<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2000
REGISTRATION NO. 333-72429
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-------------------------------
VIDEO NETWORK COMMUNICATIONS, INC.
(FORMERLY OBJECTIVE COMMUNICATIONS, INC.)
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3669 54-1707962
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
-------------------------------
<TABLE>
<S> <C>
VIDEO NETWORK COMMUNICATIONS, INC. ROBERT H. EMERY
50 INTERNATIONAL DRIVE 50 INTERNATIONAL DRIVE
PORTSMOUTH, NEW HAMPSHIRE 03801 PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 334-6700 (603) 334-6700
(Address, including Zip Code, and Telephone Number, (Name, Address, including Zip Code, and Telephone
including Area Code, of Registrant's Principal Executive Number of Agent for Service)
Offices)
</TABLE>
COPY TO:
ELLEN C. GRADY, ESQ.
SHAWPITTMAN
1676 INTERNATIONAL DRIVE
MCLEAN, VIRGINIA 22102
(703) 790-7946
-------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as possible after the effective date of this Registration Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, other than securities offered only in
connection with dividend or 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, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration
<PAGE> 2
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
================================================================================
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to our Registration Statement
(Registration No. 333-72429) updates, amends and completes the prospectus
included in the Registration Statement for use by (1) certain selling
stockholders to offer and resell up to 837,839 shares of common stock covered by
the Registration Statement; and (2) Video Network Communications, Inc. (the
"Company") to offer and sell up to (a) 4,600,000 shares of common stock issuable
upon the exercise of our outstanding publicly traded common stock purchase
warrants issued in our June 1999 public offering of units, and (b) the following
securities issuable upon exercise of our outstanding purchase options: 600,000
shares of common stock, redeemable common stock purchase warrants to purchase
400,000 shares of common stock, and an additional 400,000 shares of common stock
issuable upon the exercise of those warrants. This Post-Effective Amendment
No. 1 also converts the Registration Statement from a registration statement
on Form SB-2 to a registration statement on Form S-3. We originally filed
this Registration Statement with the Commission in February 1999 in connection
with (1) a primary offering of units by us, each unit consisting of three
shares of common stock and two warrants to purchase one share of common stock,
in an underwritten offering (the "Company Offering"), and to register the sale
by us of purchase options issued to certain affiliates of the representative
of the underwriters of the Company Offering and the securities underlying the
purchase options, and (2) a secondary offering of shares of common stock by
certain selling stockholders who may offer and sell such securities on a
delayed or continuous basis from time to time. The Commission declared the
Registration Statement effective on June 15, 1999. We completed the Company
Offering in June 1999.
We are filing this Post-Effective Amendment No. 1 to complete the
prospectus to be used to offer and sell the following securities. Certain
selling stockholders are offering and reselling 837,839 shares of our common
stock, originally issued by us in private placements completed in February and
June 1999. We are also using this prospectus to offer and sell 4,600,000 shares
of our common stock issuable upon exercise of our outstanding warrants, and the
following securities issuable upon the exercise of our outstanding purchase
options: (a) 600,000 shares of common stock, (b) 400,000 redeemable common stock
purchase warrants, and (c) an additional 400,000 shares of common stock issuable
upon exercise of those warrants. We issued and sold the publicly traded warrants
in the Company Offering. Our publicly traded warrants are first exercisable on
June 15, 2000 at an initial exercise price of $4.00 per share and expire on June
15, 2004. We first issued the outstanding purchase options in our June 1999
public offering to certain affiliates of the representative of the underwriters
of the Company Offering (the "Representative's Purchase Options"). The
Representative's Purchase Options become exercisable on June 15, 2000, the first
anniversary of the date of issuance, at an initial exercise price of $12.375 per
purchase option, and are exercisable for a period of four years. The warrants
underlying the purchase options are the same as the warrants sold in the Company
Offering except that the initial exercise price is $6.60 per share.
Of the securities to be offered and sold in the Offering by the
selling stockholders, 721,741 shares of common stock are subject to a lock-up
arrangement that expires on June 15, 2000, and 58,101 shares of common stock
held by certain of our directors and executive officers and former directors and
former executive officers are subject to a lock-up arrangement that expires on
September 15, 2000. In both cases, the shares of common stock subject to the
lock-up arrangements can be transferred earlier than the expiration date of the
lock-up with the prior consent of the representative of the underwriters of our
June 1999 public offering.
All of the equity securities covered by this Post-Effective
Amendment No. 1 to be offered and sold by the selling stockholders will be
sold for their own accounts, and we will not receive any proceeds from the
sale of such securities. If the outstanding publicly traded warrants are
exercised in full, we will receive gross proceeds of $18,400,000. If the
Representative's Purchase Options are exercised in full for cash, we will
receive gross proceeds of $2,475,000 and if the warrants issuable upon
exercise of Representative's Purchase Options are exercised in full, then we
will receive additional gross proceeds of $2,640,000. We intend to use any net
proceeds from the exercise of the outstanding publicly traded warrants, or the
exercise of the Representative's Purchase Options and the underlying warrants,
for general corporate purposes and to provide working capital.
<PAGE> 4
PROSPECTUS
VIDEO NETWORK COMMUNICATIONS, INC. [VIDEO NETWORK COMMUNICATIONS, INC. LOGO]
This prospectus relates to the offering and sale of the following
equity securities of Video Network Communications, Inc., by the persons
indicated. Certain selling stockholders of VNCI are offering and reselling
837,839 outstanding shares of our common stock. We are offering up to 4,600,000
shares of our common stock for issuance upon exercise of our outstanding
publicly traded warrants and the following equity securities for issuance upon
the exercise of 200,000 outstanding purchase options: 600,000 shares of our
common stock, 400,000 redeemable common stock purchase warrants, and an
additional 400,000 shares of our common stock issuable upon exercise of the
warrants mentioned above.
Our outstanding publicly traded warrants entitle the holder to
purchase one share of our common stock at an initial exercise price of $4.00 per
share during a four-year period beginning on June 15, 2000. We may, with the
consent of the representative of our June 1999 public offering, redeem the
warrants at any time after they become exercisable at a price of $.01 per
warrant upon not less than 30 days' notice if the last sale price of the common
stock has been at least 200% of the then exercise price per warrant (initially
$8.00 per share) for the 20 consecutive trading days ending on the third day
prior to the day on which notice is given.
The outstanding purchase options are exercisable by the holders
during a period beginning on June 15, 2000 and ending on June 15, 2004, and are
exercisable in cash at an initial exercise price of $12.375 per unit. In lieu of
paying the exercise price in cash, holders of the purchase options also have the
right to convert any exercisable but unexercised portion of the purchase options
into securities using a conversion formula based on the value of the options
being converted. Upon exercise of the purchase options, each holder is entitled
to receive, for each purchase option exercised, three shares of our common stock
and two redeemable common stock purchase warrants. The common stock and the
warrants are separately transferable. Each warrant issued upon exercise of the
purchase options entitles the holder to purchase one share of common stock at an
initial exercise price of $6.60 during a four-year period that begins on June
15, 2000 and expires on June 15, 2004. Upon issuance, these warrants will
constitute part of the class of our outstanding publicly traded warrants. As
with our other publicly traded warrants, we have the right to redeem the
warrants at any time after they become exercisable, at a price of $.01 per
warrant upon not less than 30 days' prior written notice if the last sale price
of the common stock has been at least 200% of the then exercise price per
warrant for the 20 consecutive trading days ending on the third day prior to the
date on which the notice is given.
Of the securities covered by this prospectus, 721,741 shares of
common stock are subject to a lock-up arrangement that expires on June 15, 2000,
and 58,101 shares of common stock held by certain of our directors and executive
officers and former directors and former executive officers are subject to a
lock-up arrangement that expires on September 15, 2000. In both cases, the
shares of common stock subject to the lock-up arrangements can be transferred
earlier than the expiration date of the arrangement with the prior consent of
the representative of the underwriters of our June 1999 public offering.
We will not receive any proceeds from the sale of common stock by
the selling stockholders. If the outstanding publicly traded warrants are
exercised in full for cash, we will receive gross proceeds of $18,400,000. In
addition, if the purchase options are exercised in full, we will receive gross
proceeds of $2,475,000, and we will issue to the holders of such options a total
of 600,000 shares of our common stock and 400,000 redeemable common stock
purchase warrants. If those warrants are exercised in full, we will receive
additional gross proceeds of $2,640,000, and we will issue a total of an
additional 400,000 shares of our common stock to the holders of such warrants.
We may pay certain solicitation fees in connection with the exercise of the
publicly traded warrants. At the time we completed our June 1999 public
offering, we agreed to pay EarlyBirdCapital.com, the representative of the
underwriters of that offering, a fee equal to 5% of the exercise price of each
warrant exercised if EarlyBirdCapital.com solicited the exercise of such
warrant. The payment of the solicitation fee is subject to certain conditions,
including, among others, limitations imposed by the National Association of
Securities Dealers, Inc. on
<PAGE> 5
the payment and scope of such fees.
