OFFERING CIRCULAR
XXXXXXXX.XXX, INC.
OFFER TO EXCHANGE
ONE SHARE OF ITS
COMMON STOCK, $.01 PAR VALUE
FOR EACH EIGHT PRIVATE PLACEMENT
COMMON STOCK PURCHASE WARRANTS
_____________________________________________________________________________
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., MOUNTAIN TIME,
ON THURSDAY, SEPTEMBER 23, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
_____________________________________________________________________________
Xxxxxxxx.xxx, Inc., a Nevada corporation ("Xxxxxxxx.xxx"), hereby offers
to exchange one share of its Common Stock, $.01 par value (the "Common
Stock"), for each eight Warrants to Purchase Common Stock issued in
Xxxxxxxx.xxx's Private Offering in November 1997 (the "Private Placement
Warrants"), upon the terms and subject to the conditions set forth in this
Offering Circular and in the related Letter of Transmittal (which, together,
constitute the "Exchange Offer").
There is no active trading market for the Private Placement Warrants.
Any stockholder desiring to tender all or any portion of his Private
Placement Warrants should complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it to American Securities Transfer & Trust,
Inc. (the "Exchange Agent"), together with all other required documents,
including the Warrant Certificates.
Questions and requests for assistance may be directed to the Exchange
Agent at its addresses and telephone numbers set forth herein.
______________________
The date of this Offering Circular is August 25, 1999
______________________
This Offering Circular does not constitute an offer for exchange or a
solicitation of an offer for exchange of any securities other than the
securities covered by this Offering Circular, by Xxxxxxxx.xxx or any other
person. The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of Private Placement Warrants in any
jurisdiction in which the making of the Exchange Offer or acceptance thereof
would not be in compliance with the laws of such jurisdiction. However,
Xxxxxxxx.xxx may, in its discretion, take such action as it may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to holders of Private Placement Warrants in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY XXXXXXXX.XXX.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY
OF THIS INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
The Exchange Offer is being made by Xxxxxxxx.xxx in reliance on the
exemption from the registration requirements of the Securities Act of 1933, as
amended, afforded by Sections 3(a)(9) and/or 4(2) thereof and Regulation D
thereunder. Xxxxxxxx.xxx will not pay any commission or other remuneration to
any broker, dealer, salesman or other person for soliciting tenders of Private
Placement Warrants. Regular employees of Xxxxxxxx.xxx may solicit exchanges
from the holders of the Private Placement Warrants, but they will not receive
additional compensation therefor.
AVAILABLE INFORMATION
Xxxxxxxx.xxx is subject to certain informational reporting requirements
of the Exchange Act and in accordance therewith files reports and other
information with the Securities and Exchange Commission. These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024 of the SEC's office at
000 Xxxxx Xxxxxx, X.X., Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000, and at its
regional offices located at 0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000 and Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX
00000. Copies of such reports, proxy statements and other information can be
obtained from the Public Reference Section of the SEC at 000 Xxxxx Xxxxxx,
X.X., Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000 at prescribed rates. The SEC
maintains a Web site (xxxx://xxx.xxx.xxx) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically. Additional updating information with respect to the securities
covered herein may be provided in the future to purchasers by means of
appendices to this prospectus.
Xxxxxxxx.xxx has filed with the Commission a Transaction Statement on
Schedule 13E-4, together with exhibits, pursuant to Rule 13e-4 of the General
Rules and Regulations under the Act, furnishing certain additional information
with respect to the Exchange Offer. The Schedule 13E-4 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the offices of the Commission in the manner set forth above.
