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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 16, 2000
NETRIX CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-20512 54-1345159
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
NETRIX CORPORATION
13595 DULLES TECHNOLOGY DRIVE
HERNDON, VIRGINIA 20171
(Address of Principal Executive Offices, Including Zip Code)
(703) 742-6000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 16, 2000, Netrix Corporation, a Delaware corporation doing business
under the name Nx Networks ("Nx Networks"), completed its acquisition of
AetherWorks Corporation, a privately held Minnesota corporation that provides
innovative voice and data carrier class convergence solutions for the
telecommunications industry ("AetherWorks"). The acquisition was effected
through the merger of AetherWorks with and into Nx1 Acquisition Corp., a
wholly-owned subsidiary of Nx Networks (the "Merger"), pursuant to an Agreement
of Plan of Merger executed by all three parties, dated as of December 31, 1999.
In the Merger, Nx Networks issued 2,622,000 shares of its common stock for all
outstanding shares of AetherWorks. Each holder of an option or warrant to
acquire AetherWorks common stock became entitled to acquire 1.377 shares of Nx
Networks common stock per AetherWorks share originally underlying the option or
warrant, and the exercise price per share was reduced proportionately.
Under the terms of the Merger Agreement, a further adjustment will be made to
the merger consideration if the closing price of Nx Networks common stock on the
Nasdaq Stock Market for the 15 trading day period ended October 31, 2000 does
not equal or exceed $22.50 per share. In such event, additional shares of Nx
Networks common stock will be issued such that the consideration per share of
AetherWorks common stock is equal to $22.50 per share based upon that average
closing price; provided the total number of shares of Nx Networks common stock
issued in the Merger will not exceed 19.9% of the total Nx Networks outstanding
shares.
The Merger constituted a tax-free reorganization.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of the business acquired, AetherWorks, as of
and for the years ended September 30, 1999 and 1998 required by this item are
incorporated herein by reference to the Form S-3 registration statement (no.
333-96165) filed with the Securities and Exchange Commission on February 10,
2000. The Condensed Balance Sheets of AetherWorks as of December 31, 1999
(unaudited) and September 30, 1999 and for the three months ended December 31,
1999 (unaudited) and 1998 (unaudited) required by this item, are set forth
below.
<TABLE>
<CAPTION>
AetherWorks Corporation
(A Development Stage Company)
Condensed Balance Sheets as of
December 31, 1999 and September 30, 1999
Unaudited
December 31, September 30,
1999 1999
--------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 224,176 $ 550,205
Prepaid expenses 23,290 60,463
------------- ------------
Total Current Assets 247,466 610,668
Fixed Assets, net 1,663,298 1,993,219
------------- ------------
Total Assets $ 1,910,764 $ 2,603,887
============= -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current Liabilities:
Accounts payable and other accrued expenses $ 1,077,122 $ 923,683
Lease Payable 1,411,876 1,590,078
Notes payable 1,798,119 1,050,089
------------ -------------
Total Current Liabilities 4,287,117 3,563,850
------------ -------------
Notes Payable 8,036,854 8,036,854
Shareholders' equity (deficit):
Common stock shares B-1, $.01 par value,
10,000,000 shares authorized, 251,413 shares
issued and outstanding 2,514 2,514
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,200,409 shares issued and outstanding 12,004 12,004
Additional paid-in capital 10,026,701 10,026,701
Deficit accumulated during development stage (20,454,426) (19,038,036)
------------- -------------
Total Shareholders' equity (deficit) (10,413,207) (8,996,817)
------------- -------------
Total Liabilities and Shareholders' Equity $ 1,910,764 $ 2,603,887
============= =============
</TABLE>
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AetherWorks Corporation
(A Development Stage Company)
Condensed Statements of Operations
Three months ended December 31, 1999 and 1998
Unaudited
December 31, December 31,
1999 1998
------------ ------------
Operating Expenses:
General and administrative $ 395,170 $ 301,214
Research and development 995,573 1,202,135
------------ ------------
Total Operating Expenses 1,390,743 1,503,349
------------ ------------
Operating Loss (1,390,743) (1,503,349)
------------ ------------
Other expense (income):
Interest expense 34,004 53,878
Interest income (8,357) (16,191)
------------ -----------
Net loss $ (1,416,390) $(1,541,036)
============= ============
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<TABLE>
<CAPTION>
AetherWorks Corporation
(A Development Stage Company)
Condensed Statements of Cash Flows
Three months ended December 31, 1999 and 1998
Unaudited
