<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1999
REGISTRATION NO. 333-81109
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NETRIX CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 54-1345159
(State or other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 22071
(703) 742-6000
(Address and Telephone Number of Principal Executive Offices)
LYNN C. CHAPMAN
PRESIDENT
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 22071
(703) 742-6000
(Name, Address and Telephone Number of Agent for Service)
WITH A COPY TO:
JAY R. SCHIFFERLI, ESQ.
KELLEY DRYE & WARREN LLP
TWO STAMFORD PLAZA
281 TRESSER BOULEVARD
STAMFORD, CONNECTICUT 06901
(203) 324-1400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective. If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
|_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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 this form is a post-effective amendment filed pursuant to Rule 462(d) 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. |_|
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 23, 1999
PRELIMINARY PROSPECTUS
NETRIX CORPORATION
This prospectus relates to 1,597,935 shares of common stock of
Netrix Corporation that may be offered for sale by the security holders
identified on page 7 of this prospectus under the caption "Selling Security
Holders." The selling security holders may sell these shares from time to
time on the Nasdaq Stock Market at then prevailing market prices, or in
privately negotiated transactions at prices privately negotiated. The
securityholders are not obligated to sell any of their shares under this
registration statement. We will not receive any proceeds from the sale of
the common stock by the securityholders.
Netrix Corporation's common stock is currently traded on the
Nasdaq National Market under the trading symbol "NTRX." On August 20, 1999,
the last sale price of the common stock on that market was $4.031 per
share.
------------
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities or
determined if this prospectus is truthful and complete. Any representation
to the contrary is a criminal offense.
------------
The date of this Prospectus is August __, 1999.
<PAGE>
YOU SHOULD RELY ONLY UPON THE INFORMATION IN THIS PROSPECTUS. WE HAVE
NOT, AND THE SELLING SECURITY HOLDERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO
PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE SELLING
SECURITY HOLDERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON THE
FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
NETRIX CORPORATION
Netrix Corporation is a worldwide provider of voice and data networking
products. We develop, manufacture, market and support networking equipment for
voice, data and image networks. Our products are designed to transport voice
over data networks to enable its customers to realize significant cost savings.
Netrix was incorporated in Virginia in October 1985, and reincorporated
in Delaware in March 1987. Our principal executive offices are located at 13595
Dulles Technology Drive, Herndon, Virginia 20717, and our telephone number is
(703) 742-6000.
RISK FACTORS
This offering involves a high degree of risk. Before investing in these
securities, you should consider carefully the following risk factors, in
addition to the other information contained in this prospectus. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you could lose part or all of your investment.
WE INCURRED NET LOSSES IN EACH OF THE LAST TWO YEARS AND WE CANNOT BE
CERTAIN THAT WE WILL GENERATE SUFFICIENT REVENUES TO AGAIN BECOME PROFITABLE.
For the years ended December 31, 1998 and 1997, respectively, we
incurred net losses of approximately $6.3 million and $8.6 million. Through June
1999, we have incurred additional losses of approximately $3.8 million. If we
cannot return to sustained profitability we will be forced to sell all or part
of our business, liquidate or seek to reorganize. We will continue to incur
significant sales and marketing, product development and general and
administrative expenses and, as a result, we will need to generate higher
revenues to achieve and sustain profitability on an annual basis. We expect to
increase our revenues through our new line of network exchange products;
however, to date, sales of network exchange products have not been sufficient to
replace the decline in our mature product sales. Although revenues from network
exchange products have grown in recent quarters, we cannot be certain that we
will continue to achieve revenue growth or realize sufficient revenues to
achieve profitability.
WE MAY REQUIRE ADDITIONAL CAPITAL TO FULLY IMPLEMENT OUR PLAN TO RETURN
TO PROFITABILITY, AND WE CANNOT BE CERTAIN THAT THE NECESSARY FUNDS WILL BE
AVAILABLE.
Our ability to return to profitability is largely dependent upon our
ability to introduce new products and technologies and expand our sales efforts
in new geographic and product markets. These activities require substantial
capital, and if we do not have access to sufficient funds, either from our own
2
<PAGE>
operations or through third party financing, our ability to make these necessary
expenditures will be limited. As described in the preceding paragraph, there can
be no assurance that we will be able to obtain these necessary funds from our
own operations. If we are required to seek third party financing, we cannot
assure you that we will be able to obtain financing on terms favorable to us, or
at all. If we obtain additional funds by selling any of our equity securities,
the percentage ownership of our stockholders will be reduced, stockholders may
experience additional dilution, or the equity securities we issue may have
rights, preferences or privileges senior to the common stock. If adequate funds
are not available to us or available to us on satisfactory terms, we may be
required to limit our product development activities or other operations, or
otherwise modify our business strategy. These actions, if taken, could increase
the difficulties we face in returning to sustained profitability.
