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Rule 424(b)(1)
Registration No. 333-40021
PROSPECTUS
15,232 SHARES
NATURAL MICROSYSTEMS CORPORATION
COMMON STOCK
The Prospectus relates to the resale of up to 15,232 shares (the "Shares")
of Common Stock, $.01 par value per share, of Natural MicroSystems Corporation
(the "Company") held by certain stockholders of the Company (the "Selling
Stockholders").
_________________________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. FOR A
DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE
PURCHASE OF THESE SECURITIES, SEE "RISK FACTORS" BEGINNING ON PAGE 4.
_________________________
The Selling Stockholders and their agents, donees, distributees, pledgees
and other successors in interest may offer and sell the Shares from time to time
in one or more transactions on The Nasdaq Stock Market, or otherwise, at market
prices then prevailing or in negotiated transactions. The Shares may also be
sold pursuant to option, hedging or other transactions with broker-dealers. The
Shares may also be offered in one or more underwritten offerings. The
underwriters in an underwritten offering, if any, and the terms and conditions
of any such offering will be described in a supplement to this Prospectus. See
"Selling Stockholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. See "Use of Proceeds".
The Common Stock of the Company is traded on the National Market of The
Nasdaq Stock Market (the "Nasdaq National Market") under the symbol "NMSS". On
November 11, 1997, the last reported sale price of Common Stock on the Nasdaq
National Market was $47.18 per share.
_________________________
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.
___________________
THE DATE OF THIS PROSPECTUS IS NOVEMBER 25, 1997.
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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 with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048, and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also may be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such material may also be obtained
from the Commission's web site at http://www.sec.gov. The Common Stock of the
Company is traded on the Nasdaq National Market. Reports, proxy statements and
other information concerning the Company also may be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules filed therewith. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any agreement
or other document are not necessarily complete, and in each instance reference
is made to the copy of such agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the principal office of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
all or any part thereof may be obtained from such office upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-14805) are incorporated herein by reference: (1) the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996; (2) the Company's
interim reports on Form 10-Q for the fiscal quarters ended March 31, 1997, June
30, 1997 and September 30,1997; (3) the Company's current report on Form 8-K
filed with the Commission on April 24, 1997; and (4) the description of the
Company's Common Stock incorporated by reference in the Company's registration
statement on Form 8-A (SEC File No. 0-23282) filed with the Commission on
January 25, 1994 from the registration statement on Form S-1 (SEC File No. 33-
72596) filed with the Commission on December 6, 1993.
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In addition, all documents filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the termination of the offering of the Common Stock
registered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statements contained in a document incorporated or deemed to be 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 a written
request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to the Chief
Financial Officer of the Company, 100 Crossing Boulevard, Framingham,
Massachusetts 01702-5406, Telephone: (508) 620-9300.
THE COMPANY
The Company's principal executive offices are located at 100 Crossing
Boulevard, Framingham, Massachusetts 01702-5406, and its telephone number is
(508) 620-9300. The Company was incorporated in Delaware in 1983.
AG, Alliance Generation(R), NaturalAccess, Open Telecommunications,
Telephony Services Architecture and TSA are trademarks, and Natural
MicroSystems, VOX and TEKnique are trade names, of the Company used in this
Prospectus. Multi-Vendor Integration Protocol and MVIP are trademarks of GO-
MVIP, Inc. This Prospectus also includes references to trademarks and trade
names of companies other than the Company.
________________________
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Common Stock offered by this Prospectus. In particular, potential investors
are advised that statements contained herein or incorporated by reference into
this Prospectus expressing the beliefs and expectations of management regarding
the Company's future results or performance are forward looking statements based
on current expectations that involve a number of risks and uncertainties. The
following factors describe certain market risks associated with an investment in
the Common Stock and various of the risks and uncertainties which could cause
actual results to differ materially from management expectations.
Variations in Operating Results. The Company's results of operations have
varied from quarter to quarter and, in recent quarters, approximately half of
the revenues have been received in the final month. These variations result
from a number of factors, including timing of customer orders, adjustments of
delivery schedules to accommodate customer or regulatory requirements,
availability of components from suppliers, timing and level of international
sales, mix of products sold, and timing and level of expenditures for sales,
marketing and new product development. The Company has historically operated
with little backlog and substantially all of its revenues in each quarter have
resulted from orders received in that quarter. If short-term demand for the
Company's products declines, or if the Company is unable to secure adequate
materials from its suppliers, the Company's results of operations for that
quarter would be adversely affected. No assurance can be given that these
quarterly variations will not occur in the future and, accordingly, the results
of any one quarter may not be indicative of the operating results for future
quarters.