The shares of common stock issuable upon exercise of our outstanding
warrants and the securities that are issuable by us upon exercise of the
outstanding purchase options, are offered solely by us and no underwriters are
participating in the offering. The securities offered by the selling
stockholders may be offered by them for sale from time to time in one or more
transactions, including block trades, on the Nasdaq SmallCap market, in the
over-the-counter market, in privately negotiated transactions, in other methods
of sale described under "Plan of Distribution" later in this prospectus. The
selling stockholders may sell the securities offered by this prospectus in
amounts and at times determined by them.
The selling stockholders and any broker-dealer or agent that
participates with the selling stockholders in the distribution of the equity
securities may be deemed to be "underwriters" within the meaning of section
2(11) of the Securities Act of 1933, as amended, in which case any commissions
or profits on the resale of the securities may be deemed underwriting
commissions or discounts under the Securities Act.
We will pay all of the costs and fees relating to the registration
of the securities covered by this prospectus. We will not pay, however, any
discounts, concessions or commissions payable to underwriters, dealers or agents
incident to the offering of the securities.
Our common stock and warrants trade on the Nasdaq SmallCap market
under the symbols VNCI and VNCIW, respectively. On April 25, 2000, the last
sales prices of the common stock and warrants as reported on The Nasdaq SmallCap
market was $2.50 per share and $1.2813 per warrant.
INVESTING IN OUR EQUITY SECURITIES INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD INVEST IN THE SECURITIES ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
MAY 3, 2000
<PAGE> 6
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the information requirements of the Securities
Exchange Act of 1934, and, in accordance with those requirements, we file
reports and other information with the SEC. Our reports, proxy statements, and
other information can be inspected without charge at the public reference rooms
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven
World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of those materials also may
be obtained from the public reference section of the SEC, 450 Fifth Street,
N.W., Washington, D.C., 20549, at prescribed rates. You may obtain additional
information about the operation of the public reference rooms by calling the SEC
at 1-800-SEC-0330. Information is also publicly available through the SEC's web
site located at http://www.sec.gov. Our common stock and publicly traded
warrants are quoted on the Nasdaq SmallCap Market and information concerning us
also can be inspected at the office of the Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006-1500.
The SEC maintains an Internet site at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including VNCI. We
maintain a Web site that includes our SEC reports as well as other information
about us at http://www.vnci.net. Other than the information that we specifically
incorporate by reference in this prospectus as set forth below, none of the
other information referred to above should be considered part of this
prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings with
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), until the selling stockholders sell all of the securities covered by this
prospectus. This prospectus is part of a registration statement we filed with
the SEC.
1. Our registration statement on Form 8-A filed with the SEC on
March 13, 1997, registering our common stock under Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
2. Our registration statement on Form 8-A filed with the
Commission on June 18, 1999, registering our units and
warrants under Section 12(g) of the Exchange Act; and
3. Our Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1999, as filed with the SEC on March 30,
2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Video Network Communications, Inc., 50
International Drive, Portsmouth, New Hampshire 03801, Attention: Robert H.
Emery, Chief Financial Officer and Vice President, Administration, Telephone
number 603-334-6700.
We have filed with the SEC a registration statement on Form S-3
under the Securities Act with respect to the equity securities offered under
this prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement, certain terms of which are omitted in accordance with the rules and
regulations of the SEC. Statements contained in this prospectus as to the
contents of any contract or other documents are not necessarily complete, and in
each instance, reference is made to the copy of such contract or documents filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference and the exhibits and schedules thereto. For
further information regarding VNCI and the equity securities offered under this
prospectus, we refer you to the registration statement and the exhibits and
schedules which may be obtained from the SEC at its principal office in
Washington, D.C. upon payment of the fees prescribed by the SEC.
-2-
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Where to Find Additional Information........................ 2
Incorporation of Certain Documents By Reference ............ 2
Table of Contents........................................... 3
Prospectus Summary.......................................... 4
Risk Factors................................................ 6
Use of Proceeds............................................. 10
Price Range of Common Stock................................. 10
Beneficial Ownership of Selling Stockholders............... 11
Certain Transactions With Selling Stockholders.............. 15
Description of Securities................................... 17
Plan of Distribution........................................ 18
Legal Matters............................................... 20
Experts..................................................... 20
</TABLE>
Video Network Communications, Inc. was incorporated in 1993 under
the corporate name "Objective Communications, Inc." We changed our name to Video
Network Communications, Inc. in September of 1999. Our executive offices are
located at 50 International Drive, Portsmouth, New Hampshire 03801, and our
telephone number is (603) 334-6700.
Unless otherwise indicated in this prospectus, all information in
this prospectus gives effect to a one share for seven shares reverse stock split
of our issued and outstanding common stock effective on April 14, 1999, gives
effect to the conversion to common stock of our issued and outstanding Series B
5% Cumulative Convertible Preferred Stock on June 18, 1999, and gives effect to
the conversion to common stock of our outstanding 5% Convertible Debentures due
2003 on June 18, 1999.
Some of the statements contained in this prospectus including
statements under "Prospectus Summary" and "Risk Factors" are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and may involve a number of risks and uncertainties. Actual results and
future events may differ significantly based upon a number of factors,
including:
- risks in product and technology development;
- customer and market acceptance of new products;
- demand for our products; and
- the impact of competitive products and pricing.
In this prospectus, we refer to Video Network Communications, Inc.,
a Delaware corporation, as we, the Company or VNCI. We refer to the stockholders
who beneficially own securities being offered and sold using this prospectus as
the selling stockholders. We refer to prospective investors as you or the
investor(s).
VidPhone(R) and VidModem(R) are registered trademarks of VNCI, and
we have an application pending to register VNCI(R). This prospectus also
contains trademarks and trade names of other companies.
-3-
<PAGE> 8
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere or
incorporated by reference in this prospectus. This summary is not complete and
does not contain all of the information you should consider before investing in
the common stock. You should read the entire prospectus and the documents
incorporated by reference in this prospectus carefully, including the "Risk
Factors" section.
GENERAL
We design, develop and market full motion, high resolution,
cost-effective video network systems. Users of our VidPhone video network system
can view broadcast video, participate in multi-party video conferences and
retrieve stored video on demand. We believe that the VidPhone system offers
greater functionality and compatibility with existing infrastructure and higher
quality than other video network or conferencing systems available today.
The VidPhone video network system:
- enables simultaneous two-way transmission of full-motion,
high resolution video, FM-quality audio, and data;
- has no transmission delays within a building or small
business campus so audio and video are fully synchronized;
- uses the same wiring as the telephone;
- is independent of the local area network ("LAN"), so no
additional wiring or local area network management is
required; and
- requires minimal computer processing power, which permits
concurrent use of other computer applications.
Our initial products and technology first achieved commercial
acceptance during the first half of 1999. We have had limited sales of our
system and its components since the introduction, but we have shown revenue
and sales growth. To date we have recognized minimal revenues from sales of
the VidPhone system and its components.
We market our video network system directly and through telephone
product and service providers, systems integrators and value-added resellers
("VARs") who will generally market and sell our video network system as an
upgrade to their existing customers' telephone and information systems. We
currently have agreements with more than a dozen resellers. We also have a small
internal direct sales force to promote our VidPhone system, to create reference
accounts in major markets, and to support our third party resellers. We are
developing vertical distribution channels for our VidPhone system, initially
targeting the education, government and financial and medical industries. We
believe that in order for our company to be successful, we will need to achieve
higher level of sales in a relatively short time, which may require
substantially higher sales and marketing expenditures in the future. At this
time, we do not have the financial resources to expend on sales and marketing
that may be required to achieve this growth.
RECENT DEVELOPMENTS
We have significantly restructured our management and operations
since July 1998. James Bunker, who has extensive experience "turning-around"
businesses, served as our President and Chief Executive Officer from July 1998
to September 1999. He currently serves as the Chairman of our Board of
Directors. In September 1999, we hired Carl Muscari, who currently serves as our
President and Chief Executive Officer and as a member of our Board of Directors.
Our founder, Steven Rogers, who formerly served as our Chief Executive Officer
and President from our inception until July 1998, continued to serve our company
as a senior officer responsible for our technology from July 1998 until August
1999, when he left our company. Mr. Rogers continues to serve as a member of our
Board of Directors. We also recently hired a new Vice President, Sales and
Marketing, in an effort to improve our sales in the near future.
-4-
<PAGE> 9
As part of our restructuring, we significantly reduced the number of
our employees from approximately 135 in July 1998, to approximately 54 employees
as of the date of this prospectus. We also implemented new cash management and
expense policies. These changes reduced our total operating expenses in 1999 by
approximately 54% compared to the same period in 1998, and reduced our cash
used in operating activities in 1999 by approximately 51% over 1998. During
1999, we also refined our sales and marketing strategy, focusing on promoting
the VidPhone system to our large resellers and their customers.