WE RELY TO A LARGE EXTENT ON INDEPENDENT DISTRIBUTION CHANNELS AND THE
LOSS OF A SIGNIFICANT NUMBER OF DISTRIBUTORS COULD ADVERSELY EFFECT US.
We rely on reseller channels, including distributors and systems
integrators, for a significant portion of our revenues. In particular, in
foreign markets we often have one distributor designated for an entire country,
and that distributor provides local support and service for our products. The
loss of one or more significant resellers could adversely affect our business
both in terms of:
o lost revenues;
o lost market presence; and
o the difficulties we would encounter in servicing customers
introduced to us by our resellers if we do not have other
resellers in that geographic area.
WE ARE EXPOSED TO POTENTIAL DELAYS IN PRODUCT SHIPMENTS BECAUSE WE
CONTRACT OUT OUR PRODUCT MANUFACTURING AND SOME COMPONENTS FOR OUR PRODUCTS ARE
AVAILABLE TO US ONLY FROM A SINGLE SUPPLIER OR A LIMITED NUMBER OF SUPPLIERS.
It is not economically feasible for us to develop our own product
manufacturing capacity in the foreseeable future. We rely on others to
manufacture our products and product components and this dependence exposes us
to potential interruptions or delays in product delivery. An interruption could
have a short term effect on our revenues and a longer term effect on our ability
to market our products. Currently, we rely on a single contract manufacturer to
assemble and test most of our products. Also, some of the components we use in
our products are available from only one source or a limited number of
suppliers. Although we have been able to obtain our products and these
components to date, our inability to develop alternative sources if and as
required in the future, or to obtain sufficient sole source or limited source
components as required, could result in delays or reductions in product
shipments.
WE RELY ON A LIMITED NUMBER OF KEY EMPLOYEES, THE LOSS OF ANY OF WHOM
COULD ADVERSELY IMPACT OUR DEVELOPMENT.
Our success depends to a significant degree upon the continued
contributions of our management, marketing, engineering and technical personnel,
many of whom would be difficult to replace. In addition, as we continue to
develop the network exchange product line and other new products, we will need
to attract and retain additional qualified personnel. There is intense
competition for qualified personnel in our industry, and there can be no
assurance that we will be able to attract and retain the qualified personnel
necessary for the development of our business. Loss of the services of any of
our key employees would be detrimental to our development. We do not have
employment contracts with our key employees and we do not have "key man" life
insurance on any of our officers or directors.
3
<PAGE>
OUR INTELLECTUAL PROPERTY RIGHTS ARE AN IMPORTANT PROTECTION FOR OUR
PRODUCTS, AND WE COULD BE ADVERSELY AFFECTED IF OUR RIGHTS ARE CHALLENGED OR
CIRCUMVENTED BY COMPETITORS.
Our ability to compete successfully within our industry is dependent in
part upon the patents and nondisclosure agreements that we have obtained, upon
technical measures that we take to protect confidential information and upon
trade secret, copyright and trademark laws that we rely on to establish and
protect our proprietary rights. If any of our proprietary rights are challenged
or circumvented by competitors or other companies are able to market
functionally similar products, systems or processes without infringing our
proprietary rights.
BECAUSE A PORTION OF OUR REVENUES ARE DERIVED FROM SALES TO THE UNITED
STATES GOVERNMENT, WE COULD BE ADVERSELY AFFECTED BY GOVERNMENTAL RESTRAINTS OR
POLICY CHANGES.
A portion of our revenues results from sales to the United States
government, primarily through systems integrators. The revenues generated by
this government business, which is spread across numerous agencies and
departments, could be adversely affected by governmental budgetary or fiscal
restraints or changes in governmental policy.
OUR CERTIFICATE OF INCORPORATION AND BY-LAWS CONTAIN PROVISIONS THAT
COULD DELAY OR PREVENT A CHANGE IN CONTROL.
Provisions of our certificate of incorporation and by-laws may have the
effect of discouraging, delaying or preventing a take-over attempt that could be
in the best interests of our stockholders. These include provisions that:
o separate our Board of Directors into three classes;
o limit the ability of our stockholders to call special
stockholder meetings;
o require advance notice of nominations for directors and
stockholder proposals to be considered at stockholder
meetings; and
o require a vote greater than two-thirds to remove directors
from office or amend many of the provisions of our certificate
of incorporation and by-laws.
Our board of directors also has the right, without further action of
the stockholders, to issue and fix the terms of preferred stock, which could
have rights senior to the common stock. We are also subject to the "business
combination" provisions of the Delaware General Corporate Law, which imposes
procedures impeding business combinations with "interested stockholders" that
are not approved of by our board of directors.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934. As required by the Securities Exchange Act, we file
reports, proxy statements and other information with the SEC. The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at regional offices of the SEC at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661 and at Seven
World Trade Center, 13th Floor, New York, New York 10048. In addition, we are
required to file electronic versions of these documents through the SEC's
Electronic Data Gathering, Analysis and Retrieval System (EDGAR). The SEC
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. Copies of these materials may also be
obtained at prescribed rates from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549. The
common stock is quoted on the Nasdaq National Market. Information regarding the
trading of our common stock on the Nasdaq National Market can be obtained from
the Nasdaq National Market, 9801 Washingtonian Boulevard, Gaithersburg, Maryland
20878 ((202) 496-2500).