Competition. The market for products of the type supplied by the Company
is highly competitive. The Company has numerous competitors whose products
compete with one or more of the Company's products. The products of one
competitor, Dialogic Corporation, which is significantly larger than the Company
and has significantly greater resources available to it, compete directly
against the Company's full range of products. As the Company enters new
markets, it expects to encounter competition from additional competitors, some
of whom may have greater resources than the Company. In addition, certain large
applications and systems developers use their own proprietary computer telephony
enabling components as an alternative to purchasing commercially available
products such as those sold by the Company.
Market Acceptance of Products; Technological Changes. The market for the
Company's products is characterized by rapidly changing technology, evolving
industry standards and frequent new product introductions. The Company's near
term success and future growth is substantially dependent upon continuing market
acceptance of its products. The Company's future success will in large part
depend on its continued ability to enhance its existing products and to develop
new products to meet changing customer requirements and emerging industry
standards. There can be no assurance that the Company will successfully develop
new products and enhancements, including its NaturalAccess software line, Quad
T1, IP telephony, and SS7 products, on a timely basis or that such products and
enhancements will achieve market acceptance. Delay in the development of these
products and enhancements or their failure to
4
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achieve market acceptance could adversely affect the Company's business. In
addition, there can be no assurance that products or technologies developed by
others will not render the Company's products or technologies noncompetitive or
obsolete. One computer telephony industry standard which has emerged over the
last several years is Multi-Vendor Integration Protocol (MVIP), an architecture
for interoperability and switching, of which the Company was the primary
developer. Although a substantial number of products are based on MVIP, a
competing architecture for interoperability, Dialogic Corporation's Signal
Computing System Architecture (SCSA), has been introduced and others may emerge.
There is currently a standards effort to unify suppliers of both enabling
products and applications developers under the Enterprise Computer Telephony
Forum (ECTF) in which the Company participates. The Company is an early endorser
of the ECTF's, the H.100 protocol. There can be no assurance that SCSA or
another architecture will not supersede MVIP or H.100, which could adversely
affect the Company's business.
Integration of VOX and TEKnique Operations. The successful integration of
the operations of VOX and TEKnique, respectively, which were acquired in
November 1995 and June 1996 respectively, with those of the Company will
continue to require, among other things, the coordination of the respective
product offerings of the Company and both VOX and TEKnique and related sales,
marketing, development and administrative activities. There can be no assurance
that the Company will not encounter unexpected difficulties in such integrations
or that the expected benefits will be realized. Any unexpected delays or costs
incurred in such integration could have a material adverse effect upon the
Company.
Limited Protection of Proprietary Technology. The Company's success is
dependent upon proprietary technology. The Company currently has no patents and
protects its technology primarily through copyrights and trade secrets. There
can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent the misappropriation of its
technology or the independent development by others of similar technology.
Although the Company believes that its products and technology do not infringe
on any existing proprietary rights of others, there can be no assurance that
third parties will not assert infringement claims. If infringement is alleged,
there can be no assurance that the Company would prevail or that any necessary
licenses would be available on acceptable terms, if at all. In any event,
patent and other intellectual property litigation can be extremely protracted
and expensive.
Dependence on Market Success of Third Parties; Significant Customer. The
Company's customers are primarily original equipment manufacturers (OEMs), value
added resellers (VARs), systems integrators, telephony service providers, and
international distributors. The Company's revenues are dependent upon the
ability of its customers to develop and sell computer telephony applications and
systems to end-users. Factors affecting the ability of the Company's customers
to develop and sell their products include competition, regulatory restrictions,
patent and other intellectual property issues, and overall economic conditions.
One customer accounted for 13.9% of the Company's revenues in 1996. A second
customer accounted for 13.3% and 11.9% of the Company's revenues in 1994 and
1995, respectively, but less than 10% in 1996. There can be no assurance that
these customers will continue to purchase similar volumes of the Company's
products.
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Dependence on Outside Suppliers and Contract Assembly Manufacturers. The
Company relies on various suppliers of components for its products. Many of
these components are standard and generally available from multiple sources.
However, certain custom integrated circuits and other devices which are
components of one or more of the Company's products are acquired by the Company
from single source suppliers. Although the Company believes it could develop
other sources for each of these custom devices, the process could take several
months, and the inability or refusal of any such source to continue to supply
devices could have a material adverse effect on the Company pending the
development of an alternative source. The Company also currently relies on a
single contract manufacturer to assemble printed circuit boards for its European
operations. The Company also currently relies on two sole source contract
manufacturers to assemble printed circuit boards for each of its North American
computer telephony and intelligent network operations. Although a number of
such contract manufacturers exist, the interruption or termination of the
Company's current manufacturing relationships could have a short-term adverse
effect on the Company's business.
