three
trading days prior to the date the investor gives notice of conversion. The
Series G Preferred Shares shall automatically be converted into the Company's
Common Stock, if not previously converted, on October 1, 1998. The Series G
Preferred Shares are entitled to receive dividends only when and if dividends
are declared on the Company's Common Stock. The Company has the right to redeem
outstanding Series G Preferred Shares under certain circumstances.
In January 1997, the Company completed the sale of an aggregate of 1,740
shares of Series H Preferred Stock (the "Series H Preferred Shares") at $1,000
per share or an aggregate purchase price of $1,740,000 in a private placement.
The Series H Preferred Shares were offered and sold in reliance on the exemption
from registration under the Securities Act set forth in Regulation D under the
Securities Act. In accordance with the subscription agreement between the
Company and the holders of the Series H Preferred Shares the Company is
obligated to use its best efforts to effect a "shelf" registration of the Common
Stock issuable upon conversion of the Series H Preferred Shares and to keep the
registration statement registering such shares effective for up to two years.
In connection with the issuance of the Series H Preferred Shares the Company has
issued warrants to purchase up to 694,000 shares of the Company's Common Stock
to the investors. The warrants are exercisable over a three year term and
have an exercise price of $0.50 per share. The shares issuable upon exercise
will be registered pursuant to a separate additional registration statement.
When the Series H Preferred Shares are converted and if the Series H Warrants
are exercised they will result in additional dilution to the stockholders.
6
<PAGE>
The Series H Preferred Shares may be converted into the Company's Common
Stock at a conversion price which is the lower of (i) $0.50 (the "Series H Fixed
Conversion Price"), or (ii) 85% of the average closing bid price for the three
trading days prior to the date the investor gives notice of conversion. The
Series H Preferred Shares shall automatically be converted into the Company's
Common Stock, if not previously converted, in January, 1999. The Series H
Preferred Shares are entitled to receive dividends only when and if dividends
are declared on the Company's Common Stock. The Company has the right to redeem
outstanding Series H Preferred Shares under certain circumstances.
In addition, the Company has outstanding warrants that contain
registration rights. The warrants are subject to anti-dilution adjustments
and are currently exercisable into approximately 1,897,000 shares of the
Company's Common Stock at a current exercise price of $0.20 per share. A
registration statement related to the shares issuable upon exercise has been
filed with the Commission in October, 1996. If exercised the warrants will
result in additional dilution to stockholders.
The number of shares of the Company's Common Stock issued and outstanding
on January 17, 1996 was 65,472,794.
CONTINUING OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY. The Company has incurred substantial losses since its inception
and, as of September 30, 1996, had an accumulated deficit of approximately
$135,561,000. The Company has incurred and expects to incur, over the
near-term, additional operating losses and will continue to incur operating
losses until such time as product sales generate sufficient revenues to fund its
operations. The timing of achieving profitability is primarily dependent upon
the continued development and commercial acceptance of the Company's products,
and management's ability to strategically focus the Company. There can be no
assurance as to whether or when achievement of profitable operations will occur.
Numerous factors may materially and unpredictably affect operating results
of the Company including the uncertainties of new product introduction and sales
growth; the timing and extent of field trials of the Company's products; and
recognition of license fees. Accordingly, the Company's operating results are
expected to fluctuate from period to period.
RECEIPT BY THE COMPANY OF A GOING CONCERN OPINION FROM ITS INDEPENDENT
ACCOUNTANTS. The report dated May 17, 1996, of Coopers & Lybrand L.L.P on the
Company's consolidated financial statements for the fiscal year ended March 31,
1996, contains an explanatory paragraph regarding the Company's ability to
continue as a going concern.
LISTING OF THE COMPANY'S COMMON STOCK ON NASDAQ SMALLCAP MARKET. During
1995, the Company received notice from Nasdaq indicating that as a result of the
Company's failure to maintain $4,000,000 of net tangible assets, as required by
the NASD bylaws governing continuance on the Nasdaq National Market, the
Company's Common Stock would be delisted if the required net tangible assets
condition was not satisfied. Subsequently, the NASD moved the Company to the
Nasdaq SmallCap Market commencing August 25, 1995. The NASD bylaws governing
continuance on the Nasdaq SmallCap Market currently require companies whose
shares trade below $1.00 per shares to, among other things, maintain capital
surplus of at least $2,000,000 and a public float with a market value of at
least $1,000,000.