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933 with respect to the securities being offered by this
prospectus. As permitted by the rules and regulations of the SEC, this
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to us and the offer and sale of
the securities, reference is made to the registration statement. Statements
contained in this prospectus concerning the provisions of documents filed with
the registration statement as exhibits are necessarily summaries of those
documents, and each of these statement is qualified in its entirety by reference
to the copy of the applicable document filed with the SEC. The registration
statement may be inspected without charge at the public reference facilities of
the SEC at the addresses contained in the preceding paragraph and copies of all
or any part of the registration statement may be obtained from the SEC at
prescribed rates.
Pursuant to the rules of the SEC, we are able to "incorporate by
reference" into this document the information that we have on file with the SEC.
This means that we may disclose important information to you by referring you to
other documents. The information incorporated by reference is considered to be
part of this prospectus. In addition, any later information we file with the SEC
and incorporated by reference will update and supersede the information referred
to or contained in this prospectus. We incorporate by reference the documents
listed below and any future filings we make with the SEC under section 13a,
13(c), 14 or 15(d) of the Exchange Act until this offering has been completed:
o Our Annual Report on Form 10-K for the year ending December 31, 1998;
and
o Our Quarterly Reports on Form 10-Q for the quarters ending March 31,
1999 and June 30, 1999.
5
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the information set forth in this prospectus includes "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. In addition, from time to time, we may publish
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act or make oral statements that constitute
forward-looking statements. These forward-looking statements may relate to
matters such as anticipated financial performance, future revenues or earnings,
business prospectus, projected ventures, new products, anticipated market
performance and similar matters. The words "budgeted," "anticipate," "project,"
"estimate," "expect," "may," "believe," "potential" and similar statements are
intended to be among the statements that are forward looking statements. Because
these statements reflect the reality of risk and uncertainty that is inherent in
our business, actual results may differ materially from those expressed or
implied by the forward-looking statements. You are cautioned not to place undue
reliance on these forward looking statements, which are made as of the date of
this prospectus.
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of the
safe harbor, we caution you that a variety of factors could cause our actual
results to differ materially from the anticipated results or other expectations
expressed in our forward-looking statements. These risks and uncertainties, many
of which are beyond our control, include, but are not limited to those set forth
under the caption "Risk Factors" on page 4 and in our filings with the SEC.
We undertake no obligation to release publicly any revisions to the
forward looking statements to reflect events or circumstances after the date of
this prospectus or to reflect unanticipated events or developments.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling security holders. If the warrants are exercised, we will receive up to
$208,000, reflecting the total exercise price.
6
<PAGE>
SELLING SECURITY HOLDERS
This prospectus relates to the resale of 1,597,935 shares of common
stock. This common stock is issuable upon the conversion of preferred stock or
the exercise of warrants we have recently issued. The terms of the issuances are
described in this section below under the caption "Sale of the preferred stock
and warrants." The following table sets forth, to our knowledge:
o the number of shares of common stock beneficially owned by each
selling security holder;
o the number of shares of common stock to be offered and sold by the
selling security holder; and
o the number of shares of common stock and percentage of outstanding
shares of common stock to be beneficially owned by the selling
security holder after the offer and sale contemplated by this
prospectus, assuming that all the shares offered by the selling
security holder are in fact sold.
Unless otherwise indicated, to our knowledge, each person has sole
investment and voting power, if applicable (or shares these powers with his or
her spouse), with respect to the securities set forth in the following table.
As of August 9, 1999 we had 11,562,906 shares of common stock issued
and outstanding.