Our financial results for 1999 reflect the positive effects of the
restructuring and cost reduction program that we began in July of 1998. As a
result of the introduction of the first commercial version of the VidPhone
system in August 1998, which incorporated our Release 1.4 software, we reported
revenues of approximately $2.4 million for 1999, compared to approximately
$766,000 for 1998. As a result of our aggressive cost reduction program, total
selling, general and administrative expenses were reduced in 1999 to
approximately $5 million, from approximately $9 million during 1998, a decrease
of approximately $4 million or approximately 44%. We believe that our 1999
results are a positive first step toward our goal of achieving commercial
acceptance of the VidPhone system.
We expect that our operating expenses will continue to be in the
range of the current level, or will increase slightly, for the foreseeable
future. We also anticipate that we will be required to increase inventory
purchases as sales of our products increase. We are unable to predict our
anticipated level of revenues in the future, because our product is new,
requires a substantial investment by our customers and because we do not have a
lengthy operating history upon which to base our projections. We have a limited
operating history, and therefore, we do not have any substantial basis upon
which to predict our sales cycle.
As of December 31, 1999, we had approximately $2,595,000 in cash and
cash equivalents, which had declined to approximately $1,848,000 at March 31,
2000. We expect to generate revenues from operations during the next twelve
months. However, we believe that these additional revenues together with our
existing cash may not be sufficient to fund our operations for that period.
Accordingly, we anticipate that we may require additional financing to fund our
operations. We have begun discussions with some potential financial investors
and strategic partners and we are seeking to complete a private financing in the
near future. We intend to continue to fund our operations with our existing cash
and with cash generated from customer payments on outstanding accounts
receivable until we complete an additional financing. However, the timing and
amount of customer payments is uncertain. Our ability to complete a financing,
the timing of the financing and its terms are subject to a number of conditions,
including market conditions, some of which are beyond our control. There can be
no assurance that the Company will be able to secure financing or, if obtained,
the timing or the terms of any such financing. If we do not secure additional
financing when needed, we may be forced to consider alternative methods of
maximizing stockholder value, which could include a sale of the Company, asset
sales, workout alternatives or bankruptcy.
STRATEGY
Our objective is to become a leading provider of video network
systems. The key elements of our strategy are to:
- create brand-name recognition of the VidPhone system;
- position the VidPhone system as an enhancement to existing
telephone and information systems; and
- distribute the VidPhone system through established
distribution channels with large customer bases.
-5-
<PAGE> 10
RISK FACTORS
Investing in our equity securities is very risky. You should be able
to bear a complete loss of your investment. You should consider carefully the
following factors, among others.
WE WILL REQUIRE ADDITIONAL FINANCING
We estimate that our cash on hand will fund and anticipated receipts
from operations will fund our operations for the foreseeable future. However,
changes in the market in which we operate, in our business, or in our business
plan could increase our need for additional capital. Our future capital
requirements could exceed our current expectations as a result of increases in
the cost of manufacturing and marketing activities, the size of our research and
development programs, the length of time required to collect accounts
receivable, and competing technological and market developments.
After our current cash is exhausted, we will need additional cash to
continue operating. To date, the cash generated from operations has not been
sufficient to fund our business and we have been dependent on financings to
continue operating. We expect that we will continue to require outside debt or
equity financing for the foreseeable future. We do not currently have any lines
of credit or bank financing, and we do not anticipate having access to bank
financing for the foreseeable future. We may not be able to raise any additional
money through equity or debt financings on acceptable terms or at all. If we
were to raise additional funds through the issuance of equity or convertible
debt securities, your investment in VNCI could be substantially diluted and
those securities could have preferences and privileges that your securities do
not have. If we are not able to complete additional financings when capital is
needed, we will not be able to continue operating.
WE MAY BE UNABLE TO MEET THE PAYMENT SCHEDULE ON NOTES PAYABLE
In January 1999, we re-negotiated amounts due to a trade creditor,
Sanmina Corp., and our legal counsel and converted $3,575,000 in accounts
payable balances to long-term debt. In connection with the re-negotation of such
obligations, in June 1999, Sanmina transferred to us title to an additional
$1,100,000 in value of our inventory located at a Sanmina subcontractor. In the
first half of 1999, we repaid $1,175,000 of the principal amount of the
$4,675,000 in long-term debt incurred in the first half of 1999. In January
2000, we defaulted on the interest payment due and we did not pay subsequent
interest and principal payments on these notes when due. Subsequently, we made
a partial payment to the holder of one of the notes. To date, neither of the
holders of these notes has taken any action against the Company. We are
currently seeking to re-negotiate the repayment terms of these notes and we
consider successful renegotiation of the terms of these notes critical to our
financial condition and future operations. We have not been successful in the
discussions to date in obtaining the agreement of either of the holders to
renegotiate the terms of either of these notes and there can be no assurance
that we will be able to do so. Failure to re-negotiate the terms of these notes,
including an extension of the terms, would have a materially adverse effect on
the financial condition and cash flows of the Company.
CUSTOMERS MAY NOT BUY OUR PRODUCTS DUE TO CONCERNS OVER OUR VIABILITY
Due to our recurring losses from operations and lack of cash, some
potential customers may decide not to purchase our video network system because
of concerns that we may be unable to service, enhance or upgrade the systems. If
we are not able to alleviate concerns about our long-term viability, we may not
be able to market and sell our video network system successfully and continue
operations.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT LOSSES TO CONTINUE
We have incurred substantial losses from operations to date and had
an accumulated deficit of approximately $52.5 million through December 31, 1999.
Our financial statements for the year ended and as of December 31, 1999,
indicate that there is substantial doubt about our ability to continue as a
going concern. We expect to continue to lose money for the foreseeable future.
-6-
<PAGE> 11
We recognized only $2.4 million in revenues during 1999, and
recognized only $766,000 in revenues from the sale of products during the year
1998. We did not recognize any revenues in 1997. Accordingly, there is no
historical basis for you to expect that we will be able to realize operating
revenues or profits in the future. We have a limited number of orders for
delivery early in 2000 and we cannot predict with accuracy what our revenues
will be in the future. Our ability to generate sales and to recognize operating
revenues in the future will depend on a number of factors, certain of which are
beyond our control, including:
- customer acceptance of products shipped and installed to
date and in the future;
- our ability to generate new sales of products and secure
customer acceptance; and
- customer payments.
WE HAVE A LIMITED OPERATING HISTORY
Although we were incorporated in 1993, we focused on research and
development until we shipped our first commercial VidPhone system in the third
quarter of 1998. James F. Bunker, our Chairman, has been with us since only July
1998 and Carl Muscari, our President and Chief Executive Officer, joined us in
September 1999. In January 2000, we hired Stephen A. LeMarche as Vice President,
Sales and Marketing. Accordingly, we have limited experience managing the
Company since we shipped our first commercial video network system. Because of
our limited operating history, you have limited information on which to assess
our ability to realize operating revenues or profits in the future.
WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS EFFECTIVELY
We Are Dependent on Resellers. We distribute our products primarily
through major sellers of telephony products, system integrators and VARs.
Currently, we have agreements with approximately one dozen resellers. These
arrangements are for relatively short contractual periods and may be terminated
under certain circumstances. We cannot assure you that we will be able to
maintain existing relationships or establish new relationships. We compete for
relationships with third-party resellers with larger, better-established
companies with substantially greater financial resources. If we cannot maintain
our current reseller relationships and cannot develop new relationships, we may
not be able to sell our video network system.
Resellers May Not Be Effective Distributors. Sales to third-party
resellers are expected to generate a significant part of our future revenues.
However, we have sold only a limited number of video network systems and
components under our reseller arrangements, and to date have recognized minimal
revenues from those sales. We currently have limited orders from our resellers
for additional sales of VidPhone systems. If our resellers fail to market and
sell our products, or our products fail to become an accepted part of the
resellers' product offerings, the value of your investment could be reduced.
We May Not Be Able To Develop Direct Sales and Marketing
Capabilities. We expect to depend on the marketing efforts of our resellers for
the foreseeable future. However, we are developing a small direct marketing
capability to promote our video network system and to support our resellers. We
cannot assure you that we will be able to create awareness of, and demand for,
our products through our marketing efforts, or that the development of our
direct marketing capabilities will lead to sales of our products and services.
If we cannot successfully develop our own sales and marketing capabilities, we
may not succeed in building brand-name recognition of the VidPhone system, and
we will remain solely dependent on reseller efforts.
THE MARKET FOR VIDEO COMMUNICATIONS PRODUCTS MAY NOT DEVELOP
The market for video communications products is new and is rapidly
evolving. As is typical for a new technology, demand for and market acceptance
of new products is unpredictable. If the market for video communications
products fails to develop or develops more slowly than expected, our business
and financial condition could be materially and adversely affected.
-7-
<PAGE> 12
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY
Our success will depend, in part, on our ability to protect our
intellectual property rights to our proprietary hardware products. Toward that
end, we rely in part on trademark, copyright and trade secret law to protect our
intellectual property in the U.S. and abroad. The degree of protection provided
by patents is uncertain and involves largely unresolved complex legal and
factual questions.