NASD has recently proposed, and is currently soliciting comments with
respect to, a change in its bylaws to permit continued listing of securities
only if the minimum bid price is at least $1.00. The Company's Common Stock
has been trading at a price that is below $1.00 per share. As of December
31, 1996 the Company does not meet the current capital requirements and if
the proposed change is not adopted, then, absent an exception from the
capital requirements, the Company's stock will be delisted. If the proposed
change is adopted and the price of the Company's stock does not increase to
at least $1.00 per share,
7
<PAGE>
then, absent an exception to the new requirement, the Company's stock will be
delisted. A delisting of the Company from Nasdaq could adversely affect the
value and liquidity of the shares of the Company's Common Stock and restrict
the Company's future ability to raise equity capital.
UNCERTAINTY OF MARKET ACCEPTANCE. The Company's technology and products
relate to an innovative method of providing telecommunications services. Market
acceptance of the Company's technology will depend in large part on the
Company's ability to demonstrate to potential customers and licensees, the
viability, relative cost-effectiveness and other benefits of the Company's
technology compared to competitive solutions or alternative communications
technologies. Many companies have significant investments and vested interests
in existing technologies and, accordingly, may be unwilling to rapidly accept
new communications technologies. Deployment by telephone and cable service
providers and electric utilities, particularly in the United States, may be
prevented or further delayed by regulatory barriers or limitations on new
capital expenditures. The Company believes that the ability to achieve rapid
acceptance of its technology in major telecommunications markets depends on its
establishment of strategic alliances with major equipment suppliers (OEM's),
system integrators and communication service providers as well as the ability to
demonstrate the cost effectiveness and functionality of the Company's products
in a market with evolving requirements.
There can be no assurance that the Company's existing or future products
will be commercially accepted other than as demonstrated by the Company's sales
growth to date. If market acceptance of these products is slower than
anticipated, the Company's product sales and results of operations would be
adversely affected, which may result in continuing losses. In addition, a
slower rate of product commercialization is likely to result in an increased
need for additional outside funding of the Company's operations.
COMPETITION. Many areas of the telecommunications industry are
characterized by intense competition, with a large number of companies offering
or seeking to develop technology or system capabilities similar to those of the
Company's technology or products. Many of these companies have substantially
greater financial, marketing and other resources than the Company, are
significantly more established in the industry and have substantial investments
in their technology. The Company's competitors include manufacturers and
vendors of technology and products which address specific customer or market
needs for each discrete area of the telecommunications industry. The Company
also competes directly with many companies who are developing or who are forming
alliances with companies in the communications field to develop innovative
communications technologies. In certain markets, the Company will also be
indirectly competing with companies who are also potential customers of its
technology and products, such as original equipment manufacturers. There can be
no assurance that competitors will not succeed in developing technologies or
offering products that are marketed at a lower price than those of the Company
or in obtaining market acceptance for products more rapidly than the Company.
Continued deregulation of the domestic telephone and cable television
industries, as well as the emergence of new telecommunications technologies, can
be expected to result in increased competition.
TECHNOLOGICAL CHANGES; RISK OF PRODUCT OBSOLESCENCE. The market for the
Company's technology and products is characterized by rapidly changing
technology and evolving industry standards. Although the Company believes its
approach to telecommunications requirements to be innovative, current
competitors or market entrants may develop new technologies, products, or
standards which could adversely affect the Company's ability to compete
effectively or which could render the Company's technology and products
obsolete. The Company's success will depend on its ability to anticipate
changes in technology and industry standards and to respond to market and
technological developments on a timely basis.
8
<PAGE>
RELIANCE ON CORPORATE RELATIONSHIPS. From time to time, the Company has
established corporate relationships and intends to enter into future corporate
relationships to test, distribute and market its products. Continued
participation by corporate partners under marketing, distribution and supply
agreements with the Company will depend not only on the timely achievement of
development and marketing objectives by the Company, which cannot be assured,
but also on each corporate partner's own financial, competitive, marketing and
strategic considerations. The Company's agreements with strategic marketing,
distribution and supply partners are generally terminable by their corporate
partners on short notice. Suspension or termination of agreements with certain
corporate partners could have a material adverse affect on the Company.
