Filed pursuant to
Rule 424(b)(3)
Commission File No. 333-48107
PROSPECTUS
2,281,720 Shares
COM21, INC.
Common Stock
This prospectus relates to the public offering, which is not being
underwritten, of up to 2,281,720 shares of our common stock which is held
by some of our current shareholders. These shareholders acquired these
shares in a private transaction in which we acquired all of the ordinary
shares of GADline, Ltd.
The prices at which such shareholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is quoted on the Nasdaq National Market under the
symbol "CMTO." On September 15, 2000, the closing bid price for our common
stock was $13.63.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE THE SECTIONS
ENTITLED "RISK FACTORS" IN THE DOCUMENTS WE FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION THAT ARE INCORPORATED BY REFERENCES IN THIS PROSPECTUS
FOR CERTAIN RISKS AND UNCERTAINTIES THAT YOU SHOULD CONSIDER.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is September 19, 2000.
No person has been authorized to give any information or to make any
representations other than those contained in this prospectus in connection
with the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by Com21,
Inc. (referred to in this prospectus as "Com21" or the "Registrant"), any
selling shareholder or by any other person. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than
the securities covered by this prospectus, nor does it constitute an offer
to or solicitation of any person in any jurisdiction in which such offer
or solicitation may not lawfully be made.
THE COMPANY
Com21's principal executive offices are located at 750 Tasman Drive,
Milpitas, California 95053. Com21's telephone number is (408) 953-9100.
RISK FACTORS
You should carefully consider the following risks, as well as the other
information included or incorporated by reference in this prospectus,
before deciding whether you wish to purchase any of the shares offered
hereby.
Com21 is currently experiencing significant delays in shipments from its
OEM modem supplier and shortages of certain components.
Com21 is currently experiencing delays in shipment from its OEM modem
supplier because of a market shortage of tuners and flash memory, and an
industry wide shortages of components could impact Com21's modem shipments.
If Com21 is unable to purchase OEM modems or key components from its
vendors at a high enough volume to meet demand, or qualify and secure
additional sources of supply, Com21 will be unable to meet its production
and delivery schedules and revenue will be adversely affected.
Com21 does not have long term supply contracts to ensure sources of
supply for all components. Its suppliers may enter into exclusive
arrangements with its competitors, stop selling their products or
components to Com21 at commercially reasonable prices or refuse to sell
their products or components to Com21 at any price. If Com21 is unable to
obtain sufficient quantities of modems or components, or to develop
alternative sources for products and/or components its revenue would be
materially adversely affected.
If any manufacturer or other sole source suppliers delay or halt production
of any of their components, Com21's business, operating results and
financial condition could be materially adversely affected.
Com21's operating results in one or more future periods are likely to
fluctuate significantly and may fail to meet or exceed the expectations of
securities analysts or investors.
Com21's operating results are likely to fluctuate significantly in the
future on a quarterly and an annual basis due to a number of factors, many
of which are outside its control. Factors that could cause Com21's
revenues to fluctuate include the following: key component shortages or
failures from its suppliers in providing necessary materials and modems;
delays in introducing standards based products that are certified as
meeting the specifications of various approval organizations; new product
introductions by Com21 or by its competitors; variations in the timing of
orders and shipments of Com21's products; variations in the size of orders
by Com21's customers; the timing of upgrades of cable plants; variations
in capital spending budgets of cable operators; delays in obtaining
regulatory approval for commercial deployment of cable modem systems; and
general economic conditions and economic conditions specific to the cable
and electronic data transmission industries.
The amount and timing of Com21's operating expenses generally will vary
from quarter to quarter depending on the level of actual and anticipated
business activities. Research and development expenses will vary as Com21
develops new products.
Total revenues for any future quarter are difficult to predict. Supply of
components and OEM DOCSIS modems, manufacturing or testing constraints
could result in delays in the delivery of Com21's products. Delays in the
product deployment schedule of one or more of Com21's cable operator
customers would likely materially adversely affect Com21's operating
results for a particular period.
A variety of factors affect Com21's gross margin, including the following:
the effectiveness of its cost reduction efforts; the sales mix within a
product group, especially between proprietary and DOCSIS modems; the
average selling prices of Com21's products; component prices Com21 secures
from its vendors; the sales mix between Com21's headend equipment and cable
modems; the volume of products manufactured; and the distribution channel
or customer mix.
In the past Com21 has experienced declines in the average selling price of
its cable modems and headend equipment. Com21 expects average sales prices
of its modems and headend equipment will continue to show decreases to meet
competitive pressures, especially those pressures related to DOCSIS and
other standards based modems. In addition, the sales mix between Com21's
headend equipment and modems also affects its gross margin. Sales of
Com21's cable modems yield lower gross margins than do sales of its headend
equipment, and sales of its DOCSIS cable modems currently yield
substantially lower margins than do sales of its proprietary cable modems.