Risks Associated with International Operations. The Company's sales to
customers outside North America accounted for 31.1% of the Company's revenues in
1996 and 30% in the first six months of 1997. In addition, the Company believes
that a material portion of its domestic sales ultimately result in the use of
the Company's products outside North America. Accordingly, a significant portion
of the Company's revenues are subject to the risks associated with international
sales. The Company has significant assets denominated in French currency and
has denominated a significant portion of its sales in foreign currencies.
Further, customers generally evaluate the purchase of the Company's products
based on the purchase price expressed in the customer's currency. Therefore,
changes in foreign currency exchange rates may adversely affect the sale of the
Company's products. The Company does not currently engage in currency hedging
transactions to offset the risks associated with variations in currency exchange
rates. In addition, international markets have different regulatory
environments than those of the United States, and the Company is required to
obtain approval for its products prior to their use in other countries. There
can be no assurance that changes will not occur in such regulations or that, if
such changes occur, the Company will be able to continue to sell its products
into the affected markets. In addition, the Company's international business
may be adversely affected by risks such as political instability, trade and
tariff regulations, difficulty in obtaining export licenses, difficulties or
delays in collecting accounts receivable, and difficulties in staffing and
managing international operations.
Possible Volatility of Stock Price. Factors such as announcements of
technological innovations or new products by the Company, its competitors and
other third parties, as well as quarterly variations in the Company's results of
operations and market conditions in the industry, may cause the market price of
the Common Stock to fluctuate significantly. In addition, the stock market in
general has recently experienced extreme price and volume fluctuations, which
have particularly affected the market prices of many high technology companies
and which have often been unrelated to the operating performance of such
companies. These broad market fluctuations may adversely affect the market
price of the Common Stock.
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Dependence on Key Personnel. The Company is highly dependent on certain
key executive officers and technical employees, the loss of any of whom could
have an adverse impact on the future operations of the Company. In addition,
the Company may need to hire additional skilled personnel to support the
continued growth of its business and the market for skilled personnel,
especially those with the technical abilities required by the Company, is
currently very competitive. There can be no assurance that the Company will be
able to retain its existing personnel or attract additional qualified employees.
Certain Charter Provisions with Anti-Takeover and Other Effects. The
Company's Board of Directors has the power to issue shares of Common Stock and
Preferred Stock which, if issued, could dilute and adversely affect various
rights of the holders of Common Stock and, in addition, could be used to
discourage an unsolicited attempt to acquire control of the Company. The
Company's Certificate of Incorporation also provides for a classified board of
directors and contains other provisions which may also discourage an unsolicited
takeover attempt. These provisions could limit the price that investors might
be willing to pay in the future for shares of Common Stock and could make it
more difficult for stockholders of the Company to effect certain corporate
actions.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders.
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SELLING STOCKHOLDERS
Set forth below, with respect to each Selling Stockholder, is the number of
shares of Common Stock beneficially owned as of October 24, 1997, the number of
Shares offered pursuant to this Prospectus and the number of shares to be owned
after completion of the offering (assuming the sale of all the Shares offered
hereunder).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of
Shares to be Number of Shares
Total Number of Offered or to be Owned After
Name Shares Owned (1) Sold the Offering
- --------------------------------- ---------------- ------------ -----------------
Julius M. Rothschild
as Trustee of the Julius M.
Rothschild Revocable Trust
dated January 14, 1997.......... 25,537 6,859 18,678
- --------------------------------- ------ ----- -----
Herbert L. Pavey................ 16,198 6,859 9,339
- --------------------------------- ------ ----- -----
John C. Alexander............... 2,119 838 1,281
- --------------------------------- ------ ----- -----
Adam J. Machalek................ 134 134 0
- --------------------------------- ------ ----- -----
Jeffrey M. DeMent............... 499 134 365
- --------------------------------- ------ ----- -----
Joseph A. Lee................... 396 106 290
- --------------------------------- ------ ----- -----
Jeffrey M. Putnam............... 196 106 90
- --------------------------------- ------ ----- -----
Jeffrey T. Rego................. 396 106 290
- --------------------------------- ------ ----- -----
Stephen F. Witt.................. 170 46 124
- --------------------------------- ------ ----- -----
Tedd R. Pierce.................. 15 15 0
- --------------------------------- ------ ----- -----
Celeste M. Baril................ 59 9 50
- --------------------------------- ------ ----- -----
Michael A. Firman............... 34 9 25
- --------------------------------- ------ ----- -----
Mark D. Davis.................... 25 7 18
- --------------------------------- ------ ----- -----
Mary V. Hubner................... 13 4 9
- --------------------------------- ------ ----- -----
</TABLE>
(1) Such Shares were issued by the Company to such Selling Stockholders in
exchange for their shares of common stock in connection with the merger of
a wholly-owned subsidiary of the Company with and into Tek-Nique, Inc., an
Illinois corporation ("Tek-Nique") on June 14, 1996 and as contingent
consideration for certain performance deliverables on April 28, 1997. Tek-
Nique and PSR Systems, Inc., are each currently wholly-owned subsidiaries
of the Company.