DEPENDENCE ON SUPPLIERS. The Company relies on outside sources to
manufacture components of its products, none of which are contractually
obligated to meet the long-term requirements of the Company. While the Company
believes there are a number of potential sources of supply for each component,
there can be no assurance that current or alternative sources will be able to
supply all of the Company's demands on a timely basis. Although the Company
believes alternative sources are available, any interruption in the supply by
these suppliers or substitution of an alternative supplier would likely result
in delays in delivery that could adversely affect the Company's business. In
addition, reliance on outside manufacturing sources reduces the Company's
control over production costs.
RELIANCE ON THIRD PARTY MANUFACTURERS. The Companies strategy includes
seeking subcontracts with high volume manufacturers in order to provide the
capacity necessary to support projected demands for the Company's products
without incurring the capital expenditures required in connection with
establishing an internal manufacturing capability. The Company may also seek to
cross-license the manufacture of certain elements of its systems to strategic
alliances when such activity could result in enhancements or cost reductions to
its products being funded by the licensee. There can be no assurance that the
Company will be able to secure subcontract manufacturing. Should it not be able
to do so and significant sales materialize, the Company will incur significant
expenditures in building manufacturing capacity and could experience delays in
fulfilling it's production obligations.
In January 1994, the Company entered into a three-year agreement with Sanyo
Electric Co. Ltd. ("Sanyo") providing for Sanyo to manufacture the customer
interface unit of the FPN1000 system. Sanyo commenced initial manufacturing of
the customer interface unit during the fourth quarter of fiscal 1995. The
Company has outstanding non cancelable commitments with Sanyo to purchase
approximately $2.0 million of customer interface units. The Company and Sanyo
currently have agreed that the Company will purchase this inventory which is
comprised of both finished goods and components through the remainder of fiscal
1997.
RISKS OF INTERNATIONAL OPERATIONS. The Company's strategy includes
marketing its technology to licensees and partners, which may include
governmental entities, and selling products in foreign countries. In addition,
a substantial portion of the components of the Company's products are fabricated
overseas. Accordingly, the Company's business will be subject to many of the
risks of international operations, including tariffs and other trade barriers,
currency control regulations, political instability, unexpected changes in
regulatory requirements, difficulties in staffing and managing foreign
operations, longer payment cycles, greater difficulty in accounts receivable
collection and potential adverse tax consequences. Also, currency conversion
gains and losses could contribute to fluctuations in the Company's results of
operations. If for any reason exchange or price controls or other restrictions
on the conversion or repatriation of foreign currencies were imposed, the
Company's operating results could be adversely affected. There can be no
assurance that these factors will not have an adverse impact on the Company's
international operations and, consequently, its operating results.
DEPENDENCE ON LICENSEES AND INDEPENDENT DISTRIBUTORS. To the extent the
Company licenses its technology, revenues beyond the initial license fee will be
derived primarily from product component sales to or royalties from licensees or
other revenue-sharing arrangements which are dependent on the successful
marketing of products utilizing Company technology. Principal marketing
activities are expected to be conducted or controlled by licensees of the
Company's technology. Accordingly, the Company's future success will depend to
a significant
9
<PAGE>
extent on the commitment of Company licensees to the Company's technology and
products. If the Company licenses its technology and products, it may also
not have control over the manufacturing process, quality assurance or costs.
Although the Company's licensing strategy is based partially on the Company's
assessment that licensees may be more effective than the Company in
penetrating certain markets and obtaining greater market share, there can be
no assurance that this will be the case. Accordingly, revenues which may be
derived by the Company under license arrangements may be less than from sales
which might have been derived by the Company if the Company were marketing
its products directly. In addition, Entergy Enterprises is entitled to
receive or participate in certain license and sublicense fees derived by the
Company. Further, because the Company believes that the success of a
telecommunications technology such as the Company's depends on rapid and
widespread market penetration, the inability of licensees to achieve such
penetration will materially adversely affect the Company's business and
prospects. In certain markets, marketing efforts (including marketing to
potential licensees) are or may in the future be conducted by independent
distributors and OEMs who may also represent entities that are more
significant to the distributor's business than is the Company and who may
have no contractual obligation to market the Company's technology or products.