December 31, December 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss for the period $ (1,416,390) $ (1,541,036)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 326,293 345,001
Changes in operating assets and liabilities:
Note receivable -- (2,010)
Prepaid expenses 37,173 1,092
Accounts payable and accrued expenses 153,440 78,202
------------ -------------
Net cash used in operating activities (899,484) (1,118,751)
INVESTING ACTIVITIES:
(Purchases) dispositions of property and equipment, net 3,628 (63,737)
------------ --------------
Net cash provided by (used) in investing activities 3,628 (63,737)
------------ --------------
FINANCING ACTIVITIES:
Payments on capital leases (177,303) (191,879)
Net increase (payments) on notes payable 747,130 (6,988)
------------ --------------
Net cash provided by (used in) financing activities 569,827 (198,867)
------------ --------------
Decrease in cash and cash equivalents (326,029) (1,381,355)
Cash and cash equivalents at beginning of period
550,205 1,862,889
------------ -------------
Cash and cash equivalents at end of period $ 224,176 $ 481,534
============ =============
</TABLE>
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AetherWorks Corporation
(A Development Stage Company)
Notes to Condensed Financial Statements
1. DESCRIPTION OF BUSINESS
AetherWorks Corporation (the "Company") was formed on February 24, 1993 as a
development stage company engaged in the design and development of hardware and
software which will integrate voice and data. In addition, the software
developed provides a computer telephony framework on which software applications
can operate in the telephony environment.
2. GOING CONCERN
As reflected in the accompanying financial statements, the Company has
accumulated a deficit during its development stage. The Company may be unable to
maintain solvency unless it continues to obtain additional financing to continue
as a going concern. The Company intends to obtain additional debt or equity
financing in fiscal 2000 to fund operations.
Because of uncertainties regarding the achievability of management's plans, no
assurances can be given as to the Company's ability to continue in existence.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amount
and classification of liabilities that my result from the possible inability of
the Company to continue as a going concern.
3. SUMMARY OF ACCOUNTING POLICIES
The accompanying condensed consolidated unaudited financial statements included
herein have been prepared by the Company in accordance with general accepted
accounting principles for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") for
reporting on interim statements. Accordingly, certain information and footnote
disclosures required for complete financial statements are not included herein.
It is recommended that these condensed financial statements be read in
conjunction with the financial statements and related notes of the Company as
reported on Netrix Corporation Form S-3 (No. 333-96165) filed with the SEC in
February 2000.
In the opinion of management all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of the condensed
consolidated financial position, results of operations, and cash flows at the
dates and for the periods presented have been included. The condensed balance
sheet presented as of September 30, 1999 has been derived from the financial
statements that have been audited by the Company's independent public
accountants. The results of operations for the three months ended December 31,
1999 may not be indicative of future results.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less than purchased to be cash equivalents. Cash equivalents are
carried at cost which approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost net of accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets of three to five years.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
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Reclassifications
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
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(b) Pro Forma Financial Information.
NETRIX UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma Consolidated Statement of Operations of NX
Networks for the three months ended March 31, 2000 and the year ended December
31, 1999 illustrate the effect of the mergers with OpenROUTE and AetherWorks.
The unaudited Pro Forma Consolidated Statements of Operations assume that the
mergers with OpenROUTE and AetherWorks were completed as of the beginning of the
periods presented, January 1, 2000 and January 1, 1999, respectively. Certain
reclassifications have been made to OpenROUTE and AetherWorks' financial
statements to conform with NX Networks presentation.
Under the terms of the OpenROUTE transaction, the holders of OpenROUTE common
stock and stock options received one share of NX Networks common stock for each
OpenROUTE share converted. Under the terms of the AetherWorks transaction,
options will receive an aggregate of l.38 shares of NX Networks common stock.