Com21 anticipates that its sales mix will continue to be weighted toward
cable modems during 2000 and increasingly toward its lower margin DOCSIS
cable modems. If the price declines are not offset by a decline in the
costs of manufacturing its cable modems due to engineering delays in
introducing its cost reduced ATM and DOCSIS modems or in getting certified
by various standards bodies or an increase in sales of higher margin
telephone and office cable modems, Com21's gross margin will be adversely
affected.
Because of these factors, Com21's operating results in one or more future
periods may not meet or exceed the expectations of securities analysts or
investors. In that event, the trading price of its common stock would
likely decline.
Com21 may not be able to produce sufficient quantities of its products
because Com21 depends on third-party manufacturers, their suppliers and
OEM suppliers and have limited manufacturing experience.
Com21 contracts for the manufacture of cable modems and integrated circuit
boards on a turnkey basis. Com21's future success will depend, in
significant part, on its ability to have others manufacture its products
cost-effectively, in sufficient volumes and to meet production and delivery
schedules. A number of risks are associated with Com21's dependence on
third-party manufacturers including: failure to meet Com21's delivery
schedules; quality assurance; manufacturing yields and costs; the potential
lack of adequate capacity during periods of excess demand; difficulty in
planning mix of units to be produced by manufacturer; and increases in
prices and the potential misappropriation of Com21's intellectual property.
Any manufacturing disruption could impair Com21's ability to fulfill
orders. Com21 has no long-term contracts or arrangements with any of its
vendors that guarantee product availability, the continuation of particular
payment terms or the extension of credit limits. Com21 may experience
manufacturing or supply problems in the future. Com21 is dependent on its
manufacturers to secure components at favorable prices, but it may not be
able to obtain additional volume purchase or manufacturing arrangements on
terms that it considers acceptable, if at all. Any such difficulties could
harm Com21's relationships with customers.
Com21's future success will depend in part upon its ability to enhance its
existing products and to develop and introduce, on a timely basis, new
products and features that meet changing customer requirements and emerging
industry standards.
The market for cable modem systems and products is characterized by rapidly
changing technologies and short product life cycles. Com21's future success
will depend in large part upon its ability to: identify and respond to
emerging technological trends in the market; develop and maintain
competitive products; enhance its products by adding innovative features
that differentiate its products from those of its competitors; bring
products to market on a timely basis at competitive prices; and respond
effectively to new technological changes or new product announcements by
others.
If Com21's product development and enhancements take longer than planned,
the availability of products would be delayed. Com21's future success will
depend in part upon its ability to enhance its existing products and to
develop and introduce, on a timely basis, new products and features that
meet changing customer requirements and evolving and emerging industry
standards.
The technical innovations required for Com21 to remain competitive are
inherently complex, require long development cycles, are dependent in some
cases on sole source suppliers and require Com21, in some cases, to license
technology from others. Com21 must continue to invest in research and
development to attempt to maintain and enhance its existing technologies
and products, but it may not have the funds available to do so. Even if
Com21 has sufficient funds, these investments may not serve the needs of
customers or be compatible with changing technological requirements or
standards. Most expenses must be incurred before the technological
feasibility or commercial viability can be ascertained. Revenues from
future products or product enhancements may not be sufficient to recover
the development costs associated with the products or enhancements.
Competition for qualified personnel in the cable networking equipment and
telecommunications industries is intense, and Com21 may not be successful
in attracting and retaining these personnel.
Com21's future success will depend, to a significant extent, on the ability
of its management to operate effectively, both individually and as a group.
Com21 is dependent on its ability to retain and motivate high caliber
personnel, in addition to attracting new personnel. Competition for
qualified personnel in the cable networking equipment and
telecommunications industries is extremely intense, especially in the San
Francisco Bay Area, and Com21 may not be successful in attracting and
retaining such personnel. Com21 expects to add additional personnel in the
near future. There may be only a limited number of people with the
requisite skills to serve in those positions and it may become increasingly
difficult to hire these people. Com21 is actively searching for research
and development engineers, who are in short supply. Com21's business will
suffer if it encounters delays in hiring additional engineers.
In response to the intense competition for qualified personnel in the San
Francisco Bay Area, Com21 has opened up development facilities in Ireland
and New York, and a customer service center in The Netherlands and is
exploring setting up additional centers in other locations.
Competitors and others have in the past and may in the future attempt to
recruit Com21's employees. Com21 does not have employment contracts with
any of its key personnel. Com21 is experiencing higher turnover than in
1999 due to increased competition for qualified personnel. Com21 does not
maintain key person life insurance on its key personnel. The loss of the
services of any of its key personnel, the inability to attract or retain
qualified personnel in the future or delays in hiring required personnel,
particularly engineers, could negatively affect Com21's business.
Com21 may be subject to risks associated with acquisitions.