<TABLE>
<CAPTION>
Beneficial Ownership
After the Offering (1)
-----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number of
Name and Address Prior to the Offering be Sold Shares Percentage
---------------- --------------------- ------- ------ ----------
<S> <C> <C> <C> <C>
Charles Ziegler 45,455 45,455 --- ---
c/o LIT
220 Bush, Suite 580
San Francisco, CA 94104
Donald Abramson 67,275 67,275 --- ---
220 Bush Street, #545
San Francisco, CA 94104
The Advent Fund LLC 127,275 127,275 --- ---
440 South LaSalle, Suite 2500
Chicago, IL 60605
Downco Holdings, Ltd. 72,725 72,725 --- ---
c/o Robert Goodman
1013 Cove Road
Mamaroneck, NY 10543
Paul Johnson 18,185 18,185 --- ---
1112 Park Avenue
New York, NY 10128
</TABLE>
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<TABLE>
<CAPTION>
Beneficial Ownership
After the Offering (1)
-----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number of
Name and Address Prior to the Offering be Sold Shares Percentage
---------------- --------------------- ------- ------ ----------
<S> <C> <C> <C> <C>
Clifford T. Dirkes 36,365 36,365 --- ---
707 Golfview Road
Morrestown, NJ 08057
SoundShore Opportunity Holding Fund Ltd. 36,365 36,365 --- ---
c/o AIG
1281 East Main Street
Stamford, CT 06902
SoundShore Holdings Ltd. 90,910 90,910 --- ---
c/o AIG
1281 East Main Street
Stamford, CT 06902
Triton Capital Investments 90,910 90,910 --- ---
One Sansome, 39th Floor
San Francisco, CA 94104
Hull Overseas, Ltd. 90,910 90,910 --- ---
152 West 57th Street
New York, NY 10019
Richard A. Levy and Susan C. Levy, JTWROS 109,095 109,095 --- ---
1258 Linder Avenue
Highland Park, IL 60035
St. Claire International, Ltd. 36,365 36,365 --- ---
c/o Hedge Funds Services (BVI) Ltd.
Box 23
Ellen L. Shelton Building
Road Town, Tortola
British Virgin Islands
Special Situations Fund III, L.P. 1,454,200(2) 109,090 1,294,200 11.0
153 East 53rd Street, 51st Floor
New York, NY 10022
Special Situations Cayman Fund, L.P. 1,454,200(2) 36,365 1,294,200 11.0
153 East 53rd Street, 51st Floor
New York, NY 10022
Special Situations Technology Fund, L.P. 1,454,200(2) 14,545 1,294,200 11.0
153 East 53rd Street, 51st Floor
New York, NY 10022
</TABLE>
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<TABLE>
<CAPTION>
Beneficial Ownership
After the Offering (1)
-----------------------------
Number of Shares Number of
Beneficially Owned Shares to Number of
Name and Address Prior to the Offering be Sold Shares Percentage
---------------- --------------------- ------- ------ ----------
<S> <C> <C> <C> <C>
RKB Capital, L.P. 36,365 36,365 --- ---
130 West Lake Street
Wayzata, MN 55391
Omicron Partners L.P. 109,095 109,095 --- ---
153 East 53rd Street, 48th Floor
New York, NY 10022
363,340 363,640 --- ---
Abernathy Group
20 Exchange Place, 38th Floor
New York, NY 10005
57,000 57,000 --- ---
Renwick Securities, Inc.
50 East 42nd Street, Suite 1306
New York, NY 10017
50,000 50,000 --- ---
Coast Business Credit
a division of Southern Pacific Bank
1212 Wilshire Boulevard, Suite 1400
Los Angeles, California 90025
- ----------------------
* Less than 1 percent
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the SEC and generally includes consideration of voting
or investment power with respect to the securities at issue.
Information with respect to beneficial ownership is based upon
information as of August 22, 1999, and assumes that there is
outstanding an aggregate of 11,562,906 shares of common stock, not
including treasury shares. Except as otherwise indicated in the
footnotes below, and subject to community property laws where
applicable, we believe, based upon information furnished by selling
security holders, that the persons named in this table have sole voting
and investment power with respect to all shares of common stock shown
as beneficially owned by them.
(2) Based on a Schedule 13G dated February 12, 1999. Special Situation Fund
III, L.P., Special Situations Cayman Fund, L.P. and Special Situations
Technology Funds, L.P. are affiliated. Includes a total of 1,294,200
shares of common stock and 160,000 shares of common stock issuable upon
conversion of the preferred stock.
SALE OF THE PREFERRED STOCK AND WARRANTS
During the period ended June 30, 1999, we raised funds through a
private offering of 298,187 shares of our Series A 8% convertible preferred
stock. We did not use an underwriter in the offering, although we did compensate
the persons who introduced us to investors, as described below. We sold the
preferred stock at $13.75 per share, which represented five times the price of
our common stock at the time we committed to undertake the offering. Each share
of preferred stock is convertible into shares of our common stock at a
conversion price of $2.75 per share (representing five shares of common stock
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for every share of preferred stock), but subject to proportional adjustment if
we undertake a stock split, stock consolidation or stock dividend with respect
to our common stock. This registration statement provides for the resale of the
common stock. Most of this common stock is subject to limitations on transfer
until May 2000. The resale limitations will be lifted prior to May 2000 as
follows:
o if the average closing bid price for our stock price is at least
$3.43 for 10 consecutive trading days, 25% of the common stock may be
sold;
o if the average closing bid price for our stock price is at least
$4.29 for 10 consecutive trading days, an additional 25% of the
common stock may be sold;
o if the average closing bid price for our stock price is at least
$5.36 for 10 consecutive trading days, an additional 25% of the
common stock may be sold; and
o if the average closing bid price for our stock price is at least
$6.71 for 10 consecutive trading days, all remaining shares will may
be sold.