ACCOUNTING TREATMENT
NX Networks recorded the OpenROUTE and AetherWorks mergers as purchase
transactions. For accounting purposes, NX Networks is deemed to be the acquiring
corporation in each merger.
The pro forma adjustments are based upon currently available information and
assumptions that Netrix management believes are reasonable and certain
information provided by OpenROUTE management and AetherWorks management. NX
Networks will account for each merger based upon the estimated fair market value
of the net tangible assets, intangible assets and liabilities acquired at the
date of acquisition. The adjustments included in the Unaudited Pro Forma
Consolidated Financial Statements represent the preliminary determination of
these adjustments based upon available information. NX Networks cannot assure
you that the actual adjustments will not differ significantly from the pro forma
adjustments reflected in the Unaudited Pro Forma consolidated Financial
Statements.
For illustrative purposes, NX Networks has made a preliminary allocation of
excess cost over estimated net assets acquire to goodwill as OpenROUTE's assets
and liabilities are estimated to approximate fair value. The final allocation of
purchase price to asset and liabilities acquired will depend upon the final
purchase price and final estimates of fair values of assets and liabilities of
OpenROUTE at the closing date. NX Networks will undertake a study to determine
the fair value of assets and liabilities acquired and will allocate the purchase
price accordingly. NX Networks believes that the carrying value of current
assets and current liabilities approximated fair value and that the excess of
cost over historical net assets acquired will be allocated to property and
equipment, goodwill and other identifiable intangibles. However, there can be no
assurance that the actual allocation will not differ significantly form the pro
forma allocation.
For illustrative purposes, NX Networks has made a preliminary allocation of
excess cost over estimated net assets acquired to goodwill as AetherWorks'
assets and liabilities are estimated to approximate fair value. For purposes of
this Pro forma Financial Information, NX Networks assumed the price per share to
be $22.50, as guaranteed in the merger agreement. NX Networks also engaged an
independent third party to determine the amount of the excess purchase price
related to purchased in-process research and development. The final allocation
of purchase price to assets and liabilities acquired will depend upon the final
purchase price and final estimated of fair values of assets and liabilities of
AetherWorks at closing date. NX Networks will undertake a study to determine the
fair values of assets and liabilities acquired and will allocate the purchase
price accordingly. NX Networks believes that the carrying value of current
assets and current liabilities approximated fair value and that the excess of
cost over historical net assets acquired will be allocated to property and
equipment, in-process research and development, goodwill and other identifiable
intangibles. However, there can be no assurance that the actual allocation will
not differ significantly form the pro forma allocation.
The Unaudited Pro Forma Consolidated Financial Statements are not necessarily
indicative of either future results of operations or results that might have
been achieved if the mergers with OpenROUTE and AetherWorks had been consummated
as of the indicated dates. The Unaudited Pro Forma Consolidated Financial
Statements should be read in conjunction with the historical financial
statements of NX Networks, OpenROUTE, and AetherWorks, together with the related
notes thereto, which are incorporated by reference into this registration
statement.
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<TABLE>
<CAPTION>
NX Networks, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2000
(in thousands, except per share amounts)
NX Networks AetherWorks AetherWorks NX Networks
Historical (1) Historical (2) Pro-forma Pro-forma
-------------- -------------- Adjustments Combined
----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product $ 7,053 $ -- $ -- $ 7,053
Service and other 1,890 -- -- 1,890
---------- --------- -------- -----------
Total revenues 8,943 -- -- 8,943
---------- --------- -------- -----------
Cost of revenues:
Product 4,184 -- -- 4,184
Service and other 1,304 -- -- 1,304
----------- --------- -------- ------------
Total cost of revenues 5,488 -- -- 5,488
----------- --------- -------- ------------
Gross profit 3,455 -- -- 3,455
----------- --------- -------- ------------
Operating expenses:
Sales and marketing 3,973 -- -- 3,973
General and administrative 2,349 478 -- 2,827
In-process research and development 30,800 -- (30,800) (3) --
Amortization of intangibles 5,143 -- 2,920 (4) 8,063
Research and development 2,675 950 -- 3,625
Stock compensation expense 6,495 -- 1,404 (5) 7,899
Restructuring charge 427 -- -- 427
------------ ---------- -------- -----------
Total operating expense 51,862 1,428 26,476 26,814
------------ ---------- -------- -----------
(Loss) income from operations (48,407) (1,428) 26,476 (23,359)
Interest and other (expense) income, net (30) 38 -- 8
------------ ---------- -------- -----------
Net (loss) income $ (48,437) $ (1,390) $ 26,476 $ (23,351)
============ ========== ======== ===========
Basic and diluted loss per common share $ (1.57) $ (.70)
============ ===========
Basic and diluted weighted average common
shares outstanding 30,901 33,523
============ (13) ============
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</TABLE>
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<TABLE>
<CAPTION>
NX Networks, Inc.