Subsequent to June 30, 2000, Com21 acquired GADline Ltd., an Israeli
developer of integrated end-to-end system solutions delivering telephone
and high-speed data over a hybrid fiber-coaxial infrastructure, and BitCom,
Inc., an engineering consulting firm, specializing in wireless, satellite,
and networking engineering. Com21 continually evaluates strategic
acquisitions of other businesses. The process of integrating any acquired
business into Com21's business and operations is risky and may create
unforeseen operating difficulties and expenditures. The areas in which
Com21 may face difficulties include: assimilating the acquired operations
and personnel; limits on Com21's ability to retain the acquired customers;
risks of entering markets in which Com21 has no or limited direct prior
experience and where competitors in such markets have stronger market
positions; disruption of Com21's ongoing business; limits on Com21's
ability to successfully incorporate acquired technology and rights into its
service offerings and sell the acquired products; and implementation of
controls, procedures and policies appropriate for a larger public group of
companies that prior to acquisition had been smaller, private companies.
Com21 has very limited experience in managing the integration process.
Moreover, it may not be able to successfully overcome potential problems
encountered with these acquisitions or other potential acquisitions. In
addition, future acquisitions could materially adversely affect its
operating results by diluting its stockholders' equity, causing Com21 to
incur additional debt, incurring significant immediate expenses related to
write-offs, or incurring amortization of acquisition expenses and acquired
assets.
Com21 must reduce the cost of its cable modems to remain competitive.
Certain of Com21's competitors' cable modems are priced lower than Com21's
cable modems. As headend equipment becomes more widely deployed, the price
of cable modems and related equipment will continue to decline. In
particular, industry standards, including the DOCSIS standard in North
America, has caused increased price competition for cable modems.
Com21 may not be able to continually reduce the costs of manufacturing its
cable modems sufficiently to enable it to lower its modem prices and
compete effectively with other cable modem suppliers. In addition Com21 may
not be able to get its DOCSIS modems certified in a timely manner by
various standards bodies including CableLabs. If Com21 is unable to reduce
the manufacturing costs of its cable modems, Com21's gross margin and
operating results would be harmed.
Com21 has a short operating history, has incurred net losses since its
inception and expects future losses.
Com21 did not commence product shipments until April 1997. As a result, it
has only a limited operating history upon which you may evaluate its
prospects. Com21 has incurred net losses since inception and expects to
continue to operate at a loss through at least the first half of fiscal
year 2001. To achieve and subsequently maintain profitable operations,
Com21 must successfully design, develop, test, manufacture, introduce,
market and distribute its products on a broad commercial basis and secure
higher revenues and gross profit.
Com21's ability to generate future revenues will depend on a number of
factors, many of which are beyond its control. These factors include the
following: cable operators' success and timeliness in the installation of
subscriber site equipment; Com21's ability to meet competitive pricing
pressures; the rate at which cable operators upgrade their cable plants;
Com21's ability and the ability of cable operators to coordinate timely and
effective marketing campaigns with the availability of upgrades; cable
operators' success in marketing data-over-cable services and Com21's modems
to subscribers; and cable operators' success in setting prices for data
transmission installation service.
Due to these factors, Com21 cannot forecast with any degree of accuracy
what its revenues will be or how quickly cable operators will adopt its
systems and buy its cable modems. Therefore, Com21 may not achieve, or be
able to sustain, profitability.
Both Com21's proprietary products and its standards based products are
subject to evolving industry standards. If Com21's products do not comply
with any standard that achieves market acceptance, customers may refuse to
purchase its products.
The DOCSIS standard has achieved substantial market acceptance in North
America. Conformance with the DOCSIS standard is being determined through
certification tests performed by CableLabs. On December 9, 1999 CableLabs
certified two models of Com21's DOXport cable modem product line
representing four modems for use with DOCSIS cable networks. On March 9,
2000 CableLabs certified a DOCSIS modem supplied by Com21's OEM supplier.
On July 20, 2000 CableLabs certified the new USB-compatible DOXport 121
cable modem to be in compliance with DOCSIS 1.0. As Com21 continues to
enhance current DOCSIS products and develop new products and as the
evolution of the DOCSIS standard continues Com21 may incur additional costs
associated with making its cable modems compliant with various versions of
the DOCSIS standard. Additionally, Com21 cannot assure you that future
enhancements or new DOCSIS product offerings will be CableLabs certified
according to Com21's anticipated schedule, or that if certified, will meet
with market acceptance.
The emergence or evolution of industry standards, either through adoption
by official standards committees or widespread use by cable operators or
telephone companies could require Com21 to redesign current products.
There is movement by some cable operators in Europe towards either a DVB
or EuroDOCSIS standard. Com21 currently has DVB products that it OEMs from
a third party supplier, but Com21 cannot assure you that its DVB products
will meet the evolving DVB specifications. Moreover, Com21's relationship
with its OEM supplier will cease on September 26, 2000. Currently, Com21
is developing its own products to replace this source; however, these
products may not be available in time for market requirement.