2
TABLE OF CONTENTS
PAGE
SUMMARY .......................................................... 4
The Company ................................................. 4
Purpose of the Exchange Offer ............................... 4
The Exchange Offer .......................................... 5
RISK FACTORS ..................................................... 6
THE EXCHANGE OFFER ............................................... 10
Terms of the Exchange Offer ................................. 10
Purpose of the Exchange Offer ............................... 10
Procedure for Tendering Private Placement Warrants Stock .... 10
Withdrawal Rights ........................................... 11
Acceptance for Exchange and Exchange ........................ 12
Extension of Exchange Offer Period; Termination;
Amendments ................................................. 13
Certain Conditions of the Exchange Offer .................... 14
Fractional Shares ........................................... 15
Solicitations of Tenders; Fees .............................. 15
Interests of Certain Persons; Transactions .................. 15
CERTAIN TAX CONSEQUENCES ......................................... 16
PRICE RANGE OF COMMON STOCK ...................................... 16
DESCRIPTION OF CAPITAL STOCK AND PRIVATE PLACEMENT WARRANTS ...... 17
Common Stock ................................................ 17
Preferred Stock ............................................. 18
Private Placement Warrants .................................. 18
EXHIBIT A - Form 10-KSB for the fiscal year ended March 31, 1999
EXHIBIT B - Form 10-QSB for the quarter ended June 30, 1999
3
SUMMARY
The following is a summary of certain information contained in this
Offering Circular, including a summary of the terms of the Exchange Offer. It
is not intended to be complete and is qualified in its entirety by the more
detailed information contained in this Offering Circular.
THE COMPANY
Xxxxxxxx.xxx is an internet-based company that provides personalized
financial and lifestyle information to customers' wireless communication
devices. We also offer wireless business solutions to companies. We have
developed technology that combines real-time data, the world wide web,
customized information from corporations and wireless communications to
provide individually tailored information services to customers' pagers and
digital cellular phones. Our web site and customer support team provide
account maintenance services that allow subscribers to customize the types of
information alerts they receive. All consumer services are marketed from our
web site as well as through direct and re-seller distribution channels. Our
re-sellers currently include broker-dealers, information service providers,
wireless network carriers, and other internet companies. In addition, our
business solutions use our wireless technology to give businesses a way to
provide personalized information to their customers.
The first of our financial information services is QuoteXpress, an
investment monitoring tool that alerts subscribers with stock quote
information they pre-specify, such as price changes and volume. Other
financial services include SplitXpress, a service that notifies subscribers of
stock splits, buy-backs, takeovers, mergers and surprise earnings
announcements. CommmodityXpress tracks futures contract prices for commodities
trading on all the major US commodities markets. CompanyNews provides the
latest news stories and press releases for specific companies selected by the
subscriber. The headlines are delivered to the wireless device and the
complete story may be delivered to their email address, and is also available
on our web site.
During 1998, we introduced two new lifestyle services. Sports2Go provides
personalized real-time sports coverage with up-to-the-minute scores and
breaking game events. InfoXtra allows subscribers to receive personalized
information from a wide range of categories that include: local weather
forecasts, horoscopes, winning lottery numbers, ski conditions, beach
forecasts, top ten video rentals, and news headlines.
We currently market two message services that link the internet with
wireless communications. MailXpress alerts subscribers when important email
arrives in their mailbox. MessageX allows anyone with internet access to send
a message to the subscriber's pager or cell phone using the subscriber's email
address.
Our corporate offices are located at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000,
Xxx Xxxx Xxxxxxxxxx 00000. Our telephone number is (000) 000-0000 and our
world wide web site is xxx.xxxxxxxx.xxx.
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made to provide the holders of Private
Placement Warrants with the opportunity to obtain shares of the Company's
Common Stock for their Warrants without having to pay cash. The Private
4
Placement Warrants are exercisable at $5.00 per share of Common Stock. Since
August 1, 1999, the Company's Common Stock has traded in the range of $2.81 to
$4.38 per share.