Pro Forma Unaudited Consolidated Statement of Operations
For the year ended December 31, 1999
(in thousands, except per share amounts)
Historical Historical Historical OpenROUTE AetherWorks NX Networks
NX Networks OpenROUTE AetherWorks Pro-forma Pro-forma Pro-forma
(6) (7) (8) Adjustments Adjustments Combined
(10)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product $ 24,505 $ 9,802 $ -- $ -- $ -- $ 34,307
Service and other 6,740 2,577 -- -- -- 9,317
--------- --------- -------- --------- --------- ----------
Total revenues 31,245 12,379 -- -- -- 43,624
--------- --------- -------- --------- --------- ----------
Cost of revenues:
Product 11,758 7,965 -- -- -- 19,723
Service and other 4,777 2,059 -- -- -- 6,836
--------- -------- -------- --------- -------- -----------
Total cost of revenues 16,535 10,024 -- -- -- 26,559
--------- -------- -------- --------- -------- -----------
Gross profit 14,710 2,355 -- -- -- 17,065
---------- -------- -------- --------- -------- ------------
Operating expenses:
Sales and marketing 6,468 4,349 -- -- -- 10,817
General and administrative 5,202 4,298 1,730 -- -- 11,230
Amortization of intangibles 371 5,593 -- 17,184 (9) 14,016 (11) 37,164
Research and development 7,043 3,933 5,928 -- -- 16,904
Stock compensation expense 18,778 6,590 -- -- 7,043 (12) 32,411
Bad debt expense 540 351 -- -- -- 891
Restructuring charge 900 -- -- -- -- 900
---------- -------- -------- -------- --------- ---------
Total Operating expense 39,302 25,114 7,658 17,184 21,059 110,317
---------- -------- -------- -------- --------- ---------
Loss from operations (24,592) (22,759) (7,658) (17,184) (21,059) (93,252)
Interest and other (expense) income, net (178) 136 221 -- -- 179
---------- -------- -------- --------- ---------- ----------
Loss before income taxes (24,770) (22,623) (7,437) (17,184) (21,059) (93,073)
Provisions for income taxes -- 10 -- -- -- 10
---------- -------- -------- --------- ---------- ----------
Net loss (24,770) (22,633) (7,437) (17,184) (21,059) (93,083)
Dividends and accretion of preferred stock (1,399) -- -- -- -- (1,399)
---------- --------- -------- --------- ---------- ----------
Net loss attributable to common
shareholders $ (26,169) $(22,633) $(7,437) $(17,184) $ (21,059) $ (94,482)
=========== ========= ======== ========= ========== ==========
Basic and diluted loss per common share $ (2.17) $ (3.12)
=========== ==========
Basic and diluted weighted average common
shares outstanding 12,074 (13) 30,292
=========== ==========
</TABLE>
The accompanying notes are an integral part of this pro forma
condensed consolidated financial statements.
(1) Information obtained from the historical unaudited consolidated
statement of operation of NX Networks.
(2) Information obtained from historical statement of operations of
AetherWorks from January 1, 2000 through the date of acquisition,
March 16, 2000.
(3) Reflects the removal of one-time in-process research and development
charge in connection with the AetherWorks acquisition.
(4) Reflects the amortization expense of goodwill and intangibles acquired
in the merger of AetherWorks by use of the straight-line method over
4 years.