Additionally, Com21 cannot assure you that if a EuroDOCSIS standard obtains
widespread acceptance Com21 will be able to design and produce a EuroDOCSIS
modem that meets EuroDOCSIS specifications.
The widespread adoption of DOCSIS, DVB, EuroDOCSIS or other standards
outside North America could cause aggressive competition in the cable modem
market and result in lower sales of Com21's proprietary headend products
and lower revenues from licensing of its network management software. Any
of these events would adversely affect Com21's gross margin and its
operating results.
The development of new competing technologies and standards increases the
risk that current or new competitors could develop products that would
reduce the competitiveness of Com21's products. If any of these new
technologies or standards achieve widespread market acceptance, any failure
by Com21 to develop new products or enhancements, or to address these new
technologies or standards, would harm its business.
Com21 relies on indirect distribution channels for its products and needs
to develop additional distribution channels.
Today, cable operators and systems integrators purchase cable modems from
vendors through direct and indirect sales channels. Due to the DOCSIS
standard achieving widespread market acceptance, Com21 anticipates that the
North American cable modem market may at some point shift to a consumer
purchase model. If this occurs, Com21 will sell more of its cable modems
directly through consumer sales channels. Com21's success will then be
dependent on its ability to market effectively to end users, to establish
brand awareness, to set up the required channels of distribution and to
have cable operator's reference sell Com21's products. Com21 has started
to establish new distribution channels for its cable modems. Com21 may not
have the capital required or the necessary personnel, or expertise to
develop these distribution channels, which could materially adversely
affect its business, operating results and financial condition. To the
extent that large consumer electronics companies enter the cable modem
market, their well-established retail distribution capabilities would
provide them with a significant competitive advantage.
The market in which Com21 sells its products is characterized by many
competing technologies, and the technology on which its product is based
may not compete effectively against other technologies.
The market for high-speed data transmission services has several competing
technologies which offer alternative solutions. Technologies which compete
with Com21's solution include the following: telephone company-related
wireline technologies such as dial-up (analog modems) digital subscriber
line, known as DSL, ADSL, among others, and integrated services digital
network, known as ISDN; wireless technologies such as local multipoint
distribution service, known as LMDS, multi-channel multipoint distribution
service, commonly known as MMDS, and direct satellite; and fiber optic
technologies such as fiber to a residence and fiber to a multi-dwelling
unit.
Because of the widespread reach of telephone networks and the financial
resources of telephone companies, competition from telephone company-
related solutions is expected to be intense. Cable modem technology may not
be able to compete effectively against wireline or wireless technologies.
In addition, one of Com21's competitors has developed a commercially
available alternative modulation technology. Significant market acceptance
of alternative solutions for high-speed data transmission could decrease
the demand for Com21's products if these alternatives are viewed as
providing faster access, greater reliability, increased cost-effectiveness
or other advantages.
Com21's market is highly competitive and has many more established
competitors.
The market for Com21's products is intensely competitive, rapidly evolving
and subject to rapid technological change.
Many of Com21's current and potential competitors have been operating
longer, have better name recognition, more established business
relationships and significantly greater financial, technical, marketing and
distribution resources than Com21 does. These competitors may undertake
more extensive marketing campaigns, adopt more aggressive pricing policies
and devote substantially more resources to developing new or enhanced
products than Com21 does.
Com21's failure to adequately protect its proprietary rights may adversely
affect it.
Com21 relies on a combination of patent, copyright and trademark laws, and
on trade secrets and confidentiality provisions and other contractual
provisions to protect its proprietary rights. These measures afford only
limited protection. Com21's means of protecting its proprietary rights in
the U.S. or abroad may not be adequate and competitors may independently
develop similar technologies. Com21's future success will depend in part
on its ability to protect its proprietary rights and the technologies used
in its principal products. Despite Com21's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of its
products or to obtain and use trade secrets or other information that Com21
regards as proprietary. In addition, the laws of some foreign countries do
not protect Com21's proprietary rights as fully as do the laws of the U.S.
Issued patents may not preserve Com21's proprietary position. Even if they
do, competitors or others may develop technologies similar to or superior
to Com21's. If Com21 does not enforce and protect its intellectual
property, its business will be harmed.
From time to time, third parties, including Com21's competitors, have
asserted patent, copyright and other intellectual property rights to
technologies that are important to Com21. Com21 expects that it will
increasingly be subject to infringement claims as the number of products
and competitors in the cable modem market grows and the functionality of
products overlaps.
The results of any litigation matter are inherently uncertain. In the event
of an adverse result in any litigation with third parties that could arise
in the future, Com21 could be required to pay substantial damages,
including treble damages if it is held to have willfully infringed, to halt
the manufacture, use and sale of infringing products, to expend significant
resources to develop non-infringing technology, or to obtain licenses to
the infringing technology. Licenses may not be available from any third
party that asserts intellectual property claims against Com21, on
commercially reasonable terms, or at all. In addition, litigation
frequently involves substantial expenditures and can require significant
management attention, even if Com21 ultimately prevails. There can be no
assurance that Com21 would be able to successfully resolve legal disputes
in the future.