The Exchange Offer also provides Xxxxxxxx.xxx the opportunity to reduce
the number of Private Placement Warrants outstanding. There are currently
outstanding 1,369,927 Private Placement Warrants exercisable to purchase an
equal number of shares of Common Stock. Some potential investors have
expressed concerns over the large number of warrants outstanding because of
the potential dilution to holders of Common Stock and possible effects on the
market for the Common Stock. As a result, management believes that the
Exchange Offer may make the Company more attractive to potential investors.
THE EXCHANGE OFFER
Exchange Ratio One share of Common Stock for each eight Private
Placement Warrants.
Expiration Date 5:00 p.m. (Mountain time), on Thursday, September
23, 1999, unless extended.
Withdrawal Rights Tenders may be withdrawn by providing proper
written notification to the Exchange Agent at any
time before the Expiration Date. See "The Exchange
Offer -- Withdrawal Rights".
How to Tender Warrantholders desiring to tender all or any portion
of their Private Placement Warrants should properly
complete, sign and mail or deliver the Letter of
Transmittal to the Exchange Agent, together with any
other required documents, such as the certificate
for such Warrants. See "The Exchange Offer --
Procedure for Tendering Private Placement Warrants.
Acceptance of Tenders Subject to the terms and conditions of the Exchange
Offer, Private Placement Warrants validly tendered
and not withdrawn will be accepted on the Expira-
tion Date and certificates for shares of Common
Stock will be issued in exchange for such properly
tendered Warrants and mailed by the Exchange Agent
as soon as practicable after the Expiration Date.
See "The Exchange Offer -- Acceptance for Exchange
and Exchange".
Federal Income Tax Generally, no gain or loss will be recognized for
Consequences federal income tax purposes by the holders of
Private Placement Warrants upon the exchange of
such shares for Common Stock pursuant to the
Exchange Offer. See ""Certain Tax
Consequences".
Trading There is no trading market for the Private Place-
ment Warrants. Accordingly, Xxxxxxxx.xxx is unable
to determine the current market value for these
Warrants. The Common Stock that will be issued
upon consummation of the Exchange Offer is cur-
rently traded in the over-the-counter market,
and quotations are included on the OTC Bulletin
Board under the symbol "NETD".
5
Exchange Agent American Securities Transfer & Trust, Inc.
THIS OFFERING CIRCULAR AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE EXCHANGE OFFER.
RISK FACTORS
An investment in the Common Stock is very risky. You should be able to
bear a complete loss of your investment. In deciding whether to exchange your
Private Placement Warrants for shares of Common Stock, you should carefully
consider the following risk factors, among others, as well as information
contained in this Offering Circular, our most recent annual reports on Form
10-KSB and Form 10-QSB, which are attached hereto.
Common Stock issued in The shares of Common Stock to be issued in
Exchange Offer will be exchange for Private Placement Warrants will
restricted be "restricted securities" as that term is
defined under SEC Rule 144. However, under
interpretations of the holding period
requirements of Rule 144, persons who exchange
their Private Placement Warrants for Common
Stock in the Exchange Offer may "tack" their
holding period for the Common Stock with the
period they have held their warrants. Since
the Private Placement Warrants were issued in
November 1997, persons who have held such
warrants since that time could immediately
resell their Common Stock. In addition, we
have filed a registration statement on Form S-3
with the SEC which is not yet effective which
would register the resale of the Common Stock.
However, we can give no such assurance as to
when such registration statement will become
effective. It is possible that the registration
statement will never become effective.
We have a history of losses We have recorded a net loss for each year since
and we may not be able to our current business started in 1996 through
achieve profitability. our fiscal year ended March 31, 1999. As of
June 30, 1999, we had an accumulated deficit of
$26,717,306. Our ability to operate
profitably depends on increasing our sales
through increased market acceptance of our
products and services and successfully competing
with other companies. We are also subject to
other risks associated with new business
enterprises. Therefore, we cannot assure you
that Xxxxxxxx.xxx will achieve profitability.