DEPENDENCE ON PATENTS AND OTHER PROPRIETARY RIGHTS. The Company has twelve
issued United States patents, six issued foreign patents and two additional
United States patent applications pending, all generally covering the Company's
core technology. In addition, more than 20 corresponding patent applications
are pending in various foreign countries. The Company believes these patents
have been and will continue to be important in enabling the Company to compete
in the telecommunications industry. However, there can be no assurance that the
Company's patents will not be challenged or circumvented by competitors or will
provide the Company with any competitive advantages or that other companies will
not be able to market functionally similar products, systems or processes
without violating the Company's patent rights or that any additional patents
will be issued. Failure to obtain patent protection in certain foreign
countries may have a material adverse affect on the Company's ability to compete
effectively in those countries. The Company also relies on trade secrets that
it seeks to protect, in part, through confidentiality agreements with employees
and other parties. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known to or independently
developed by competitors. As the Company intends to enforce its patents,
trademarks and copyrights and protect its trade secrets, it may be involved from
time to time in litigation to determine the enforceability, scope and validity
of these rights. Any such litigation could result in substantial cost to the
Company and diversion of effort by the Company's management and other personnel.
GOVERNMENT REGULATION. The Company's markets in the United States may be
materially affected by regulations and actions of the Federal Communications
Commission ("FCC"), state public service and utility commissions, the United
States Congress, and the courts relating to regulatory barriers between the
telephone service and cable television industries, rate restrictions for
services provided by companies in such industries, or other factors which affect
the market and demand for and availability of communication systems providing a
combination of telephone, computer, and video services. In certain United
States markets, regulatory barriers restrict the ability of some service
providers to provide a full range of communications services. Although
legislation has been proposed to change the current regulations for those who
provide both telephone and video services, there can be no assurance that such
legislation will be implemented or, if implemented, when such changes will
become effective. These restrictions may be an important factor in decisions by
domestic telephone companies or cable operators in purchasing Company products
or licensing Company technology. A decision by a utility to deploy an energy
management system using PowerView-TM- for use in its existing service territory
for energy applications will depend in part on the evaluation and approval of
public utility commissions. There can be no assurance that public utility
commissions will permit utilities to recover the full costs of PowerView in
their customer rate bases.
10
<PAGE>
RISKS RELATING TO FIELD AND PILOT TESTING. Telecommunications technologies
such as the Company's are generally first evaluated through a lengthy process of
testing, field trials and first deployments prior to any commercial deployments.
As a result, the Company has expended and may continue to expend substantial
sums on product development and modifications and for inventory to support field
trials which may not result in any commercial deployments. The Company's
technology and products have been tested in certain field trials which have not
yet resulted in significant purchases of Company products. Field trials are
ongoing and the Company is unable to predict whether or when any commercial
deployments will result, as this may depend on numerous factors beyond the
Company's control, such as regulatory constraints, priorities and limitations on
capital expenditures of the customer.
VOLATILITY OF STOCK PRICE. The trading price of the Company's Common Stock
has been highly volatile and could continue to be subject to significant
fluctuations in response to variations in the Company's quarterly operating
results, general trends in the industry and other factors. The market prices of
stocks of high technology companies often fluctuate based on factors unrelated
to the operating performance of specific companies. Announcements by potential
customers of their plans with respect to field trials or deployment orders for
products of the Company or of competitors of the Company could cause the market
price of the Common Stock to fluctuate substantially. Announcements of
regulatory changes, or the failure to make changes which are anticipated by the
telecommunications industry or the public, may create public perception that the
business prospects of the Company may be adversely affected. Such a perception,
whether or not accurate, may adversely affect the market price of the Common
Stock.
DEPENDENCY ON HARDWARE SUPPLIERS. The Company's PowerView-Registered
Trademark- system is integrated with hardware and software components that
comprise the in-home network. The Company has completed integration of its
current version of PowerView-Registered Trademark- in cooperation with two
hardware suppliers. The Company is currently dependent upon these suppliers for
its continued involvement in certain field trials of PowerView-Registered
Trademark- as well as potential near-term sales activities. Should these
suppliers be unable to supply or discontinue production, the Company could
experience significant delays and costs as a result of identifying and
integrating the PowerView-Registered Trademark- product with a replacement
supplier. Although the Company is investigating and evaluating additional
sources there can be no assurance that such activities will occur or, occur in a
timely enough fashion to avoid delays and incurring significant additional
integration costs.