Com21's failure to manage growth could adversely affect it.
Com21 has rapidly and significantly expanded its operations and anticipate
that further significant expansion will be required to address potential
growth in its customer base and market opportunities. To manage the
anticipated growth of its operations, Com21 will be required to: improve
existing and implement new operational, financial and management
information controls, reporting systems and procedures; hire, train and
manage additional qualified personnel; expand and upgrade its core
technologies; and effectively manage multiple relationships with its
customers, suppliers and other third parties.
Com21 competes for skilled personnel in a labor market where there is a
shortage of qualified personnel and salary demands are above the norm.
Com21 must be able to continue to recruit and retain personnel, and failure
to do so would result in Com21 not meeting its anticipated growth goals.
In addition, Com21's management team may not be able to achieve the rapid
execution necessary to fully exploit the market for its products and
services.
Com21 may not be able to install enhanced management information and
control systems in an efficient and timely manner, and its current or
planned personnel, systems, procedures and controls may not be adequate to
support its future operations.
In the future, Com21 may experience difficulties meeting the demand for its
products and services. Com21 cannot assure that its systems, procedures or
controls will be adequate to support the anticipated growth in its
operations. Any failure to manage growth effectively could materially
adversely affect its business, operating results and financial condition.
Com21 depends on strategic relationships.
Com21's business strategy relies to a significant extent on its strategic
relationships with other companies. These relationships include: software
license arrangements for Com21's network management system; technology
licensing agreements for certain products; development and OEM arrangements
with certain suppliers for advanced products; marketing arrangements with
system integrators, and others; and collaboration agreements with suppliers
of routers and headend equipment to ensure the interoperability of Com21's
cable modems with these suppliers.
These relationships may not be successful because Com21 may not be able to
continue to maintain, develop or replace them in the event any of these
relationships are terminated. In addition, any failure to renew or extend
any licenses between any third party and Com21 may adversely affect Com21's
business.
Com21's customer base is concentrated and the loss of one or more of its
customers could cause its business to suffer.
A relatively small number of customers (which include system integrators)
have accounted for a large part of Com21's revenues to date, and Com21
expects that this trend will continue. Com21 expects that its largest
customers in the future could be different from its largest customers today
due to a variety of factors, including customers' deployment schedules and
budget considerations. In addition, certain of Com21's system integrators
could develop and manufacture products that compete with Com21 and
therefore could no longer distribute Com21's products. Because a limited
number of cable operators account for a majority of Com21's prospective
customers, Com21's future success will depend upon its ability to establish
and maintain relationships with these companies. Com21 may not be able to
retain its current accounts or to obtain additional accounts. Both in the
U.S. and internationally, a substantial majority of households passed are
controlled by a relatively small number of cable operators. The loss of one
or more of its customers or its inability to successfully develop
relationships with other significant cable operators could cause Com21's
business to suffer.
Com21 is subject to risks associated with operating in international
markets.
Com21 expects that a significant portion of its sales will continue to be
in international markets for the foreseeable future. Com21 has expanded
operations in its existing international markets and intends to enter new
international markets, which will demand management attention and financial
commitment. In addition, a successful expansion of its international
operations and sales in certain markets will require Com21 to develop
relationships with international systems integrators and distributors.
Com21 may not be able to identify, attract or retain suitable international
systems integrators or distributors. Com21 may not be able to successfully
expand its international operations.
Furthermore, to increase revenues in international markets, Com21 will need
to continue to establish foreign operations, to hire additional personnel
to run these operations and to maintain good relations with its foreign
systems integrators and distributors. To the extent that it is unable to
successfully do so, Com21's growth in international sales will be limited
and its operating results could be adversely affected.
Com21's international sales to date have been denominated in U.S. dollars.
It does not currently engage in any foreign currency hedging transactions.
A decrease in the value of foreign currencies relative to the U.S. dollar
could make Com21's products more expensive in international markets.
In addition to currency fluctuation risks, international operations involve
a number of risks not typically present in domestic operations. These
risks include the following: changes in regulatory requirements; costs and
risks of deploying systems in foreign countries; licenses, tariffs and
other trade barriers; political and economic instability; difficulties in
staffing and managing foreign operations; potentially adverse tax
consequences; difficulties in obtaining governmental approvals for
products; the burden of complying with a wide variety of complex foreign
laws and treaties; and the possibility of difficult accounts receivable
collections.
Com21 is also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of high
technology products. It cannot predict whether charges or restrictions upon
the importation or exportation of its products will be implemented by the
U.S. or other countries.