Our revenue may not grow We plan to use any cash flow we generate to
enough to pay for our research and develop improvements and upgrades
research and development to our current products and services and adapt
costs. them to new technologies. Our industry is
subject to rapid technological changes. We
cannot assure you that our revenues will grow
enough to pay for the research and development
needed to improve our products and services so
6
that they compete in this rapidly changing
marketplace. If we are unable to adequately
research and develop our products and services,
they could become obsolete and we will not
achieve profitability.
We have several competi- Our market is very competitive. There are a
tors, some of them are number of competitors who are larger and have
larger and have greater much greater resources than we do. Our
resources than we do. competitors have more experienced people and
larger facilities and budgets than we do. These
competitors could use their resources to conduct
greater amounts of research and development and
to offer services at lower prices than we can.
These factors may adversely affect our ability
to compete by decreasing the demand for our
products and services.
We may need to raise We have met capital needs with private sales of
additional funds. These securities. However, we cannot assure you that
funds may not be avail- we will not need additional funds, that any
able to us. Alternative- needed funds will be available to us at all, or
ly, raising additional that any available funds will be given on ac-
funds may dilute your ceptable terms. If we need additional funds,
share ownership. and are unable to raise them, we will not be
able to continue our business operations. If
we raise funds by selling equity securities,
those sales may dilute your share ownership.
If we raise funds by forming joint ventures
with other companies, we may have to give up
some of our rights to certain technologies,
products or marketing territories.
We depend on quality Our business is largely dependent on our
managers. However, we ability to hire and retain quality managers.
only have a written Currently, we have a written employment agree-
employment agreement ment and key-man life insurance in the face
with and insurance on amount of $3 million with Xxxxxxx X. XxXxxx,
one key officer. the Company's chairman, CEO and president. We
do not have employment agreements or key-man
life insurance with any other officer. The loss
of Xx. XxXxxx or any other officer may have an
adverse effect on our business and prospects by
depriving us of the management services
necessary to operate Xxxxxxxx.xxx and achieve
profitability.
Our patents may not pro- We currently own a number of patents related to
tect us from competitors. our products, and have applied for additional
Costs of prosecuting and patents. We are not certain whether any new
defending patent infringe- patents will be granted in the future. Even if
ment claims can be signifi- we receive additional patents, they may not
cant. provide us with protection from competitors.
Our failure to obtain patent protection, or
illegal use by others of any patents we have
or may obtain could adversely effect our
business, financial condition and operating
results. In addition, the laws of certain
7
foreign countries do not protect proprietary
rights to the same extent as the laws of the
United States.
Claims for damages resulting from any such
infringement may be asserted or prosecuted
against us. The validity of any patents we have
or obtain could also be challenged. Any such
claims could be time consuming and costly to
defend, diverting management's attention and our
resources.
The limited market may Our shares are not listed on Nasdaq or any
make it difficult to exchange. Trading is conducted in the over-
resell our shares. the-counter market on the OTC Bulletin Board,
which was established for securities that do
not meet the Nasdaq or exchange listing
requirements. Consequently, selling Datalink.
net shares is more difficult because smaller
quantities of shares are bought and sold and
security analysts' and news media's coverage
of Xxxxxxxx.xxx is limited. These factors
could result in lower prices and larger spreads
in the bid and ask prices for our shares.
Because our shares are not currently listed on
Nasdaq or an exchange, they are subject to Rule
15g-9 under the Exchange Act. That rule imposes
additional sales practice requirements on
broker-dealers that sell low-priced securities
to persons other than established customers and
institutional accredited investors. For
transactions covered by this rule, a broker-
dealer must make a special suitability
determination for the purchaser and have
received the purchaser's written consent to
the transaction prior to sale. Consequently,
the rule affects the ability of broker-dealers
to sell our shares and may affect the ability
of holders to sell Xxxxxxxx.xxx shares in the
market.
We do not plan to pay We intend to retain any future earnings to fund
any dividends. the operation and expansion of our business.