As of the date of this prospectus, our stock price has been above $3.42
for 10 consecutive trading days, so a portion of the shares have been released
form this transfer restriction.
Each share of preferred stock has a liquidation preference equal to its
purchase price, plus accrued and unpaid dividends. Dividends are cumulative from
May 14, 1999, and are payable semi-annually, in arrears, on April 30 and October
31 of each year, commencing October 31, 1999. Dividends are payable in cash or
shares of common stock, at the our election. The preferred stock is redeemable
at our option at any time after the closing bid price for our common stock on
the NASDAQ Stock Market has equaled or exceeded $6.00 for 10 consecutive trading
days. The redemption price is $17.50 per share plus accrued but unpaid dividends
to the date of repurchase.
We sold the preferred stock directly to the investors. Among the
investors was Special Situations Fund III, L.P., our largest stockholder, and
Special Situations Cayman Fund, L.P. and Special Situations Technology Fund,
L.P., each of whom is affiliated with Special Situations Fund III, L.P. Other
than through their position as a significant stockholder of Netrix, we have no
relationship with Special Situations Fund III, L.P. and its affiliates, and we
have no material relationship with any other purchaser of the preferred stock.
In connection with the private placement, we received net proceeds of
approximately $4.0 million. We are using these proceeds to fund operations,
severance and other restructuring activities, and marketing and sales
initiatives.
In connection with the offering of the preferred stock, we agreed to
pay compensation to the persons who introduced investors to us. We offered these
persons the right to receive payment either (1) in cash or (2) in warrants to
acquire common stock, and each persons requested payment in warrants. One of
these persons was Renwick Securities, Inc., to whom we issued 32,000 warrants
exercisable at $2.75 per share, subject to customary anti-dilution protections.
These warrants expire in 2004.
In May 1999 we issued 25,000 warrants to Renwick Securities, Inc. as
compensation for financial consulting services they provided to us. 10,000 of
the warrants are exercisable at $3.00 per share, 7,500 are exercisable at $5.00
per share and 7,500 are exercisable at $7.00 per share. All of these warrants
expire on March 30, 2004. Renwick Securities, Inc. continues to provide
consulting services to us on specific projects.
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In April 1999, in connection with obtaining an amendment and waiver of
the minimum tangible net worth covenant contained in our credit agreement, we
issued to Coast Business Credit, a division of Southern Pacific Bank, warrants
to acquire 50,000 shares of common stock. The warrants are exercisable at $2.00
per share, and are exercisable until June 2004. Other than in its capacity as
our primary lender, we have no relationship with Coast Business Credit.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 15,000,000 shares of common
stock, $.05 par value per share, of which 11,493,009 shares are outstanding,
fully paid and non-assessable prior to this offering, and 1,000,000 shares of
preferred stock, par value $.05 per share, of which 11,493,009 are outstanding
prior to this offering. An additional 2,925,000 shares of common stock are
reserved under our stock option plans, and there are currently 1,457,888 options
outstanding. In addition, since December 31, 1998, we have issued warrants to
acquire an aggregate of 167,875 shares of common stock and we expect to issue
options to the new directors. We intend to increase our authorize common stock
to 29 million shares. This proposal will be acted upon at the August 26, 1999
reconvening of our annual meeting of stockholders.
PREFERRED STOCK
Our board of directors is authorized, without further action by the
stockholders, to issue one million shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions of the
preferred stock they issue, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption (including sinking fund
provisions), redemption prices and liquidation preferences and the number of
shares constituting and the designation of any series. A majority of the common
stock covered by this prospectus is issuable by us upon conversion of our Series
A 8% convertible preferred stock. We issued this stock in May 1999, and its
terms are described above under the caption "Sale of the preferred stock and
warrants" in the section of this prospectus titled "Selling Stockholders."
The rights and terms relating to any new series of preferred stock
could adversely affect the voting power or other rights of the holders of common
stock. Also, we issue preferred stock as a method of discouraging, delaying or
preventing a change in control of Netrix.
COMMON STOCK
The holders of common stock are entitled to one vote for each share
held of record in the election of directors and with respect to all other
matters to be voted on by stockholders. Holders of shares of common stock do not
have cumulative voting rights. Therefore, the holders of more than 50 percent of
the shares voting for the election of directors can elect all of the directors.
The holders of common stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of legally available funds. In the event
of liquidation, dissolution or winding up of Netrix, the holders of common stock
are entitled to share ratably in all assets remaining available for distribution
after payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the common stock. Our common stock does
not provide to the holders any conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the common stock.
The rights of the holders of common stock are subject to any rights that may be
fixed for holders of preferred stock, when and if any preferred stock is issued.
All of the shares of common stock currently outstanding are duly authorized,
validly issued, fully paid and non-assessable.