Future international activity may result in sales denominated in foreign
currencies. Gains and losses on the conversion to U.S. dollars of accounts
receivable, accounts payable and other monetary assets and liabilities
arising from international operations may contribute to fluctuations in
Com21's operating results. Any of these factors could materially and
adversely affect Com21's business, operating results and financial
condition.
The industry in which Com21 competes is subject to consolidation.
There has been a trend toward industry consolidation for several years,
which has continued through the second quarter of 2000. Com21 expects this
trend toward industry consolidation to continue as companies attempt to
strengthen or hold their market positions in an evolving industry. Com21
believes that industry consolidation may provide increasingly stronger
competitors that are better able to compete as sole-source vendors for
customers. This could lead to more variability in operating results as
Com21 competes to be a single vendor solution and could have a material
adverse effect on its business, operating results and financial condition.
Additionally Com21 believes that industry consolidation may lead to fewer
larger possible customers. If Com21 is unable to maintain its current
customers or secure additional customers its business could be adversely
affected.
Com21 may be subject to product returns and product liability claims due
to defects in its products.
Com21's products are complex and may contain undetected defects, errors or
failures. These errors have occurred in its products in the past and
additional errors may be expected to occur in its products in the future.
The occurrence of any defects, errors, or failures could result in delays
in installation, product returns and other losses to Com21 or to its cable
operators or end-users. Any of these occurrences could also result in the
loss of or delay in market acceptance of Com21's products, which could have
a material adverse effect on its business, operating results and financial
condition. Com21 would have limited experience with the problems that could
arise with any new products that it introduces.
Although Com21 has not experienced any product liability claims to date,
the sale and support of its products entail the risk of these claims. A
successful product liability claim brought against Com21 could have a
material adverse effect on its business, operating results and financial
condition.
The location of Com21's facilities subjects it to the risk of earthquakes
and or other natural disasters.
Com21's corporate headquarters, including most of its research and
development operations and its in-house manufacturing facilities, are
located in the Silicon Valley area of Northern California, a region known
for seismic activity. A significant natural disaster in the Silicon
Valley, such as an earthquake, could have a material adverse impact on
Com21's business, financial condition and operating results.
Com21's stock price is highly volatile and broad market fluctuations may
adversely affect the market price of its common stock.
The trading price of Com21's common stock has fluctuated significantly
since its initial public offering in May 1998. In addition, the trading
price of Com21's common stock could be subject to wide fluctuations in
response to quarterly variations in operating results, announcements of
technological innovations or new products by Com21 or its competitors,
announcements by certification and standards bodies, developments with
respect to patents or proprietary rights, changes in financial estimates
by securities analysts and other events or factors. In addition, the stock
market has experienced volatility that has particularly affected the market
prices of equity securities of many high technology companies and that
often has been unrelated or disproportionate to the operating performance
of these companies. These broad market fluctuations may adversely affect
the market price of Com21's common stock.
Additionally, Com21 may choose to structure acquisitions or other
transactions by issuing additional Com21 common stock or warrants or
options to purchase Com21 stock that would have a dilutive affect on the
common stock currently outstanding. Although Com21 anticipates these types
of transactions will increase the overall value of Com21, Inc., they may
have an adverse affect on the market price of Com21's common stock.
FORWARD-LOOKING STATEMENTS
Com21 has made forward-looking statements in this document and the
documents incorporated by reference herein that are subject to risks and
uncertainties. These statements are based on management's beliefs and
assumptions, based on information currently available to management.
Forward-looking statements include, but are not limited to, information
concerning possible future results of operations of Com21 set forth under
the section entitled "Risk Factors." Statements in this document and the
documents incorporated herein by reference preceded by, followed by or that
include the words "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "should" or similar expressions identify forward-looking
statements.
Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. The future results and
shareholder values of Com21 may differ materially from those expressed in
these forward-looking statements. Many of the factors that will determine
these results and values are beyond Com21's ability to control or predict.
Shareholders are cautioned not to put undue reliance on any
forward-looking statements. In addition, Com21 does not have any intention
or obligation to update forward-looking statements after the date of this
prospectus even if new information, future events or other circumstances
have made them incorrect or misleading. For those statements, Com21 claims
the protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995.
In evaluating the exchange, you should carefully consider the
discussion of risks and uncertainties in the section entitled "Risk
Factors" in this prospectus and in the documents incorporated by reference
herein.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file
at the SEC's Public Reference Room 15 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the Public Reference Room. Our SEC filings are also
available to the public from our web site at sttp://www.Com21.com or at the
SEC's web site at http://www.sec.gov.
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 filed with the SEC will update and supersede this information.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed.