FLUCTUATION IN REVENUES. The Company's strategy includes licensing
arrangements, which are expected to include a license fee. During the period in
which license fees are derived and retained by the Company, these fees can
represent a substantial portion of the Company's revenues. Because of the
extensive period of time involved in negotiating and obtaining a licensing
arrangement as well as the inability to predict whether or when any licenses
will be entered into, the Company may experience significant fluctuations in
revenues (or periods in which minimal or no revenues are recognized) and
operating results, at least over the near term. In addition, Entergy
Enterprises has the right to receive or participate in certain license or
sublicense fees derived by the Company. Additional variability in revenues and
operating results may arise from timing and extent of field trials, budgeting
and purchasing patterns of customers, regulation of cable television operators
and telephone companies and technological developments in the telecommunications
industry, as well as general economic trends. Notwithstanding the lack of
revenues in certain periods, the Company continues to incur significant expenses
and, accordingly, substantial net losses and cash flow shortfalls from
operations. The continued inability of the Company to generate revenues on a
predictable basis could result in the interruption or cancellation of certain of
the Company's research and product development efforts, and require the Company
to obtain additional funds.
11
<PAGE>
DEPENDENCE UPON KEY PERSONNEL. Because of the specialized technical nature
of the Company's business the Company's success will depend to a significant
extent upon a number of key technical and management employees. While the
Company employees are required to sign standard agreements concerning
confidentiality and ownership of inventions, the employees are generally not
otherwise subject to employment agreements. The loss of the services of any of
the Company's key employees could have a material adverse effect on the
Company's business, financial condition or results of operations. The Company
does not maintain life insurance policies on its key employees.
NO ASSURANCE OF ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. The Company's
ability to maintain its competitive technological position will depend, in part,
upon its ability to attract and retain highly qualified scientific, managerial
and manufacturing personnel. Competition for such personnel is intense. The
loss of a significant group of key employees would adversely affect the
Company's product development effort. On November 20, 1996 the Company's Board
of Directors authorized employees, exclusive of officers and members of the
Board of Directors, the right to cancel certain outstanding stock options and
receive new stock option grants with an exercise price of $0.50 per share (the
exercise price was in excess of fair market value on the date of the Board
authorization). Options to purchase up to 1,264,000 shares of Common Stock
would be subject to the employee rights. The new option grants would provide
for new vesting ranging from one to three years.
OBLIGATIONS DUE ENTERGY ENTERPRISES. Pursuant to an Amended Product
License Agreement (the "License Agreement") with Entergy Enterprises, Inc.
(Entergy) the Company is obligated to pay Entergy $3,500,000 in March 1998 and
$3,500,000 in March 1999. The amounts due Entergy will be reduced by any
royalty payments paid to Entergy in connection with the License Agreement prior
to their payment. There can be no assurance that the Company will have
generated sufficient cash flow from its operating activities to meet this
obligation and as a result may be required to seek external debt or equity
financing at that time.
ANTI-TAKEOVER PROVISIONS. The Company is subject to agreements and
provisions which could hinder or preclude an unsolicited acquisition of the
Company. The Company has an employment agreement with one of its executive
officers and severance agreements with five of its other officers and employees.
The employment agreement which expires in June 1997, provides for the executive
to be paid the remainder of his contract if it is terminated upon a change of
control. The severance agreements generally provide for six months salary in
the event the officer/employee is terminated without cause. Additional payments
would be due in the event new employment is not secured within a twelve month
period. In addition, the Company's Restated Certificate of Incorporation
authorizes the Board of Directors to issue, without stockholder authorization,
shares of preferred stock, in one or more designated series or classes. The
Restated Certificate of Incorporation and By-laws also provide for the Board of
Directors to be divided into three classes which serve for staggered three-year
terms. The Company is also subject to a Delaware statute regulating business
combinations. In addition, the Company has adopted a preferred stock purchase
plan. Any of these agreements or provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less likely
that stockholders receive a premium for their shares as a result of any such
attempt. These provisions may also have a depressive effect on the market price
of the Common Stock.