The process of seeking patent and trademark protection can be long
and expensive, and there is no assurance that any pending or future applications
will result in patents and/or registered trademarks. Further, we cannot assure
you that any proprietary rights granted will provide meaningful protection or
any commercial advantage to us. We also cannot assure you that claims for
infringement will not be asserted or prosecuted against us in the future,
although we are not presently aware of any basis for claims. A number of
companies have developed and received proprietary rights to technologies that
may be competitive with our technologies. Most of these entities are larger and
have significantly greater resources than we do. Given the rapid development of
technology in the telecommunications industry, we cannot assure you that our
products do not or will not infringe upon the proprietary rights of others.
WE ARE DEPENDENT ON THIRD PARTIES FOR MANUFACTURING
We outsource the manufacturing and assembly of many of the
components of our products. We cannot assure you that our subcontractors will
continue to perform under our agreements with them or that we will be able to
negotiate continuing arrangements with these manufacturers on acceptable terms
and conditions, or at all. In particular, our failure to pay these manufacturers
when due during 1998 and 1999 could affect their willingness to continue working
with us. If we cannot maintain relationships with our current subcontractors, we
may not be able to find other suitable manufacturers. Any difficulties
encountered with these manufacturers could cause product defects and/or delays
and cost overruns and may cause us to be unable to fulfill orders on a timely
basis. Any of these difficulties could materially and adversely affect us.
SALES OF A LARGE NUMBER OF SHARES IN THE PUBLIC MARKET COULD REDUCE THE MARKET
PRICE OF OUR EQUITY SECURITIES
Substantially all of our currently outstanding shares of common
stock, including the shares covered by this prospectus, have been registered for
sale under the Securities Act, are eligible for sale under an exemption from the
registration requirements or are subject to registration rights pursuant to
which holders may require us to register their shares in the future. Sales or
the expectation of sales of a substantial number of shares of our common stock
in the public market could adversely affect the prevailing market price of our
common stock and other equity securities.
OUR MARKET VALUE IS HIGHLY VOLATILE
The market price of our common stock has been highly volatile and
may continue to fluctuate in the future. We completed an initial public offering
of 295,714 shares of our common stock at a price of $38.50 per share in April
1997. Subsequently, in November 1997 we completed a follow-on public offering of
142,857 shares of common stock at a price of $161.875 per share. In June of
1999, we completed a public offering of 2,300,000 units, each unit consisting of
three shares of common stock and two warrants with an exercise price of $4.00.
The units were sold at a price of $7.50 per unit. On April 25, 2000, the last
sales prices of our common stock and warrants as reported on the Nasdaq SmallCap
market was $2.50 per share and $1.2813 per warrant. As a result of our stock
price volatility, it is difficult to determine the market value of our company.
You cannot be sure how the price of our equity securities might change in the
future.
GOVERNMENT REGULATION
Several components of our video network system, including the
VidModem and VidPhone Switch, must comply with certain regulations of the
Federal Communications Commission ("FCC"). Under FCC regulations, we will be
required to follow a verification procedure consisting of a self-certification
that the VidModem complies
-8-
<PAGE> 13
with applicable regulations pertaining to radio frequency devices. A qualified,
independent testing facility tested the VidModem, and it was found to comply
with FCC regulations. We obtained equipment registrations from the FCC for
certain VidPhone system components, including the VidPhone switch, that are
connected to the public switched telephone network.
Although we believe that at present the VidPhone system complies
with all applicable government regulations, future government regulations could
increase the cost of bringing products to market or adversely affect our ability
to market and sell our products and technology.
-9-
<PAGE> 14
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock
offered by the selling stockholders covered by this prospectus, which are being
offered for sale by the selling stockholders for their own account.
If the outstanding publicly traded warrants are exercised in full,
we will receive gross proceeds of $18,400,000. The publicly traded warrants are
first exercisable on June 15, 2000. If the outstanding purchase options are
exercised in full for cash, we will receive gross proceeds of $2,475,000 and
will issue 600,000 shares of our common stock and warrants to purchase an
additional 400,000 shares of our common stock. The outstanding purchase options
are first exercisable on June 15, 2000. If the warrants issuable upon exercise
of the outstanding purchase options are exercised in full, then we will receive
additional gross proceeds of $2,640,000.
We intend to use any net proceeds from the exercise of the
outstanding publicly traded warrants, the outstanding purchase options and the
warrants issuable upon exercise of the outstanding purchase options for general
corporate purposes and to provide working capital. We may pay certain
solicitation fees in connection with the exercise of the publicly traded
warrants. At the time we completed our June 1999 public offering, we agreed to
pay EarlyBirdCapital.com, the representative of the underwriters of that
offering, a fee equal to 5% of the exercise price of each warrant exercised if
EarlyBirdCapital.com solicited the exercise of such warrant. The payment of the
solicitation fee is subject to certain conditions, including, among others,
limitations imposed by the National Association of Securities Dealers, Inc. on
the payment and scope of such fees.
PRICE RANGE OF COMMON STOCK
Our common stock traded on the Nasdaq SmallCap Market from April 3,
1997 to October 30, 1997 and traded on the Nasdaq National Market from October
31, 1997 to April 30, 1999. As of May 3, 1999, our common stock trades on the
Nasdaq SmallCap Market. The following table sets forth, for the periods
indicated, the range of high and low sales prices per share reported on such
quotation systems as adjusted to reflect the one share for seven shares reverse
split in the common stock that occurred on April 14, 1999.
<TABLE>
<CAPTION>
AS ADJUSTED
------------------------
HIGH LOW
---------- --------
<S> <C> <C>
PERIOD ENDING:
June 30, 1997 (from April 3, 1997)......... $ 99.750 $ 41.125
September 30, 1997......................... 267.750 77.875
December 31, 1997.......................... 257.250 89.250
March 31, 1998............................. 173.250 101.066
June 30, 1998.............................. 141.750 46.375
September 30, 1998......................... 67.375 18.375
December 30, 1998.......................... 38.500 12.250
March 31, 1999............................. 24.941 5.908
June 30, 1999.............................. 7.658 2.438
September 30, 1999......................... 5.469 2.031
December 31, 1999.......................... 4.313 1.625
March 31, 2000............................. 8.875 2.750
</TABLE>
The market price of our common stock historically has been highly
volatile. We completed an initial public offering of 295,714 shares of our
common stock at a price of $38.50 per share in April 1997. Subsequently, in
November 1997 we completed a follow-on public offering of 142,857 shares of
common stock at a price of $161.875 per share. In June 1999, we completed a
public offering of our units consisting of three shares of common stock and two
redeemable common stock purchase options. In the June 1999 offering, we sold a
total of 2,300,000 units at $7.50 per unit, comprised of an aggregate of
6,900,000 shares of our common stock and an aggregate of 4,600,000 redeemable
common stock purchase options. On April 25, 2000, the last sale price per share
of our common stock as reported on the Nasdaq SmallCap market was $2.50 per
share and the last sale price of our publicly traded warrants as reported on the
Nasdaq SmallCap market was $1.2813 per share. It is difficult to predict the
future market price per share of our common stock, and you cannot be sure how
the price per share of our common stock may change in the future.
-10-
<PAGE> 15
BENEFICIAL OWNERSHIP OF
SELLING STOCKHOLDERS
The following table sets forth certain information provided to us by
the selling stockholders regarding their beneficial ownership of our common
stock as of the date of this prospectus, unless otherwise indicated. Unless
otherwise noted, each security holder named has sole voting and investment power
with respect to such shares, subject to community property laws where
applicable.
Selling stockholders may sell the shares of common stock covered by
this prospectus at such times and in such amounts as they may determine. For
purposes of preparing this table, we have assumed that each selling stockholder
will sell all of the shares of common stock offered pursuant to this prospectus.