(a) Com21's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 filed March 24, 2000, including certain information in
Com21's Definitive Proxy Statement in connection with Com21's 2000
Annual Meeting of Shareholders;
(b) Com21's Quarterly Reports on Form 10-Q (a) for the quarter ended
March 31, 2000 filed May 15, 2000, and (b) for the quarter ended June
30, 2000 filed August 15, 2000;
(c) Com21's Current Reports on Form 8-K (a) filed April 24, 2000, and
(b) filed July 18, 2000, and as amended and filed September 18, 2000;
and
(d) The description of Com21 Common Stock contained in its
registration statement on Form 8-A filed April 8, 1998, including any
amendments or reports filed for the purpose of updating such
descriptions.
You may request a copy of these filings, at no cost, by writing to
telephoning us at the following address:
David Robertson
Chief Financial Officer
Com21, Inc.
750 Tasman Drive
Milpitas, CA 95053
(408) 953-9100
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have
authorized no one to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other
than the date on the front of the document.
USE OF PROCEEDS
Com21 will not receive any of the net proceeds from the sale of the
shares of Com21 common stock offered hereby, all of which proceeds will be
received by the selling shareholders.
PLAN OF DISTRIBUTION
Com21 is registering all 2,281,720 shares on behalf of certain selling
shareholders. All of the shares were issued by us in connection with our
acquisition of GADline, Ltd. Com21 acquired all of the outstanding
ordinary shares of GADline, and GADline is now a wholly-owned subsidiary
of Com21. Com21 will receive no proceeds from this offering. The selling
shareholders named in the table below or pledgees, donees, transferees or
other successors-in-interest selling shares received from a named selling
shareholder as a gift, partnership distribution or other non-sale-related
transfer after the date of this prospectus (collectively, the "Selling
Shareholders") may sell the shares from time to time. The Selling
Shareholders will act independently of Com21 in making decisions with
respect to the timing, manner and size of each sale. The sales may be made
on one or more exchanges or in the over-the-counter market 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
Shareholders may effect such transactions by selling the shares to or
through broker-dealers. The shares may be sold by one or more of, or a
combination of, the following:
- a block trade in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and resell
a portion of the block as principal to facilitate the
transaction,
- purchases by a broker-dealer as principal and resale by
such broker-dealer for its account pursuant to this prospectus,
- an exchange distribution in accordance with the rules of
such exchange,
- ordinary brokerage transactions and transactions in which
the broker solicits purchasers, and
- in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In
effecting sales, broker-dealers engaged by the Selling Shareholders may
arrange for other broker-dealers to participate in the resales.
The Selling Shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise.
In such transactions, broker-dealers may engage in short sales of the
shares in the course of hedging the positions they assume with Selling
Shareholders. The Selling Shareholders also may sell shares short and
redeliver the shares to close out such short positions. The Selling
Shareholders may enter into option or other transactions with broker-
dealers which require the delivery to the broker-dealer of the shares. The
broker-dealer may then resell or otherwise transfer such shares pursuant
to this prospectus. The Selling Shareholders also may loan or pledge the
shares to a broker-dealer. The broker-dealer may sell the shares so
loaned, or upon a default the broker-dealer may sell the pledged shares
pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Shareholders. Broker-
dealers or agents may also receive compensation from the purchasers of the
shares for whom they act as agents or to whom they sell as principals, or
both. Compensation as to a particular broker-dealer might be in excess of
customary commissions and will be in amounts to be negotiated in connection
with the sale. Broker-dealers or agents and any other participating
broker-dealers or the Selling Shareholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act
in connection with sales of the shares. Accordingly, any such commission,
discount or concession received by them and any profit on the resale of the
shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. Because Selling Shareholders may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, the Selling Shareholders will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144
promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The Selling Shareholders have advised Com21
that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of
their securities. There is no underwriter or coordinating broker acting
in connection with the proposed sale of shares by Selling Shareholders.
The shares will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states the shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously
engage in market making activities with respect to our common stock for a
period of two business days prior to the commencement of such distribution.
In addition, each Selling Shareholder will be subject to applicable
provisions of the Exchange Act and the associated rules and regulations
under the Exchange Act, including Regulation M, which provisions may limit
the timing of purchases and sales of shares of our common stock by the
Selling Shareholders. Com21 will make copies of this prospectus available
to the Selling Shareholders and has informed them of the need for delivery
of copies of this prospectus to purchasers at or prior to the time of any
sale of the shares.
Com21 will file a supplement to this prospectus, if required, pursuant
to Rule 424(b) under the Securities Act upon being notified by a Selling
Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by
a broker or dealer. Such supplement will disclose:
- the name of each such Selling Shareholder and of the
participating broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
- the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable,
- that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated
by reference in this prospectus, and
- other facts material to the transaction.
Com21 will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Shareholders will bear all
commissions and discounts, if any, attributable to the sales of the shares.
The Selling Shareholders may agree to indemnify any broker-dealer or agent
that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities
Act.