(5) Reflects the amortization of $15.8 million of compensation expense for
the assumed intrinsic value of stock options to be granted to
AetherWorks' employees immediately subsequent to closing to acquire
1,000,000 shares of NX Networks common stock at an exercise price of
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$6.81 per share plus an immediate charge of $0.3 million. The
compensation expense will be recognized over the options vesting period
generally two to three years.
(6) Information obtained from the historical consolidated statement of
operation of NX Networks which includes OpenROUTE from the date of
acquisition, December 22, 1999.
(7) Information obtained from the historical unaudited consolidated
statement of operations of OpenROUTE from January 1, 1999 through the
date of acquisition, December 22, 1999.
(8) Information obtained from the historical statement of operations of
AetherWorks for the year ended September 30, 1999 less the historical
unaudited statement of operations of AetherWorks for the three months
ended December 31, 1998 plus the the historical statement of operations
of AetherWorks for the three months ended December 31, 1999.
(9) Reflects the amortization expense of the excess of cost over historical
net assets acquired in the merger of OpenROUTE by use of the
straight-line method over 4 years.
(10) AetherWorks pro-forma adjustments excludes the one-time in-process
research and development charges of $30.8 million in connection with
the AetherWorks acquisition.
(11) Reflects the amortization expense of intangibles acquired in the merger
of AetherWorks by use of the straight-line method over 4 years.
(12) Reflects the amortization of $15.8 million of compensation expense for
the assumed intrinsic value of stock options granted to AetherWorks'
employees immediately subsequent to closing to acquire 1,000,000 shares
of Netrix common stock at an exercise price of $6.81 per share plus an
immediate charge of $0.3 million. The compensation expense will be
recognized over the options vesting period generally two to three
years.
(13) The average common shares outstanding used in calculating basic and
diluted pro forma loss per common share are calculated assuming that
the estimated number of shares of NX Networks common stock issued in
the mergers were outstanding from the beginning of the periods
presented. For purposes of this Pro forma Financial Information, the
company assumed that it would issue approximately 15,900,000 and
2,622,000 million shares of common stock in connection with the
OpenROUTE acquisition and the AetherWorks acquisition, respectively.
Options and warrants to purchase shares of common stock were not
included in computing pro forma diluted earnings per common share
because their inclusion would result in a smaller loss per common
share.
(c) Exhibits.
The following exhibits are filed with this Report:
EXHIBIT NO. DESCRIPTION
2.1* Agreement and Plan of Merger by and among Netrix
Corporation, doing business as Nx Networks, Nx1
Acquisition Corp. and AetherWorks Corporation, dated
as of December 31, 1999.
10.1* Voting Agreement between Netrix Corporation doing
business as Nx Networks, and William H. Costigan,
Robert C. Lind and Jonathan A. Sachs dated as of
December 31, 1999.
10.2* Registration Rights Agreement made by Netrix
Corporation, doing business as Nx Networks, in favor
of the holders of common stock of AetherWorks
Corporation, dated as of December 31, 1999.
23.1 Consent of Ernst & Young LLP.
-----------
* Incorporated by reference to the Current Report on Form 8-K filed by
Netrix Corporation on January 14, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETRIX CORPORATION
Date: May 30, 2000 By: /S/ Peter J. Kendrick
_____________________________
Name: Peter J. Kendrick
Title: Chief Financial Officer
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EXHIBIT LIST
EXHIBIT NO. DESCRIPTION
2.1* Agreement and Plan of Merger by and among Netrix
Corporation, doing business as Nx Networks, Nx1
Acquisition Corp. and AetherWorks Corporation, dated
as of December 31, 1999.
10.1* Voting Agreement between Netrix Corporation doing
business as Nx Networks, and William H. Costigan,
Robert C. Lind and Jonathan A. Sachs dated as of
December 31, 1999.
10.2* Registration Rights Agreement made by Netrix
Corporation, doing business as Nx Networks, in favor
of the holders of common stock of AetherWorks
Corporation, dated as of December 31, 1999.
23.1 Consent of Ernst & Young LLP.
* Incorporated by reference to the Current Report on Form 8-K filed by
Netrix Corporation on January 14, 2000.
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