However, we have not been advised by any selling stockholder whether they have
any present intention to sell such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(1)
--------------------------------- ---------------------------
NUMBER OF NUMBER OF SHARES NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT BEING SOLD SHARES PERCENT
- ------------------------------------------ ------------ ----------- ----------------- ---------------------------
<S> <C> <C> <C> <C> <C>
AG Superfund International Partners,
L.P. ..................................... 20,962 *% 20,962 -- --
Ralph A. Bard III (2)..................... 77,855 * 5,714 72,141 *
Kenneth Baronoff ......................... 2,795 * 2,795 -- --
Stanley H. Blum........................... 10,857 * 10,857 -- --
Roger Booker (3) ......................... 50,357 * 1,397 48,960 *
James F. Bunker (4) ...................... 219,208 2.5 10,558 208,650 2.3
Eugene Cacciamani (5) .................... 30,790 * 2,795 27,995 *
Conchetta Capotorto (6) .................. 6,987 * 6,987 -- --
Marc S. Cooper (7) ....................... 82,452 * 6,987 75,465 *
Robert H. Emery (8) ...................... 64,922 * 8,415 56,507 *
Kenneth M. Endelson ...................... 5,714 * 5,714 -- --
Andrew Feiner (9) ........................ 17,857 * 2,857 15,000 *
GAM Arbitrage Investments, Inc. .......... 20,962 * 20,962 -- --
Martin Grant ............................. 1,428 * 1,428 -- --
Scott Greiper ............................ 4,192 * 4,192 -- --
John W. Heilshorn, Jr. (10) .............. 16,046 * 15,403 643 *
Clifford Kendall (11) .................... 37,234 * 27,949 9,285 *
Carl Kleidman ............................ 2,795 * 2,795 -- --
Leonardo, L.P. ........................... 181,671 2.0 181,671 -- --
Richard T. Liebhaber (12)................. 31,520 * 27,949 3,571 *
Kenneth Logue ........................... 13,975 * 13,975 -- --
Allan Lyons .............................. 6,987 * 6,987 -- --
William Maines ........................... 6,987 * 6,987 -- --
James Mitarotanda ........................ 6,987 * 6,987 -- --
Howard W. Muchnick ....................... 4,286 * 4,286 -- --
Mary Murphy(13)........................... 6,987 * 6,987 -- --
Jerald Politzer .......................... 6,987 * 6,987 -- --
Ramius Fund, Ltd.......................... 83,848 * 83,848 -- --
Raphael, L.P. ............................ 41,924 * 41,924 -- --
RCG Halifax Fund, Ltd..................... 249,368 2.8 249,368 -- --
Malladi Sudhakar Reddy.................... 5,714 * 5,714 -- --
Raymond D. Rice (14) ..................... 18,664 * 15,403 3,261 *
Martin and Ellen Rosenman ................ 5,714 * 5,714 -- --
Stewart Shiman (15)....................... 88,856 1.0 5,714 83,142 *
Carl E. Siegel ........................... 5,714 * 5,714 -- --
</TABLE>
-11-
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C>
Jack M. Threadgill ....................... 2,857 * 2,857 -- --
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of common stock is based on 8,907,970 shares of
common stock outstanding as of the date of this prospectus, including
6,900,000 shares of common stock issued as part of our outstanding
units (each unit consisting of three shares of common stock and two
redeemable common stock purchase warrants). The common stock and
warrants that comprise the units are detachable and separately
transferable. Beneficial ownership is determined in accordance with
rules of the SEC and for each beneficial owner is based on information
provided to us by such selling security holder. For each beneficial
owner, shares of common stock subject to options or warrants
exercisable within 60 days of the date of this prospectus are deemed
outstanding.
(2) Includes 39,000 shares of common stock and 26,000 publicly traded
warrants to purchase shares of common stock held by Mr. Bard as units.
(3) Mr. Booker serves as our Vice President, Operations and Engineering.
Includes 48,960 shares of common stock that may be acquired upon the
exercise of outstanding options.
(4) Mr. Bunker serves as our Chairman. Includes (i) 53,090 shares of
common stock that may be acquired by Mr. Bunker upon the exercise of
outstanding options; (ii) 10,558 shares of common stock beneficially
owned by Mr. Bunker through a family limited partnership that he
controls; and (iii) 155,560 shares of common stock that may be
acquired by the family limited partnership controlled by Mr. Bunker
upon the exercise of outstanding options.
(5) Dr. Cacciamani serves as a director of VNCI. Includes 27,965 shares of
common stock issuable upon the exercise of outstanding options.
(6) Shares are held by Mrs. Caportorto as custodian for Alexandra
Caportorto under the New Jersey Uniform Gifts To Minors Act.
(7) Mr. Cooper serves as a director of VNCI. Includes 25,714 shares of
common stock that may be acquired upon the exercise of an option held
by Barington Capital Group, L.P., 17,857 shares of common stock
issuable upon the exercise of another option held by Barington and
31,894 shares of common stock issuable upon the exercise of other
options held by Mr. Cooper. Includes options to acquire 3,857 shares
of common stock which Cross Connect, L.L.C. has the right to acquire
from Barington under certain circumstances. Cross Connect, L.L.C. is
not affiliated with Barington or Mr. Cooper. Mr. Cooper disclaims
beneficial ownership of the shares of common stock that may be
acquired upon exercise of options held by Cross Connect and Barington.
(8) Mr. Emery serves as our Chief Financial Officer and Vice President,
Administration. Includes 54,960 shares of common stock that may be
acquired by Mr. Emery upon the exercise of outstanding options and 833
shares of common stock that may be acquired upon the exercise of
outstanding warrants that are presently exercisable.
(9) Includes 9,000 shares of common stock and 6,000 publicly traded
warrants to purchase shares of common stock held by Mr. Feiner as
units.
(10) Mr. Heilshorn is a principal of LHA, Inc., a public relations firm
that performs services for VNCI. During 1999, 1998 and 1997, we paid
LHA an aggregate of $86,797, $118,701, and $38,788 for its services,
respectively. To date in 2000, we have paid LHA $14,784 for public
relations services. We expect to continue to use LHA in the future.
(11) Mr. Kendall served as the Chairman of our Board of Directors from 1994
to early 1999.
(12) Mr. Liebhaber served as one of our directors from 1994 until 1998.
Includes 3,571 shares of common stock held by Mr. Liebhaber through a
family foundation.
(13) Ms. Murphy served as our Vice President, Sales and Marketing from
October 1997 to October 1998.
(14) Includes warrants to purchase 821 shares of common stock at $28.00 per
share and 15,403 shares of common stock beneficially owned by Mr. Rice
through the Raymond D. Rice Revocable Declaration of Trust Dated
4/11/96. Mr. Rice served as an outside advisor to us from 1994 to
early 1999. We did not pay Mr. Rice any compensation for his services
in 1999, 1998 or 1997.
(15) Includes 1,357 shares of common stock beneficially owned by Mr. Shiman
through a charitable remainder trust, 45,000 shares of common stock
and 30,000 publicly traded warrants to purchase shares of common
-12-
<PAGE> 17
stock held by Mr. Shiman as units, and warrants to purchase an
additional 1,786 shares of common stock.
The registration of the securities under the Securities Act shall
not be deemed an admission by the selling stockholders or us that the selling
stockholders are underwriters for purposes of the Securities Act of any of the
securities offered under this prospectus. We provide you with a discussion of
any material transactions involving us and the selling stockholders below under
the caption "Certain Transactions With Selling Stockholders."
-13-
<PAGE> 18
CERTAIN TRANSACTIONS WITH SELLING STOCKHOLDERS
The following is a description of material transactions between us
and the selling stockholders listed above during the past three years.
RELATED PARTY LOANS
In April 1996, Clifford M. Kendall, then Chairman of the Board of
Directors, loaned us $100,000 in aggregate principal amount, on which interest
accrued quarterly at a fixed rate of 7% per year. We repaid the principal amount
of and accrued interest on the loan after our initial public offering of common
stock was completed in April 1997.
On January 8, 1999, a limited partnership controlled by our Chairman
and Chief Executive Officer, James Bunker, made a loan to us to permit us to
continue operating. The principal amount of the loan was $100,000, which was
converted into units in our February 1999 private placement. The purchase of
securities by Mr. Bunker in the February 1999 private placement was made on the
same terms and conditions as unaffiliated third parties purchasing units in the
offering, except that Mr. Bunker was issued only 3,571 shares of common stock in
the February 1999 private placement and unaffiliated third party investors
investing the same dollar amount were issued 5,714 shares per unit. We repaid
all of the promissory notes issued in the February 1999 private placement,
including the note held by Mr. Bunker, in June 1999 using a portion of the net
proceeds from our June 1999 public offering.
Mr. Bunker voluntarily deferred the payment of his salary from
November 9, 1998, through June 18, 1999, the date on which we closed the June
1999 public offering. His accrued and unpaid salary totaled $115,385 and we had
repaid this obligation in full, without interest, by November 1999.
EQUITY TRANSACTIONS
Barington Capital Group, L.P.
Mr. Marc Cooper served as the Chairman of Barington Capital Group,
L.P. until June 1999, and continues to hold an equity interest in the LNA
Capital Corp, the corporate general partner of Barington. Barington acted as the
underwriter of our initial public offering of common stock completed in April
1997, for which it received underwriting discounts and commissions of
approximately $1,100,000. In addition, Barington received a non-accountable
expense allowance of $341,550, and was issued an option to purchase 25,714
shares of common stock. That option is exercisable until April 8, 2002 at an
exercise price of $63.53 per share. Barington also served as an underwriter of
our public offering of common stock completed in October 1997, for which it
received underwriting fees and commissions of approximately $500,000.
In December 1997, we granted Barington an option to acquire 17,857
shares of common stock at an exercise price of $96.67 per share, the fair market
value of the common stock on the date of grant. The option was granted as
consideration for business and financial services to be provided to us over a
two-year period, including investment banking services and consulting services
relating to mergers and acquisitions.
We have agreed to use our best efforts (including the solicitation
of proxies, if necessary) to elect one designee of Barington to the Board of
Directors until April 8, 2002. Mr. Cooper has served as a director since April
1997 and was elected pursuant to this agreement.