SELLING SHAREHOLDERS
The following table sets forth the number of shares owned by each of
the Selling Shareholders. None of the Selling Shareholders has had a
material relationship with Com21 within the past three years other than as
a result of the ownership of the shares or other securities of Com21 or as
a result of their employment with Com21 as of the date of the closing of
the acquisition of GADline. No estimate can be given as to the amount of
shares that will be held by the Selling Shareholders after completion of
this offering because the Selling Shareholders may offer all or some of the
shares and because there currently are no agreements, arrangements or
understandings with respect to the sale of any of the shares. The shares
offered by this prospectus may be offered from time to time by the Selling
Shareholders named below.
Number of
Shares
Percent of Registered
Number of Shares Outstanding For Sale
Name of Selling Shareholder Beneficially Owned Shares (1) Hereby (2)
______________________________ __________________ ___________ __________
Gidon Tahan 443,353 1.83% 443,353
David Cohen 443,353 1.83% 443,353
William C. Mattison, Jr. 19,758 * 19,758
Bear Stearns Securities Corporation
as Custodian for William C.
Mattison, Jr. IRA R/O 6,585 * 6,585
Mattison Family Trust 19,758 * 19,758
The Mattison Foundation, Inc. 6,585 * 6,585
Emanuel Gerard 43,907 * 43,907
Eric Singer 2,304 * 2,304
Bank of America FBO Eric Singer IRA 2,304 * 2,304
Charles L. Ughetta IRA 2,194 * 2,194
Charles F. & Kathryn D. Ughetta 2,194 * 2,194
Vincent John Kenney 1,645 * 1,645
Nathan Schipper 657 * 657
Richard C. Mekenzie, Jr. 21,953 * 21,953
Issac & Ruth Vidomlanski 3,951 * 3,951
Abraham & Myra Selesny 1,316 * 1,316
Nathan Low 43,738 * 43,738
Merich Ozada 43,738 * 43,738
Israel Emerging Growth Fund, L.P. 4,938 * 4,938
Adrian Davis 987 * 987
Joshua Ellenhorn 1,975 * 1,975
Leonard Beder 987 * 987
Steve Aaronson 987 * 987
Warren & Chana Fermaglich 23,835 * 23,835
Dena Levenson 940 * 940
Elizabeth Korda 6,585 * 6,585
Robert Korda 19,758 * 19,758
Philip J. Hempleman 104,982 * 104,982
Leonard Rauner 19,090 * 19,090
Wayne Wilkey 7,634 * 7,634
Alexander Greenberg 7,634 * 7,634
Joel Ackerman 3,816 * 3,816
David D. May 5,725 * 5,725
Sanford B. Prater 5,725 * 5,725
Kirk Balzer 3,816 * 3,816
Green Cay Latin American Fund LDC 66,905 * 66,905
Green Cay Emerging Market Fund LDC 33,452 * 33,452
Ashline, Ltd. 175,636 * 175,636
Charles Benchabat 422 * 422
A.U.K. Investments 1,244 * 1,244
Avraham Fischer 25,162 * 25,162
Courses Investment in Technology Ltd.193,638 * 193,638
Telrad Holdings LTD. 290,094 1.20% 290,094
Julie Lynn Selesny 657 * 657
Tamar Aderet Selesny 164 * 164
Adena R. Selesny 164 * 164
Chaim David Selesny 164 * 164
Yaacov Eliezer Selesny 164 * 164
Equity Trade Finance Ltd. 8,781 * 8,781
Robert Harow 1,316 * 1,316
Private Equity Bridge Invest Ltd. 155,050 * 155,050
___________________
* Represents beneficial ownership of less than one percent.
(1) Based on the number of shares outstanding on July 5, 2000.
(2) Assumes the sale of all shares of Com21 common stock offered
by the Selling Shareholders. This registration statement also
shall cover any additional shares of common stock which become
issuable in connection with the shares registered for sale hereby
by reason of any stock divided, stock split, recapitalization or
other similar transaction effected without the receipt of
consideration which results in an increase in the number of Com21's
outstanding shares of common stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Com21 by Wilson Sonsini Goodrich & Rosati, Professional Corporation, San
Francisco, California.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule incorporated in this prospectus by reference
from Com21's annual report on Form 10-K for the year ended December 31,
1999 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and
have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
____________________________________ ____________________________________
We have not authorized any person to
make a statement that differs from
what is in this prospectus. If any
person does make a statement that
differs from what is in this
prospectus, you should not rely on
it. This prospectus is not an offer
to sell, nor is it seeking an offer
to buy, these securities in any
state in which the offer or sale is
not permitted. The information in COM21, INC.
this prospectus is complete and
accurate as of its date, but the
information may change after that
date. 2,281,720 Shares
of Common Stock
TABLE OF CONTENTS
Page ________________________
The Company 1
PROSPECTUS
Risk Factors 1
________________________
Forward-Looking Statements 9
Where You Can Find More
Information 9
Use of Proceeds 10 September 19, 2000
Plan of Distribution 12
Selling Shareholders 14
Legal Matters 15
Experts 15
____________________________________ ____________________________________