11
<PAGE>
WARRANTS
There are currently outstanding approximately 167,875 warrants to
purchase common stock. Each warrant entitles the registered holder to purchase
one share of our common stock, $.05 par value, at exercise prices ranging from
$2.00 to $10.00 per share, exercisable at various times until June 30, 2004.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company, whose address is 40 Wall Street, New York, New York,
10005, telephone number (212) 936-5100.
PLAN OF DISTRIBUTION
The common stock may be offered and sold from time to time by one or
more of the selling security holders, or by pledgees, donees, transferees or
other successors in interest. No selling security holder is required to offer or
sell any of his common stock. The selling security holders anticipate that, if
and when offered and sold, the common stock will be offered and sold in
transactions (which may include block transactions) effected on the Nasdaq Stock
Market at then prevailing market prices. The selling security holders reserve
the right, however, to offer and sell the common stock on any other national
securities exchange on which the common stock is or may become listed or in the
over-the-counter market, in each case at then prevailing market prices, or in
privately negotiated transactions each at a price then to be negotiated. All
offers and sales made on the Nasdaq Stock Market or any other national
securities exchange or in the over-the-counter market will be made through or to
licensed brokers and dealers. No agreements, arrangements or understandings have
been entered into with any broker or dealer, and no brokers or dealers have been
selected, in connection with the offer and sale of the common stock. All
proceeds from the sale of the common stock will be paid directly to the selling
security holders and will not be deposited in an escrow, trust or other similar
arrangement. We will not receive any of the proceeds from the sales of the
common stock by the selling security holders. However, we will receive proceeds
from the exercise of the warrants by the selling security holders. No discounts,
commissions or other compensation will be allowed or paid by the selling
security holders or by us in connection with the offer and sale of the common
stock except that usual and customary brokers' commissions may be paid by the
selling security holders.
The selling broker may act as agent or may acquire shares of common
stock or interests in common stock as principal or pledgee and may, from time to
time, effect distributions of shares of common stock or interests. If a dealer
is utilized in the sale of common stock in respect of which the prospectus is
delivered, the selling security holders will sell common stock to the dealer as
principal. The dealer may then resell the common stock to the public at varying
prices to be determined by the dealer at the time of resale.
We have agreed to indemnify the selling security holders and the
selling security holders have agreed to indemnify us, our officers, directors,
employees, agents and controlling persons from certain damages or liabilities
arising out of or based upon any untrue statement or alleged untrue statement of
any material fact contained in or material omission or alleged omission from the
registration statement, any preliminary, final or summary prospectus contained
in the registration statement, or any amendment or supplement to the
registration statement, to the extent the untrue statement or omission was made
in the registration statement or other document in reliance upon information
furnished by the indemnifying party.
12
<PAGE>
The legal, accounting and other fees and expenses related to the offer
and sale of the common stock contemplated by this prospectus are estimated to be
$10,000 and will be paid by us. We will pay all expenses incurred in connection
with this offering, excluding commissions charged by any broker or dealer acting
on behalf of a selling security holder.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for Netrix by Kelley Drye & Warren LLP.
EXPERTS
The Audited Consolidated Financial Statements and Schedule incorporated
by reference in this prospectus and elsewhere in the registration statement have
been audited by the independent public accountant firm of Arthur Andersen LLP.
These reports are included in this prospectus in reliance upon Arthur Andersen
LLP's accounting and auditing authority and expertise in relation to the
provision of these reports.
13
<PAGE>
NO DEALER, SALES PERSON OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, THAT
INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NETRIX CORPORATION. THIS PROSPECTUS NETRIX CORPORATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF 1,597,935
THE SECURITIES IN ANY JURISDICTION TO SHARES OF
ANY PERSON TO WHOM IT IS UNLAWFUL TO COMMON STOCK
MAKE AN OFFER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
PURSUANT TO THIS PROSPECTUS SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF NETRIX
CORPORATION SINCE THE DATE OF THIS
PROSPECTUS OR THAT THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
________________ _____________
TABLE OF CONTENTS PROSPECTUS
PAGE
---- _____________
Netrix Corporation..............................2
Risk Factors....................................2
Where to Find Additional Information............5
Special Note Regarding Forward Looking
Statements.................................6
Use of Proceeds.................................6
Selling Security Holders........................7
Description of the Securities...................11
Plan of Distribution............................12
Legal Matters...................................13
Experts.........................................13 August __, 1999
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses will be paid by Netrix Corporation.