12
<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders holding the Series G Preferred Shares or shares
of Common Stock issued upon conversion of the Series G Shares acquired the
Series G Preferred Shares from the Company in a private offering made in
reliance on Regulation D under the Securities Act, in a transaction
consummated on October 1, and October 2, 1996 (See "Risk Factors - Need for
Additional Funds and No Assurance of Available Financing").
The Selling Stockholders who may acquire its shares of Common Stock
pursuant to exercise of the Series G Warrant acquired the warrant in connection
with the Series G financing for which it acted as placement agent. (See "Risk
Factors - Need for Additional Funds and No Assurance of Available Financing").
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owns or has the right to acquire upon the
conversion of the Series G Preferred Shares (the "Preferred Shares") purchased
by each or exercise of Series G Warrants acquired by each, the number of Shares
expected to be sold by each, assuming the conversion of all Preferred Shares and
exercise of the Series G Warrant and the number and the percentage of the shares
of the Company's Common Stock which each will own or have the right to acquire
after the offering pursuant to the Registration Statement, assuming the sale of
all the Shares expected to be sold.
<TABLE>
<CAPTION>
Shares
Owned Shares Owned Percentage
Before Shares To After Owned After
Selling Stockholder(1) Offering Be Offered Offering Offering(5)
---------------------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C>
FTS Worldwide Corp.(2) 2,216,838 2,216,838 -0- --
Duroc Holding (3) 1,138,823 1,138,823 -0- --
Euro Factors International Inc. (3) 1,138,823 1,138,823 -0- --
The Law Firm of Bernstein, Leibhard & Lifshitz (3) 785,882 785,882 -0- --
Gross Foundation Inc. (3) 689,431 115,929 573,502 1.0
Harmen Partners (3) 381,176 381,176 -0- --
Bridge, Ltd. (3) 329,411 329,411 -0- --
First Granite Securities, Inc. (4) 350,000 350,000 -0- --
</TABLE>
- -------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of FPN Common Stock shown as beneficially owned by
them.
(2) Represents Shares issued upon conversion of Series G Preferred Shares and
150% of the shares issuable upon conversion of 175 Series G Preferred
Shares had such conversion occurred on January 24, 1997. The conversion
rate at January 24, 1997 was 85% of the average closing bid price of the
Company's Common Stock for the three trading days prior to January 24,
1997, (See "Risk Factors - Need for Additional Funds and No Assurance of
Available Financing".)
(3) Represents Shares issued upon conversion of Series G Preferred Shares in
January 1997.
(4) Represents Shares issuable upon exercise of Series G Warrants. (See "Risk
Factors - Need for Additional Funds and No Assurance of Available
Financing".)
(5) The number of shares of the Company's Common Stock issued and outstanding
on January 24, 1997 was 65,472,794
13
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they, or
their respective pledges, donees, transferees or successors in interest, intend
to sell all or a portion of the Shares from time to time on the Nasdaq SmallCap
Market at prices and at terms prevailing at the time of sale or at prices
related to the then current market price, or in negotiated transactions. The
Shares may be sold by one or more of the following methods: (a) a block trade
in which the 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 or dealer for its own account pursuant to this Prospectus;
(c) an over-the-counter distribution in accordance with the rules of the Nasdaq
SmallCap Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions.
There is no assurance that any of the Selling Stockholders will sell any or
all of the Shares offered by them. Pursuant to the terms of the Certificate of
Designation for Series G Preferred Stock, Series G Preferred Shares are
convertible into Common Stock to the extent of one-third of the Series G
Preferred Shares purchased beginning November 30, 1996, an additional one-third
of the Series G Preferred Shares purchased beginning December 15, 1996 and the
balance beginning December 30, 1997 at the option of the holder and are
convertible into shares of Common Stock at a conversion rate which may vary with
the market price of the Company's Common Stock. Therefore, the number of shares
of Common Stock into which the Series G Preferred Shares are convertible and
which may be sold by the Selling Stockholders at a particular time will vary in
accordance with the then applicable conversion rates. See "Risk Factors -- Need
for Additional Funds and No Assurance of Available Financing." The Series G
Warrants became exercisable on November 16, 1996 and expire in October, 1999.