We do not anticipate paying cash dividends on
our shares in the future.
Resales of outstanding Of the 3,316,716 shares issued and outstanding
restricted shares could as of July 31, 1999, 619,459 shares were
have a depressive effect "restricted securities," as defined under
on the market price of Rule 144, all of which are currently eligible
our shares. for sale under Rule 144. In addition, 4,497,070
shares which may be issued on the conversion of
the preferred stock and exercise of warrants
are being registered for resale. We are unable
to predict the effect that sales of these shares
may have on the then prevailing market price
of our shares. It is likely that market sales
of large amounts of Xxxxxxxx.xxx shares (or the
8
potential for those sales even if they do not
actually occur) will have the effect of
depressing the market price of our shares.
Securities held by our As part of our private offering which was
CEO and Chairman for which completed in November 1997, Xxxxxxx X. XxXxxx,
he gave a promissory note our CEO and chairman, bought 280,000 shares of
are being registered for preferred stock and 140,000 Private Placement
resale. Warrants which he paid for with a collateralized
non-recourse promissory note for $1,050,000 due
on November 5, 2003. The common stock
underlying these securities and the warrants are
being registered for resale by Xx. XxXxxx.
Since Xx. XxXxxx paid for these securities with
a collateralized non-recourse promissory note
these securities would not be eligible for
resale under Rule 144 until one year after the
promissory note was paid. As a result, this
registration will allow Xx. XxXxxx the
opportunity to resell his securities prior
to paying off the related promissory note, and
realize a profit prior to the time he would if
these securities were not registered for resale.
It also could potentially make it more difficult
for Xxxxxxxx.xxx to obtain payment of the
promissory note.
Year 2000 issues could Although we anticipate that there will be little
have an impact on our or no Year 2000 issues and therefore little or
business. no cost will be incurred therefrom, our business
may still be impacted. Our internal systems
meet Year 2000 compliance standards. However,
although compliance confirmation has been
provided by seventy-five percent of our vendors,
and the remaining twenty-five percent have
indicated that they are currently Year 2000
compliant, there can be no assurance that these
vendors will not experience some level of Year
2000 issues that may have an adverse effect on
our systems. We have assessed our risk related
to this occurrence as very low. Our contingency
plan in the event that an unforeseen Year 2000
issue should occur will be to change to another
vendor that is Year 2000 compliant. For this
reason, we are developing an inventory of back-
up vendors that may be called upon to provide
services in accordance with Year 2000 compliance
standards.
9
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
Xxxxxxxx.xxx hereby offers, upon the terms and subject to the conditions
set forth in this Offering Circular and in the related Letter of Transmittal,
to exchange one share of Common Stock for each eight Private Placement
Warrants outstanding of its Common Stock validly tendered by the Expiration
Date and not withdrawn as provided in this Offering Circular. The term
"Expiration Date" means 5:00 p.m., Mountain time, on Thursday, September 23,
1999, unless Xxxxxxxx.xxx shall have extended the period of time for which the
Exchange Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Exchange Offer, as so extended by
Xxxxxxxx.xxx, shall expire. Any extension, delay, termination, waiver or
amendment will be followed as promptly as practicable by notification thereof.
As of August 20, 1999, there were 1,369,927 Private Placement Warrants
outstanding held of record by 128 Warrantholders.
If Xxxxxxxx.xxx makes a material change in the terms of the Exchange
Offer, or if it waives a material condition to the Exchange Offer,
Xxxxxxxx.xxx will extend the Exchange Offer and disseminate additional
exchange offer materials to the extent required by applicable law. The minimum
period during which an offer must remain open following material changes in
the terms of the offer, other than a change in the consideration offered, will
depend upon the facts and circumstances, including the materiality, of the
changes. With respect to a change in the consideration offered, a minimum
period of 10 business days from the date of such change is generally required
to allow for adequate dissemination to Warrantholders. For purposes of the
Exchange Offer, a "business day" means any day other than a Saturday, Sunday
or a federal holiday and consists of the time period from 12:01 a.m. through
12:00 midnight, Mountain time.