TYPE OR NATURE OF EXPENSE AMOUNT TO BE PAID
------------------------- -----------------
SEC registration fee.............................. $1,247.74
Accounting fees and expenses...................... 5,000.00
Legal fees and expenses........................... 1,500.00
Miscellaneous..................................... 1,000.00
---------
Total............................................. $8,747.74
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with that action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A Delaware corporation may indemnify any person under
Section 145 who was, is or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure judgment in its favor, by reason of [such] fact as provided in the
preceding sentence, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of that
action or suit, except that no indemnification shall be made in respect of the
an action or suit if he did not act in good faith and in a manner he reasonably
believed to be in or not opposed to our best interests and unless, and then only
to the extent that, a court of competent jurisdiction shall determine upon
application that he is fairly and reasonably entitled to indemnity for those
expenses as the court shall deem proper. A Delaware corporation must indemnify
any person who was successful on the merits or otherwise in defense of any
action, suit or proceeding or in defense of any claim, issue or matter in any
proceeding, by reason of [such] fact as provided in the preceding two sentences
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection the indemnified claim. A Delaware corporation may pay for the
expenses (including attorneys' fees) incurred by an officer or director in
defending a proceeding in advance of the final disposition to repay the amount
advances if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
II-1
<PAGE>
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for any
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) in respect of[ certain] unlawful dividend
payments or stock redemptions or repurchases, or (iv) for any transaction from
which the director derived an improper personal benefit. The DGCL permits the
purchase of insurance on behalf of directors and officers against any liability
asserted against directors and officers and incurred by them in their capacity
as an officer or director, or arising out of their status as an officer or
director, whether or not the corporation would have the power to indemnify
directors and officers against that liability. We have acquired officers' and
directors' liability insurance of $1 million for members of our Board of
Directors and executive officers.
At present, there is no pending litigation or other proceeding
involving any of our directors or officers for which indemnification is being
sought, and we are not aware of any threatened litigation that may result in
claims for indemnification by any officer or director.
Article Eighth of our certificate of incorporation provides that we
will indemnify all persons we are permitted to indemnify under the Delaware
General Corporation Law, and that this indemnification will be to the fullest
extent permitted the Delaware General Corporation Law.
ITEM 16. EXHIBITS
The exhibits listed below have been filed as part of this registration
statement.
4.1* Amended and restated certificate of incorporation
(incorporated into this registration statement by reference to
Exhibit 3.1 to Netrix's registration of Form S-1 filed on
September 18, 1992, as amended (File No. 33-50464) (the "1992
S-1").
4.2* Amended and restated by-laws of Netrix (incorporated into
this registration statement by reference to Exhibit 3.2 of
the 1992 S-1).
4.3* Specimen certificate of common stock of the registrant
(incorporated into this registration statement by reference to
Exhibit 4.2 to the 1992 S-1).
4.4* Certificate of designations for the form of Series A 8%
convertible preferred stock.
4.5* Supplemental certificate of designations for the form of
Series A 8% convertible preferred stock (incorporated by
reference to Exhibit 4.2 to Netrix's quarterly report on Form
10-Q filed on August 16, 1999, Commission file no.
0-50464).
4.6* Form of Warrant issued to Renwick Securities, Inc.
(incorporated by reference to Exhibit 10.3 to Netrix's
quarterly report on Form 10-Q filed on August 16, 1999,
Commission file no. 0-50464).
4.7* Form of Warrant issued to Coast Business Credit (incorporated
by reference to Exhibit 10.2 to Netrix's quarterly report on
Form 10-Q filed on August 16, 1999, Commission file no.
0-50464).
5.1 Opinion on Legality.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Kelley Drye & Warren LLP (contained in Exhibit
5.1).
24** Power of Attorney (included within signature page).
---------------
* Incorporated by reference.
** Filed previously
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
A. To file, during any period in which offers or sales are being
made, a post-effective amendment of this registration
statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933.
(ii) To include in the prospectus any facts or events
arising after the effective date of the registration
statement (or 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.
(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.
B. That, for the purposes 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.
C. To remove from registration by means of post-effective
amendment any of the securities registered which remain unsold
at the termination of the offering.
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to any
charter provisions, by-laws, contract, arrangements, statute
or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant 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 a
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
E. Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, as amended, Netrix
Corporation hereby undertakes to file with the Securities and
Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any
rule or regulation of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that Section.
II-3
<PAGE>
ITEM 27. EXHIBITS
(a) The exhibits listed below have been filed as part of this
registration statement.
EXHIBIT NO. DESCRIPTION
----------- -----------
The exhibits listed below have been filed as part of this registration
statement.
4.1* Amended and restated certificate of incorporation
(incorporated into this registration statement by reference to
Exhibit 3.1 to Netrix's registration of Form S-1 filed on
September 18, 1992, as amended (File No. 33-50464) (the "1992
S-1").
4.2* Amended and restated by-laws of Netrix (incorporated into this
registration statement by reference to Exhibit 3.2 of the 1992
S-1).
4.3* Specimen Certificate of common stock of the registrant
(incorporated into this registration statement by reference to
Exhibit 4.2 to the 1992 S-1).
4.4* Certificate of designations for the form of Series A 8%
convertible preferred stock.