In July 1998, we issued $3,125,000 aggregate principal amount of 5%
convertible debentures due 2003 in a private placement. Our directors and
executive officers purchased an aggregate of $315,000 aggregate original
principal amount of convertible debentures. The purchasers included Mr. Cooper,
who purchased $25,000 original principal amount of convertible debentures. In
addition, other principals and employees of Barington purchased in the aggregate
$135,000 original principal amount of convertible debentures. We provide you
with additional information about the issuance of the 5% convertible debentures
below, under the caption "-- Issuance of 5% Convertible Debentures due 2003."
-14-
<PAGE> 19
ISSUANCE OF 5% CONVERTIBLE DEBENTURES DUE 2003
In July 1998, we issued $3,125,000 aggregate principal amount of
convertible debentures. $2,500,000 aggregate original principal amount of
convertible debentures were purchased by certain institutional investors (the
"Institutional Investors"), and $625,000 aggregate original principal amount of
convertible debentures were purchased by certain of our directors and executive
officers and outside consultants to and others affiliated with the Company.
Messrs. Kendall, Cooper, Liebhaber and Dr. Cacciamani, then directors of the
Company, and Messrs. Bunker, Booker and Emery and Ms. Murphy, then executive
officers of the Company, purchased convertible debentures in the offering.
Following the issuance of the convertible debentures, the following persons held
beneficially the principal amount of debentures indicated: Mr. Bunker --
$25,000; Mr. Booker -- $5,000; Mr. Emery -- $25,000; Ms. Murphy -- $25,000; Mr.
Kendall -- $100,000; Dr. Cacciamani -- $10,000; Mr. Cooper -- $25,000; and Mr.
Liebhaber -- $100,000. The offering, issuance and sale of the convertible
debentures to certain directors and executive officers was a condition precedent
to the consummation of the financing with the Institutional Investors. In
accordance with the terms of the agreements governing the convertible
debentures, all of the outstanding principal amount of and accrued and unpaid
interest on the convertible debentures automatically converted to common stock
on June 18, 1999, on the completion of our public offering. The holders of the
convertible debentures agreed to hold the shares of common stock issued upon
conversion of the convertible debentures until June 15, 2000, twelve months
after the effective date of the registration statement for our June 1999 public
offering. However, former holders of the convertible debentures may be released
from their lock-up arrangement with the prior consent of the representative of
the underwriters of our June 1999 public offering. The former holders of the
convertible debentures are publicly offering and reselling the shares of common
stock that they received upon the conversion of the convertible debentures
pursuant to this prospectus.
-15-
<PAGE> 20
ISSUANCE OF 5% SERIES B PREFERRED STOCK
In August 1998, we issued in a private placement placement
$1,150,000 of Series B 5% cumulative convertible preferred stock to Industrial
Investments Company and AUS. PER. No. 1, Inc., two unaffiliated investors.
Pursuant to agreements with these two investors, all of the issued and
outstanding shares of Series B preferred stock automatically converted to common
stock on June 18, 1999, upon the consummation of our June 1999 public offering.
The offering and sale of the Series B preferred stock was an arms length
transaction. AUS. PER. No. 1, Inc. purchased units in our February 1999 private
placement on the same terms and conditions as other investors in that offering.
AUS. PER. No. 1, Inc. is offering and selling shares of common stock it
purchased in the February 1999 private placement pursuant to this prospectus.
We believe that all of the above transactions were made on terms no
less favorable to us than could have been obtained from unaffiliated third
parties, and all of the transactions since our initial public offering were
approved by at least a majority of our Board of Directors, including a majority
of the disinterested members of the Board of Directors. All future transactions
between us and any of our officers, directors and principal stockholders and
their affiliates will be approved by at least a majority of the Board of
Directors, including a majority of the independent and disinterested members of
the Board of Directors, and will be on terms no less favorable to us than could
be obtained from unaffiliated third parties.
-16-
<PAGE> 21
DESCRIPTION OF SECURITIES
COMMON STOCK
Our Certificate of Incorporation authorizes us to issue up to
30,000,000 shares of common stock, par value $.01 per share. Of the 30,000,000
shares of common stock authorized, 8,907,970 shares are issued and outstanding
as of the date of this prospectus (including the shares of common stock issued
as part of our outstanding units, which are described below). We also have
reserved an additional 4,600,000 shares of common stock for issuance upon
exercise of our outstanding publicly traded warrants, and an additional 157,056
shares of common stock for issuance upon exercise of our other outstanding
warrants. We provide you with additional information about our outstanding
warrants below.
Holders of common stock are entitled to receive such dividends as
may be declared by the Board of Directors from funds legally available for such
dividends. Upon liquidation, holders of shares of common stock are entitled to a
pro rata share in any distribution available to holders of common stock. The
holders of common stock have one vote per share on each matter to be voted on by
stockholders, but are not entitled to vote cumulatively. Holders of common stock
have no preemptive rights. All of the outstanding shares of common stock are,
and all of the shares of common stock to be issued in connection with this
offering will be, validly issued, fully paid and non-assessable.
PUBLICLY TRADED WARRANTS
Each of the outstanding publicly traded warrants, and the warrants
that we are offering and will issue pursuant to this prospectus upon exercise of
the outstanding purchase options, will entitle the holder to purchase one shares
of common stock. The outstanding publicly traded warrants have an initial
exercise price of $4.00 per share. The warrants offered pursuant to this
prospectus that are issuable upon exercise of the outstanding purchase options
have an initial exercise price of $6.60 per share. The outstanding warrants
currently trade, and the warrants issuable upon exercise of the outstanding
purchase options when issued will trade, on the Nasdaq SmallCap market under the
symbol "VNCIW." The following is a description of those warrants.
The warrants are first exercisable on June 15, 2000, for a four-year
period. No fractional shares of common stock will be issued in connection with
the exercise of warrants. Upon exercise, we will pay the holder the value of any
such fractional shares in cash, based upon the market value of the common stock
at the time of exercise.
The warrants will expire at 5:00 p.m., New York time, on June 15,
2004. In the event that a holder of warrants fails to exercise the warrants
prior to their expiration, the warrants will expire and the holder thereof will
have no further rights with respect to the warrants.
We may, with the consent of the representative of our June 1999
public offering, redeem the warrants at any time after they become exercisable
at a price of $.01 per warrant upon not less than 30 days' prior written notice
if the last sale price of the common stock has been at least 200% of the then
exercise price per warrant (initially $8.00 per share) for the 20 consecutive
trading days ending on the third day prior to the date on which notice is given.
A holder of warrants will not have any rights, privileges or
liabilities as a stockholder of VNCI prior to the exercise of the warrants. We
are required to keep available a sufficient number of authorized shares of
common stock to permit exercise of the warrants. The exercise price of the
warrants and the number of shares issuable upon exercise of the warrants are
subject to adjustment to protect against dilution in the event of stock
dividends, stock splits, combinations, subdivisions and reclassifications. We
cannot assure you that the market price of our common stock will exceed the
exercise price of the warrants at any time during the exercise period.
LOCK-UP AGREEMENTS
The sale of certain of the securities offered and sold in this
offering is limited by restrictions under
-17-
<PAGE> 22
agreements entered into with the representative of the underwriters of our June
1999 public offering. The holders of 721,741 shares of common stock offered
hereby have agreed not to dispose of or transfer such shares of common stock
until June 15, 2000. In addition, certain of our directors and executive
officers and former directors and former executive officers holding 58,101 of
the shares of common stock offered by this prospectus have agreed not to dispose
of or transfer such shares until September 15, 2000. In all cases, the shares of
common stock subject to the lock-up arrangements can be transferred earlier than
the expiration date of the arrangement with the prior consent of the
representative of our June 1999 public offering.
PLAN OF DISTRIBUTION
The shares of common stock issuable by us upon exercise of the
publicly traded warrants, and the shares of common stock and warrants issuable
upon exercise of the outstanding purchase options and warrants underlying the
purchase options, are offered solely by us and no underwriters are participating
in this offering. However, at the time of our June 1999 public offering, we
agreed to pay EarlyBirdCapital.com (formerly known as Southeast Research
Partners, Inc.), which acted as the representative of the underwriters of that
offering, 5% of the exercise price of each such warrant the exercise of which is
solicited by EarlyBirdCapital.com. The payment of that solicitation fee is
subject to several conditions including, among others, limitations imposed by
the National Association of Securities Dealers on the payment and scope of such
fees. No warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of common stock issuable upon exercise of
such warrants under an effective registration statement filed with the SEC and
such shares have been qualified for sale or are exempt from qualification under
the securities laws of the state of residence of the holder of such warrants.
This prospectus is a part of the registration statement that we have filed
relating to the shares of common stock issuable upon exercise of the publicly
traded warrants, and the shares of common stock and warrants issuable upon
exercise of the outstanding purchase options and the warrants underlying the
purchase options. We have undertaken to keep this prospectus current, which will
permit the purchase and sale of the common stock underlying the warrants, but
there can be no assurance that we will be able to do so. Although we intend to
seek to qualify for sale the shares of common stock underlying the warrants in
various states, there can be no assurance that we will be able to do so. The
exercise period of the publicly traded warrants is currently due to expire on
June 15, 2004.