In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers
will receive commissions or discounts from the Selling Stockholders in amounts
to be negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. The Company will
pay all expenses incident to the offering and sale of the Shares to the public,
including without limitation, registration, filing and qualification fees,
printers' and accounting fees and fees and disbursements of counsel of the
Company. All discounts or commissions will be borne by the Selling
Stockholders.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act. The Selling Stockholders have agreed to indemnify in
certain circumstances the Company and certain related persons against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
twelve (12) months from the date of the Initial Registration Statement. The
Company intends to de-register any of the Shares not sold by the Selling
Stockholders at the end of such twelve (12) month period.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
14
<PAGE>
EXPERTS
The consolidated balance sheets as of March 31, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended March 31, 1996 incorporated
by reference in this Prospectus have been incorporated in reliance on the
report (which contains an explanatory paragraph relating to the Company's
ability to continue as a going concern as described in Note 2 of Notes to
Consolidated Financial Statements) of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
15
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY JURISDICTION IN WHICH 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 THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
TABLE OF CONTENTS
Page
----
Available Information...................................................... 3
Incorporation of Certain
Documents by Reference................................................. 3
The Company................................................................ 4
Risk Factors............................................................... 4
Selling Stockholders....................................................... 13
Plan of Distribution....................................................... 14
Use of Proceeds............................................................ 14
Legal Matters.............................................................. 14
Experts.................................................................... 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,456,882 SHARES
FIRST PACIFIC NETWORKS,
INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
January ______, 1997
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are
estimates except the Securities and Exchange Commission registration fees and
Nasdaq filing fee.
SEC Registration Fee............................................ $ 763
-------
Nasdaq filing fee...............................................
-------
Accounting fees and expenses.................................... 2,000
-------
Printing........................................................ -
-------
Transfer agent and registrar fees and expenses.................. -
-------
Blue Sky fees and expenses (including counsel fees)............. -
-------
Legal fees and expenses......................................... 5,000
-------
Miscellaneous expenses.......................................... 1,000
-------
Total................................................... $ 8,763
-------
-------
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Stockholders, excluding
underwriting discounts and commissions and legal fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Company provide that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporate Law (the "GCL"). Section 145 of the GCL, relating
to indemnification, is hereby incorporated herein by reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Company eliminates the personal liability of directors
to the Company or its shareholders for monetary damages for breach of
fiduciary duty as a director with certain limited exceptions set forth in
Section 102(a)(7).
The Registrant has also entered into indemnification agreements with
each of its executive officers and directors, as well as several of its
officers, the form of which is filed as Exhibit 10.1 and reference is hereby
made to such form.
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
4.1 Certificate of Designation of Series G Preferred Stock of First Pacific
Networks, Inc. (1)
4.2 Form of Stock Purchase Agreements between First Pacific Networks, Inc.
and the Series G investor executing such Agreement (2)
4.3 Form of Registration Rights Agreement between First Pacific Networks,
Inc. and the Series G investor executing such Agreement (3)
4.4 Letter of Agreement between First Granite Securities, Inc. (placement
agent) and First Pacific Networks, Inc. (4)
4.5 Warrant Agreement between the Company and First Granite Securities,
Inc. (5)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation (7)
10.1 Form of Indemnification Agreement (6)
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants (7)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1) (7)
24.1 Power of Attorney (included in the Signature Page contained in Part
II of the Registration Statement) (7)
- -----------
(1) Filed as Exhibit 4.1 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(2) Filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(3) Filed as Exhibit 4.3 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(4) Filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(5) Filed as Exhibit 4.5 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(6) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and incorporated herein by reference.
(7) Filed herewith
<PAGE>
ITEM 17. UNDERTAKINGS.
A. 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 (the "Securities Act");
(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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(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
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, 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.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, 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 the
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.
C. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
<PAGE>
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities 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 Securities Act and will be governed by the
final adjudication of such issue.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California on the 24th day of January, 1997.
First Pacific Networks, Inc.
By: /s/ James R. Hirschy
------------------------------------------
James R. Hirschy
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of First Pacific Networks,
Inc., hereby severally constitute and appoint James R. Hirschy and Kenneth W.