This Offering Circular and the related Letter of Transmittal will be
mailed to record holders of the Private Placement Warrants.
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made to provide the holders of Private
Placement Warrants with the opportunity to obtain shares of the Company's
Common Stock for their Warrants without having to pay cash. The Private
Placement Warrants are exercisable at $5.00 per share of Common Stock. Since
August 1, 1999, the Company's Common Stock has traded in the range of $2.81 to
$4.38 per share.
The Exchange Offer also provides Xxxxxxxx.xxx the opportunity to reduce
the number of Private Placement Warrants outstanding. There are currently
outstanding 1,369,927 Private Placement Warrants exercisable to purchase an
equal number of shares of Common Stock. Some potential investors have
expressed concerns over the large number of warrants outstanding because of
the potential dilution to holders of Common Stock and possible effects on the
market for the Common Stock. As a result, management believes that the
Exchange Offer may make the Company more attractive to potential investors.
PROCEDURE FOR TENDERING PRIVATE PLACEMENT WARRANTS
To tender Private Placement Warrants pursuant to the Exchange Offer a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal,
10
including, the Warrant certificates, must be received by the Exchange Agent on
or prior to the Expiration Date.
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a bank, broker, dealer, credit union,
savings association or other entity which is a member of a recognized
Medallion Program approved by the Securities Transfer Association, Inc. (an
"Eligible Institution"). Signatures on a Letter of Transmittal need not be
guaranteed if the Letter of Transmittal is signed by the registered holder of
the Private Placement Warrants tendered therewith and such holder has not
completed the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal.
If any warrant certificates are forwarded separately to the Exchange
Agent, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING WARRANTHOLDER.
IF THE LETTER OF TRANSMITTAL, WARRANT CERTIFICATES OR ANY OTHER DOCUMENTS ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Notwithstanding any other provision hereof, exchange of Private Placement
Warrants accepted for exchange pursuant to the Exchange Offer will in all
cases be made only after timely receipt by the Exchange Agent of a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees, and any other documents
required by the Letter of Transmittal.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Private Placement Warrants will be determined by Xxxxxxxx.xxx, in its sole
discretion, whose determination shall be final and binding on all parties.
Xxxxxxxx.xxx reserves the absolute right to reject any or all tenders of
Private Placement Warrants determined by it not to be in proper form or the
acceptance for exchange of or exchange for which may, in the opinion of
Xxxxxxxx.xxx's counsel, be unlawful. Xxxxxxxx.xxx also reserves the absolute
right to waive any defect or irregularity in any tender of Private Placement
Warrants. None of Xxxxxxxx.xxx or any of its affiliates or assigns, the
Exchange Agent or any other person will be under any duty to give any
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
The tender of Private Placement Warrants pursuant to any one of the
procedures described above will constitute an agreement between the tendering
Warrantholder and Xxxxxxxx.xxx upon the terms and subject to the conditions of
the Offer.