PLAN OF DISTRIBUTION
The Selling Stockholders and their agents, donees, distributees, pledgees
and other successors in interest may, from time to time, offer for sale and sell
or distribute the Shares to be offered by them hereby (a) in transactions
executed on the Nasdaq National Market, or any securities exchange on which the
shares may be traded, through registered broker-dealers (who may act as
principals, pledgees or agents) pursuant to unsolicited orders or offers to buy,
(b) in negotiated transactions, or (c) through other means. The Shares may be
sold from time to time in one or more transactions at market prices prevailing
at the time of sale or a fixed offering price, which may be changed, or at
varying prices determined at the time of sale or at negotiated
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prices. Such prices will be determined by the Selling Stockholders or by
agreement between the Selling Stockholders and their underwriters, dealers,
brokers or agents. The Shares may also be offered in one or more underwritten
offerings. The underwriters in an underwritten offering, if any, and the terms
and conditions of any such offering will be described in a supplement to this
Prospectus.
In connection with distribution of the Shares, the Selling Stockholders may
enter into hedging or other option transactions with broker-dealers in
connection with which, among other things, such broker-dealers may engage in
short sales of the Shares pursuant to this Prospectus in the course of hedging
the positions they may assume with one or more of the Selling Stockholders. The
Selling Stockholders may also sell Shares short pursuant to this Prospectus and
deliver the Shares to close out such short positions. The Selling Stockholders
may also enter into option or other transactions with broker-dealers which may
result in the delivery of Shares to such broker-dealers who may sell such Shares
pursuant to this Prospectus. The Selling Stockholders may also pledge the
Shares to a broker-dealer and upon default the broker-dealer may effect the
sales of the pledged Shares pursuant to this Prospectus.
The distribution of the Shares by the Selling Stockholders is not subject
to any underwriting agreement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from the
Selling Stockholders and/or purchasers of Shares, for whom they may act. Such
discounts, concessions, commissions or fees will not exceed those customary for
the type of transactions involved. In addition, the Selling Stockholders and
any such underwriters, dealers, brokers or agents that participate in the
distribution of Shares may be deemed to be underwriters under the Securities
Act, and any profits on the sale of Shares by them and any discounts,
commissions or concessions received by any of such persons may be deemed to be
underwriting discounts and commissions under the Securities Act. Those who act
as underwriter, broker, dealer or agent in connection with the sale of the
Shares will be selected by the Selling Stockholders and may have other business
relationships with the Company and its subsidiaries or affiliates in the
ordinary course of business. Alex. Brown & Sons Incorporated, which acts as a
market maker with respect to the Common Stock, has agreed to act as a principal
in purchasing some or all of the Shares from the Selling Stockholders and may
thereafter resell such Shares from time to time in or through one or more
transactions or distributions on the Nasdaq National Market, through other
registered brokers or dealers pursuant to unsolicited orders or offers to buy,
in independent negotiated transactions, or otherwise.
The aggregate proceeds to the Selling Stockholders from the sale of the
Shares offered by the Selling Stockholders hereby will be the purchase price of
such Shares less any broker's commissions.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdiction only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration of qualification
requirement is available and is complied with.
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The Selling Stockholders and any broker-dealer, agent or underwriter that
participates with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters 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.
There is no assurance that the Selling Stockholders will sell any or all of
the Shares described herein and may transfer, devise or gift such securities by
other means not described herein. The Company is permitted to suspend the use
of this Prospectus in connection with sales of the Shares by holders during
certain periods of time under certain circumstances relating to pending
corporate developments and public filings with the Commission and similar
events. Expenses of preparing and filing the registration statement and any and
all amendments thereto will be borne by the Company.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The legality of the Common Stock offered hereby is being passed upon for
the Company by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts. Richard N. Hoehn, a partner of Choate,
Hall & Stewart, is the Secretary of the Company.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Company............................ 3
Risk Factors........................... 4
Use of Proceeds........................ 7
Selling Stockholders................... 8
Plan of Distribution................... 8
Interests of Named Experts
and Counsel.......................... 10
</TABLE>
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15,232 SHARES
NATURAL
MICROSYSTEMS
CORPORATION
COMMON STOCK
PROSPECTUS
NOVEMBER 25, 1997
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