Schneider, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in
the capacities indicated below, the Registration Statement on Form S-3 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable First Pacific
Networks, Inc. to comply with the provisions of the Securities Act and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 24, 1997 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ James R. Hirschy PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
- ------------------------------------------ (PRINCIPAL EXECUTIVE OFFICER)
James R. Hirschy
/s/ Kenneth W. Schneider EXECUTIVE VICE PRESIDENT FINANCE;
- ------------------------------------------ CHIEF FINANCIAL OFFICER; CORPORATE SECRETARY
Kenneth W. Schneider (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ Paul C. O'Brien CHAIRMAN OF THE BOARD
- ------------------------------------------
Paul C. O'Brien
/s/ Robert P. McNamara, Ph.D. CHIEF TECHNICAL OFFICER; DIRECTOR
- ------------------------------------------
Robert P. McNamara, Ph.D.
/s/ Ambassador William A. Wilson DIRECTOR
- ------------------------------------------
Ambassador William A. Wilson
/s/ Dr. Bill B. May DIRECTOR
- ------------------------------------------
Dr. Bill B. May
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
- -----------
4.1 Certificate of Designation of Series G Preferred Stock of First Pacific
Networks, Inc. (1)
4.2 Form of Stock Purchase Agreements between First Pacific Networks, Inc.
and the Series G investor executing such Agreement (2)
4.3 Form of Registration Rights Agreement between First Pacific Networks,
Inc. and the Series G investor executing such Agreement (3)
4.4 Letter of Agreement between First Granite Securities, Inc. (placement
agent) and First Pacific Networks, Inc. (4)
4.5 Warrant Agreement between the Company and First Granite Securities,
Inc. (5)
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation (7)
10.1 Form of Indemnification Agreement (6)
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants (7)
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1) (7)
24.1 Power of Attorney (included in the Signature Page contained in Part
II of the Registration Statement) (7)
- -------------
(1) Filed as Exhibit 4.1 to the Company's Registration Statement on Form
S-3 filed with the Securities and Exchange Commission on October 31,
1996.
(2) Filed as Exhibit 4.2 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(3) Filed as Exhibit 4.3 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(4) Filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on October 31, 1996.
(5) Filed as Exhibit 4.5 to the Company's Registration Statement on Form
S-3 filed with the Securities and Exchange Commission on October 31,
1996.
(6) Filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and incorporated herein by
reference.
(7) Filed herewith
<PAGE>
EXHIBIT 5.1
January 24, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: FIRST PACIFIC NETWORKS, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As legal counsel for First Pacific Networks, Inc., a Delaware
corporation (the "Company"), we are rendering this opinion in connection with
the preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities
Act of 1933, as amended, of 6,456,882 shares of Common Stock, par value $.001
per share (the "Common Stock"), issuable or potentially issuable by the
Company upon conversion of up to 175 shares of Series G Preferred Stock (the
"Series G Preferred Stock") of the Company pursuant to respectively a
Regulation D Subscription Agreement between the Company and certain investors
executing such Agreements and the Certificate of Designation of Series G
Preferred Stock.
We have examined such instruments, documents and records as we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to the originals of all documents submitted to us as
copies.
Based on such examination, we are of the opinion that the 6,456,882
shares of Common Stock of the Company being registered pursuant to the
Registration Statement and to be sold by the selling stockholders are duly
authorized shares of Common Stock and, if and when issued upon conversion of
the Preferred Shares in accordance with the Certificates of Designation and
cancellation of the Preferred Shares, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement referred to above and the use of our name wherever
it appears in said Registration Statement.
This opinion is to be used only in connection with the issuance of
the Common Stock while the Registration Statement is in effect.
Respectfully submitted,
GRAY CARY WARE & FREIDENRICH
A Professional Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of First Pacific Networks, Inc. on Form S-3 of our reports, which include an
explanatory paragraph regarding the Company's ability to continue as a going
concern, dated May 17, 1996 (except Note 15, as to which the date is June 20,
1996), on our audits of the consolidated financial statements and financial
statement schedule of First Pacific Networks, Inc. as of March 31, 1996 and
1995 and for each of the three years in the period ended March 31, 1996,
appearing in the 1996 Annual Report on Form 10K. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
San Jose, California
January 24, 1997