This prospectus also registers shares of common stock for resale by
certain selling stockholders. The distribution of the securities by the selling
stockholders, or by pledgees, donees, transferees or other successors in
interest, may be effected from time to time in transactions on the Nasdaq
SmallCap market, other exchanges or in the over-the-counter market, or in
negotiated transactions or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The selling stockholders may sell their shares of common stock
from time to time by one or more of the following methods:
- a block trade in which the broker or dealer engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate
the transaction;
- purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
prospectus;
- an exchange distribution in accordance with the rules of such
exchange; or
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers.
In addition, any selling stockholder may sell any shares of common stock covered
by this prospectus which qualify pursuant to Rule 144 rather than under this
prospectus. Broker-dealers through which transactions involving the common stock
are effected may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of the
securities for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the selling stockholders in
connection with sales of the common stock. The selling stockholders have advised
us that they have not entered into any underwriting arrangements or
understandings relating to the sale of their shares and there is no underwriter
or coordinating broker acting in connection with the sale of the shares of
common stock by the selling stockholders.
In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from selling stockholders in
amounts
-18-
<PAGE> 23
to be negotiated immediately prior to the sale. The selling stockholders
and agents who execute orders on their behalf may be deemed to be underwriters
as that term is defined in Section 2(11) of the Securities Act and may be
required to comply with the prospectus delivery requirements of the Securities
Act. In addition, a portion of any proceeds of sales and discounts, commissions
or other compensation may be deemed to be underwriting compensation for purposes
of the Securities Act. The selling stockholders also may be subject to the
anti-manipulation requirements of the Securities Act. We have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act.
-19-
<PAGE> 24
LEGAL MATTERS
The validity of the equity securities offered hereby and legal
matters will be passed upon for us by Shaw Pittman, Washington, D.C., a
partnership including professional corporations.
EXPERTS
The financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-KSB for the year ended December 31,
1999, have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to the Company's ability to continue as a going
concern as described in Note 1 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
-20-
<PAGE> 25
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF MAY 3, 2000.
5,600,000 SHARES OF COMMON STOCK
400,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
[VIDEO NETWORK COMMUNICATIONS, INC. LOGO]
VIDEO NETWORK COMMUNICATIONS, INC.
MAY 3, 2000
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses incurred or to be
incurred by the Registrant in connection with the issuance and distribution of
the securities to be offered and sold pursuant to this Registration Statement.
All of the information set forth below constitutes good faith estimates of the
expenses indicated, other than the SEC registration fee, the NASD filing fee and
the Nasdaq filing fee.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
-------------------------------------------------------------------------------
<S> <C>
SEC registration fee............................................. $ 13,770
NASD filing fee.................................................. 4,553
Nasdaq filing fee................................................ 17,500
Blue Sky fees and expenses (including fees of counsel)........... 20,000
Printing expenses................................................ 177,000
Transfer agent and registrar's fee............................... 3,000
Legal fees and expenses (other than Blue Sky).................... 335,000
Accounting fees and expenses..................................... 175,000
Miscellaneous.................................................... 21,177
------------
Total....................................................... $ 767,000
============
</TABLE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBITS
--------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Fourth Amended and Restated Certificate of Incorporation
of the Registrant (Incorporated by reference to Exhibit
3.1 of the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 (the "Third
Quarter 1999 Form 10-QSB") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
3.2 Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended
(the "1997 Form SB-2")).
3.3 Amendment to Amended and Restated Bylaws of the Company
effective June 8th, 1999 (Incorporated by reference to
Exhibit 3.4 of the Registrant's Amended Quarterly Report
on Form 10-QSB\A for the quarter ended June 30, 1999
(the "Amended Second Quarter 1999 Form 10-QSB") filed
with the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.1 Form of Warrant for the purchase of shares of common
stock, issued in connection with the private placement
of $2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 to the 1997
Form SB-2).
4.2 Form of Warrant for the purchase of shares of common
stock, issued in connection with the private placement
of units in June 1995 and August 1996 (Incorporated by
reference to Exhibit 3.5 to the 1997 SB-2).
4.3 Form of Warrants for the purchase of 100,000 shares of
common stock, issued in connection with the private
placement of Series A Convertible Preferred Stock and
warrants in December 1996 and January 1997 (Incorporated
by reference to Exhibit 3.7 to the 1997 SB-2).
4.4 Form of Option for the purchase of 180,000 shares of
common
</TABLE>
II-1
<PAGE> 27
<TABLE>
<S> <C>
stock, issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 to the 1997
SB-2).
4.5* Specimen certificate evidencing shares of common stock
of the Registrant.
4.6 Form of Warrant issued in connection with the Series B
5% Cumulative Convertible Preferred Stock of the
Registrant (Incorporated by reference to Exhibit 4.11
forming a part of the 1998 S-3).
4.7 Senior Note issued to Sanmina Corporation by the
Registrant with a principal amount of $4,300,000.
(Incorporated by reference to Exhibit 4.10 forming a
part of the Registrant's Annual Report on Form 10-KSB,
as amended, for the year ended December 31, 1998 (the
"1998 Form 10-KSB").
4.8 Note issued to Shaw Pittman by the Registrant with a
principal amount of $400,000 (Incorporated by reference
to Exhibit 4.11 forming a part of the 1998 Form 10-KSB).
4.9 Form of Warrant for the purchase of 275,000 shares of
common stock, issued to Sanmina Corporation.
(Incorporated by reference to Exhibit 4.12 forming a
part of the 1998 Form 10-KSB).
4.10 Form of Warrant for the purchase of 40,000 shares of
common stock, issued to Shaw Pittman (Incorporated by
reference to Exhibit 4.13 forming a part of the 1998
Form 10-KSB).
4.11* Form of Unsecured Promissory Note, issued on February 4,
1999 to various subscribers in a private placement.
4.12 Form of Representative's Purchase Option (Incorporated
by reference to Exhibit 4.15 to the 1999 Form SB-2).
4.13* Specimen certificate evidencing Redeemable Common Stock
Purchase Warrant.
4.14* Form of Warrant Agreement.
4.15* Specimen certificate evidencing unit.
10.1 1994 Stock Option Plan (Incorporated by reference to
Exhibit 10.1 forming a part of the 1997 SB-2).
10.2 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.2 forming a part of the 1997 SB-2).
10.3 Form of Consulting Agreement by and between the
Registrant and Barington Capital Group, L.P.
(Incorporated by reference to Exhibit No. 10.4 forming a
part of the 1997 SB-2).
10.4 Letter Agreement, dated October 7, 1996, between
Barington Capital Group and the Registrant (Incorporated
by reference to Exhibit No. 10.5 to the 1997 SB-2).
10.5 Letter Agreement, dated December 5, 1995, by and among
PVR Securities, Inc., the Registrant, Steven A. Rogers
and John B. Torkelsen (Incorporated by reference to
Exhibit 10.6 to the 1997 SB-2).
10.6 Form of Stock Option Agreement, dated December 18, 1997,
by and between the Registrant and Barington Capital
Group, L.P. (Incorporated by reference to Exhibit 10.8
forming a part of the Registrant's Annual Report on Form
10-KSB, as amended, for the year ended December 31,
1997).
10.7 Subscription Agreement, dated as of July 1, 1998, by and
among the Registrant and certain Institutional Investors
(Incorporated by reference to Exhibit 4.1 forming a part
of the July 8-K).
10.8 Subscription Agreement, dated as of July 8, 1998, by and
among the Registrant and certain Investors (Incorporated
by reference to Exhibit 4.2 forming a part of the
Registrant's Current Report on Form 8-K dated July 1,
1998 and filed July 16, 1998 with the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended (the "July 1998 8-K").
</TABLE>
II-2
<PAGE> 28
<TABLE>
<S> <C>
10.9 Strategic Alliance and Marketing Agreement between the
Registrant and Unisys Corporation (Incorporated by
reference to Exhibit 10.9 to the 1998 Form 10-KSB).
10.10* Letter of Intent, dated January 14, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.11* Agency Agreement, dated as of January 25, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.12* Form of Subscription Agreement, dated January 25, 1999,
between the Registrant and certain Investors.
10.13* Employment Agreement, dated July 13, 1998, between the
Registrant and James F. Bunker.
10.14 Letter Agreement dated January 12, 1999, between the
Registrant and Sanmina Corporation (Incorporated by
reference to Exhibit 10.15 to the 1998 Form 10-KSB).
10.15 Letter Agreement dated January 21, 1999 between the
Registrant and Shaw Pittman Potts & Trowbridge
(Incorporated by reference to Exhibit 10.16 to the 1998
Form 10-KSB).
10.16* Form of Letter Agreement between the Registrant and the
holders of the 5% Convertible Debentures due 2003, dated
May 1999.
10.17 Amendment to Employment and Consulting Agreement by and
between the Registrant and James F. Bunker dated as of
September 9, 1999 (Incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1999).
10.18 Employment Agreement by and between the Registrant and
Carl Muscari dated September 9, 1999 (Incorporated by
reference to Exhibit 10.16 to the Third Quarter 1999
Form 10-QSB).
10.19 1999 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.15 to the Third Quarter 1999 Form 10-QSB).