4.5* Supplemental certificate of designations for the form of
Series A 8% convertible preferred stock (incorporated into
this registration statement by reference to Exhibit 4.2 to
Netrix's quarterly report on Form 10-Q filed on August 16,
1999, Commission file no. 0-50464).
4.6* Form of warrant issued to Renwick Securities, Inc.
(incorporated into this registration statement by reference to
Exhibit 10.3 to Netrix Corporation's quarterly report on Form
10-Q filed on August 16, 1999, Commission file no.
0-50464).
4.7* Form of warrant issued to Coast Business Credit (incorporated
into this registration statement by reference to Exhibit 10.2
to Netrix's quarterly report on Form 10-Q filed on August 16,
1999, Commission file no. 0-50464).
5.1 Opinion on Legality.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Kelley Drye & Warren LLP (contained in Exhibit
5.1).
24** Power of attorney (included within signature page).
---------------
*Incorporated by reference
**Filed previously
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, Netrix Corporation certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and authorizes this
registration statement to be signed on its behalf by the undersigned, in the
City of Herndon, State of Virginia, on August 23, 1999.
NETRIX CORPORATION
By: /s/ Steven T. Francesco
Steven T. Francesco
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amendment to the 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 Officer and
/s/ Steven T. Francesco Chairman of the Board of Directors August 23, 1999
- --------------------------------- (Principal Executive Officer)
Steven T. Francesco
/s/ Lynn C. Chapman President, Chief Operating Officer August 23, 1999
- --------------------------------- and Director
Lynn C. Chapman
/s/ Peter J. Kendrick Vice President-Finance and Administration August 23, 1999
- --------------------------------- and Chief Financial Officer
Peter J. Kendrick (Principal Financial Officer)
August 23, 1999
/s/ Norman F. Welsch (Principal Accounting Officer)
- ---------------------------------
Norman F. Welsch
Director August 23, 1999
- ---------------------------------
Gregory McNulty
/s/ John M. Faccibene* Director August 23, 1999
- ---------------------------------
John M. Faccibene
/s/ Richard Yalen* Director August 23, 1999
- ---------------------------------
Richard Yalen
/s/ Douglas J. Mello* Director August 23, 1999
- ---------------------------------
Douglas J. Mello
- -----------------
* By Steven T. Francesco, attorney-in-fact.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
5.1 Opinion on Legality.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Kelley Drye & Warren LLP (contained in
Exhibit 5.1).
<PAGE>
KELLEY DRYE & WARREN LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3229
(203) 351-8000
August 23, 1999
Netrix Corporation
13595 Dulles Technology Drive
Herndon, VA 20171
Ladies and Gentlemen:
We have acted as special counsel to Netrix Corporation, a Delaware
corporation (the "Company"), in connection with the registration statement on
Form S-3 (No. 333-81109) (the "Registration Statement") pertaining to the
proposed offering of 1,597,435 shares of common stock, $.05 par value per share
(the "Shares"), as described in the Registration Statement. The Shares are
issuable upon the exercise of certain warrants described in the Registration
Statement (the "Warrants") and the Company's Series A 8% convertible preferred
stock (the "Preferred Stock"). As such counsel, you have requested our opinion
as to the matters described herein relating to the Shares. All capitalized terms
used but not defined herein shall have the meanings assigned to them in the
Registration Statement.
We have examined the Company's certificate of incorporation and
by-laws, in each case as amended through the date hereof; the certificate of
designations, as supplemented, with respect to the Preferred Stock (the
"Certificate of Designations"); the agreements related to each of the Warrants
(the "Warrant Agreements"); minutes of the Company's corporate proceedings
through the date hereof, as made available to us by officers of the Company; an
executed copy of the Registration Statement and all exhibits thereto in the form
filed with the Securities and Exchange Commission; and such matters of law and
such documents and other instruments as we have deemed necessary by us in order
to deliver the within opinion. In the course of our examination, we have assumed
the genuineness of all signatures, the authority of all signatories to sign on
behalf of their principals, if any, the authenticity of all documents submitted
to us as original documents and the conformity to original documents of all
documents submitted to us as certified or photostatic copies. As to certain
factual matters, we have relied upon information furnished to us by officers of
the Company.
<PAGE>
Netrix Corporation
August 23, 1999
Page Two
Based on the foregoing and solely in reliance thereon, it is our
opinion that the Shares have been duly authorized, and when they are issued upon
conversion of the Preferred Stock or exercise of the Warrants, against payment
of the consideration therefore contemplated by the Certificate of Designations
or Warrant Agreements, as the case may be, the Shares will be validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to it in the prospectus included
therein under the caption "Legal Matters." In giving such consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
KELLEY DRYE & WARREN LLP
By: /s/ Jay R. Schifferli
A Member of the Firm
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
April 14, 1999 included (or incorporated by reference) in Netrix Corporation's
Form 10-K/A for the year ended December 31, 1998 and to all reference to our
firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
August 23, 1999