11.1* Statement re: computation of per share earnings.
21* Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney of Richard S. Friedland.
24.2 Power of Attorney of Cheryl Snyder
</TABLE>
- ----------
* Previously filed.
II-3
<PAGE> 29
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
as amended, the Registrant certifies it has reasonable grounds to believe it
meets all the requirements for filing on Form S-3 and has duly caused this
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Rockingham, New Hampshire, on May 3, 2000.
VIDEO NETWORK COMMUNICATIONS, INC.
By: /s/ CARL MUSCARI
----------------
Carl Muscari
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed by the following persons
in the capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------------------------------- -------------------------------------- -----------
<S> <C> <C>
/s/ CARL MUSCARI President and Chief Executive May 3, 2000
- ------------------------- Officer and Director
Carl Muscari (Principal Executive Officer)
/s/ ROBERT H. EMERY Chief Financial Officer and Vice May 3, 2000
- ------------------------- President, Administration
Robert H. Emery and Secretary (Principal
Financial and Accounting Officer)
Officer)
/s/ JAMES F. BUNKER* Chairman of the Board of Directors May 3, 2000
- -------------------------
James F. Bunker
/s/ EUGENE R. CACCIAMANI* Director May 3, 2000
- -------------------------
Eugene R. Cacciamani
/s/ MARC S. COOPER* Director May 3, 2000
- -------------------------
Marc S. Cooper
/s/ RICHARD S. FRIEDLAND* Director May 3, 2000
- -------------------------
Richard S. Friedland
/s/ STEVEN A. ROGERS* Director May 3, 2000
- -------------------------
Steven A. Rogers
/s/ CHERYL SNYDER* Director May 3, 2000
- -------------------------
Cheryl Snyder
*By: /s/ ROBERT H. EMERY Attorney-in-Fact May 3, 2000
--------------------
Robert H. Emery
</TABLE>
II-4
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
---------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Fourth Amended and Restated Certificate of Incorporation
of the Registrant (Incorporated by reference to Exhibit
3.1 of the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 (the "Third
Quarter 1999 Form 10-QSB") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
3.2 Amended and Restated Bylaws of the Registrant
(Incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended
(the "1997 Form SB-2")).
3.3 Amendment to Amended and Restated Bylaws of the Company
effective June 8th, 1999 (Incorporated by reference to
Exhibit 3.4 of the Registrant's Amended Quarterly Report
on Form 10-QSB\A for the quarter ended June 30, 1999
(the "Amended Second Quarter 1999 Form 10-QSB") filed
with the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.1 Form of Warrant for the purchase of shares of common
stock, issued in connection with the private placement
of $2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 to the 1997
Form SB-2).
4.2 Form of Warrant for the purchase of shares of common
stock, issued in connection with the private placement
of units in June 1995 and August 1996 (Incorporated by
reference to Exhibit 3.5 to the 1997 SB-2).
4.3 Form of Warrants for the purchase of 100,000 shares of
common stock, issued in connection with the private
placement of Series A Convertible Preferred Stock and
warrants in December 1996 and January 1997 (Incorporated
by reference to Exhibit 3.7 to the 1997 SB-2).
4.4 Form of Option for the purchase of 180,000 shares of
common stock, issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 to the 1997
SB-2).
4.5* Specimen certificate evidencing shares of common stock
of the Registrant.
4.6 Form of Warrant issued in connection with the Series B
5% Cumulative Convertible Preferred Stock of the
Registrant (Incorporated by reference to Exhibit 4.11
forming a part of the 1998 S-3).
4.7 Senior Note issued to Sanmina Corporation by the
Registrant with a principal amount of $4,300,000.
(Incorporated by reference to Exhibit 4.10 forming a
part of the Registrant's Annual Report on Form 10-KSB,
as amended, for the year ended December 31, 1998 (the
"1998 Form 10-KSB").
4.8 Note issued to Shaw Pittman by the Registrant with a
principal amount of $400,000 (Incorporated by reference
to Exhibit 4.11 forming a part of the 1998 Form 10-KSB).
4.9 Form of Warrant for the purchase of 275,000 shares of
common stock, issued to Sanmina Corporation.
(Incorporated by reference to Exhibit 4.12 forming a
part of the 1998 Form 10-KSB).
4.10* Form of Warrant for the purchase of 40,000 shares of
common stock, issued to Shaw Pittman (Incorporated by
reference to Exhibit
</TABLE>
II-5
<PAGE> 31
<TABLE>
<S> <C>
4.13 forming a part of the 1998 Form 10-KSB).
4.11* Form of Unsecured Promissory Note, issued on February 4,
1999 to various subscribers in a private placement.
4.12* Form of Representative's Purchase Option.
4.13* Specimen certificate evidencing Redeemable Common Stock.
Purchase Warrant.
4.14* Form of Warrant Agreement.
4.15* Specimen certificate evidencing unit.
10.1 1994 Stock Option Plan (Incorporated by reference to
Exhibit 10.1 forming a part of the 1997 SB-2).
10.2 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.2 forming a part of the 1997 SB-2).
10.3 Form of Consulting Agreement by and between the
Registrant and Barington Capital Group, L.P.
(Incorporated by reference to Exhibit No. 10.4 forming a
part of the 1997 SB-2).
10.4 Letter Agreement, dated October 7, 1996, between
Barington Capital Group and the Registrant (Incorporated
by reference to Exhibit No. 10.5 to the 1997 SB-2).
10.5 Letter Agreement, dated December 5, 1995, by and among
PVR Securities, Inc., the Registrant, Steven A. Rogers
and John B. Torkelsen (Incorporated by reference to
Exhibit 10.6 to the 1997 SB-2).
10.6 Form of Stock Option Agreement, dated December 18, 1997,
by and between the Registrant and Barington Capital
Group, L.P. (Incorporated by reference to Exhibit 10.8
forming a part of the Registrant's Annual Report on Form
10-KSB, as amended, for the year ended December 31,
1997).
10.7 Subscription Agreement, dated as of July 1, 1998, by and
among the Registrant and certain Institutional Investors
(Incorporated by reference to Exhibit 4.1 forming a part
of the July 8-K).
10.8 Subscription Agreement, dated as of July 8, 1998, by and
among the Registrant and certain Investors (Incorporated
by reference to Exhibit 4.2 forming a part of the
Registrant's Current Report on Form 8-K dated July 1,
1998 and filed July 16, 1998 with the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended (the "July 1998 8-K").
10.9 Strategic Alliance and Marketing Agreement between the
Registrant and Unisys Corporation (Incorporated by
reference to Exhibit 10.9 to the 1998 Form 10-KSB).
10.10* Letter of Intent, dated January 14, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.11* Agency Agreement, dated as of January 25, 1999, between
Southeast Research Partners, Inc. and the Registrant.
10.12* Form of Subscription Agreement, dated January 25, 1999,
between the Registrant and certain Investors.
10.13* Employment Agreement, dated July 13, 1998, between the
Registrant and James F. Bunker.
10.14 Letter Agreement dated January 12, 1999, between the
Registrant and Sanmina Corporation (Incorporated by
reference to Exhibit 10.15 to the 1998 Form 10-KSB).
10.15 Letter Agreement dated January 21, 1999 between the
Registrant and Shaw Pittman Potts & Trowbridge
(Incorporated by reference to Exhibit 10.16 to the 1998
Form 10-KSB).
10.16* Form of Letter Agreement between the Registrant and the
holders of the 5% Convertible Debentures due 2003, dated
May 1999.
10.17 Amendment to Employment and Consulting Agreement by and
between the Registrant and James F. Bunker dated as of
September 9, 1999 (Incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-KSB
for
</TABLE>
II-6
<PAGE> 32
<TABLE>
<S> <C>
the year ended December 31, 1999).
10.18 Employment Agreement by and between the Registrant and
Carl Muscari dated September 9, 1999 (Incorporated by
reference to Exhibit 10.16 to the Third Quarter 1999
Form 10-QSB).
10.19 1999 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.15 to the Third Quarter 1999 Form 10-QSB).
11.1* Statement re: computation of per share earnings.
21* Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
24.1* Power of Attorney of Richard S. Friedland.
24.2 Power of Attorney of Cheryl Snyder.
</TABLE>
- ----------
* Previously filed.
II-7
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated March 28, 2000 relating
to the financial statements, which appears in Video Network Communications,
Inc. Annual Report on Form 10-KSB for the year ended December 31, 1999. We also
consent to the reference to our firm under the heading "Experts" in such
registration statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 27, 2000
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY OF CHERYL SNYDER
BE IT KNOWN, that I, Cheryl Snyder, hereby constitute and appoint Carl
Muscari and Robert H. Emery and each of them, her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for and in her name, place and stead, in any and all capacities to sign any and
all amendments (including post-effective amendments) to Registration Statement
No. 333-72429 first filed by Video Network Communications, Inc. on February 16,
1999 and any or all other documents in connection therewith, granting unto said
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as gully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of
April, 2000.
/s/ Cheryl Snyder
-----------------------------
Cheryl Snyder