WITHDRAWAL RIGHTS
Tenders of Private Placement Warrants made pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date. Thereafter, such
tenders are irrevocable, except that they may be withdrawn after October 21,
1999, unless theretofore accepted for exchange as provided in this Offering
11
Circular. If Xxxxxxxx.xxx is delayed in accepting for exchange or in
exchanging Private Placement Warrants or is unable to accept for exchange or
exchange Private Placement Warrants pursuant to the Exchange Offer for any
reason, then, without prejudice to Xxxxxxxx.xxx's rights under the Exchange
Offer, the Exchange Agent may, on behalf of Xxxxxxxx.xxx, retain all Private
Placement Warrants tendered, and such Private Placement Warrants may not be
withdrawn except as otherwise provided.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth herein and must specify the name of the person who tendered
the Private Placement Warrants to be withdrawn and the number of Private
Placement Warrants to be withdrawn. If the Private Placement Warrants to be
withdrawn have been delivered to the Exchange Agent, a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution must be
submitted prior to the release of such Private Placement Warrants. In
addition, such notice must specify, in the case of any Private Placement
Warrants tendered by the delivery of certificates, the name of the registered
holder (if different from that of the tendering Warrantholder) and the serial
numbers shown on the particular certificates evidencing such Warrants to be
withdrawn. Withdrawals may not be rescinded, and Private Placement Warrants
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer. However, properly withdrawn Private Placement Warrants may be
retendered by again following one of the procedures described under "The
Exchange Offer -- Procedure for Tendering Private Placement Warrants" at any
time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Xxxxxxxx.xxx, in its sole
discretion, which determination shall be final and binding. None of
Xxxxxxxx.xxx, the Exchange Agent or any other person will be under any duty to
give notification of any defect or irregularity in any notice of withdrawal or
incur any liability for failure to give any such notification.
ACCEPTANCE FOR EXCHANGE AND EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer
(including if the Exchange Offer is extended or amended, the terms and
conditions of the Exchange Offer as so extended or amended), Xxxxxxxx.xxx will
accept for exchange and exchange all Private Placement Warrants validly
tendered by the Expiration Date and not withdrawn as soon as practicable after
the later of (i) the Expiration Date and (ii) the satisfaction or waiver of
the conditions set forth under "The Exchange Offer -- Conditions to Exchange
Offer". In addition, Xxxxxxxx.xxx reserves the right, in its sole discretion
and subject to applicable law, to delay the acceptance for exchange or
exchange of Private Placement Warrants in order to comply in whole or in part
with any applicable law or regulatory or government approval as discussed
under "The Exchange Offer -- Conditions to Exchange Offer". For a description
of Xxxxxxxx.xxx's right to terminate the Exchange Offer and not accept for
exchange or exchange Private Placement Warrants or to delay acceptance for
exchange or delay exchange of Private Placement Warrants, see "The Exchange
Offer -- Extension of the Exchange Offer Period; Termination; Amendments".
For purposes of the Exchange Offer, Xxxxxxxx.xxx shall be deemed to have
accepted for exchange Private Placement Warrants validly tendered and not
withdrawn if, as and when Xxxxxxxx.xxx gives oral or written notice to the
Exchange Agent of its acceptance of the tenders of such Private Placement
Warrants. In all cases, upon the terms and subject to the conditions of the
Exchange Offer, the exchange of Private Placement Warrants accepted for
12
exchange pursuant to the Exchange Offer will be made by Xxxxxxxx.xxx's
submission of certificates for Common Stock with the Exchange Agent, which
will act as agent for the tendering Warrantholders for the purpose of
receiving certificates for Common Stock from Xxxxxxxx.xxx and transmitting
such consideration to tendering Warrantholders.
In all cases, delivery of certificates of shares of Common Stock to be
issued in exchange for properly tendered Private Placement Warrants pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of (i) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, (ii) the certificates for such Warrants and (iii)
any other documents required by the Letter of Transmittal.
If Xxxxxxxx.xxx increases the consideration to be given for Private
Placement Warrants pursuant to the Exchange Offer, Xxxxxxxx.xxx will provide
such increased consideration for all Private Placement Warrants acquired
pursuant to the Exchange Offer whether or not such Private Placement Warrants
was tendered prior to or after such increase in consideration.
If any tendered Private Placement Warrants are not exchanged pursuant to
the Exchange Offer for any reason, certificates for such unexchanged or
untendered warrants will be returned without expense to the tendering
Warrantholder, as promptly as practicable following the expiration or
termination or withdrawal of the Exchange Offer.
EXTENSION OF EXCHANGE OFFER PERIOD; TERMINATION; AMENDMENTS
Xxxxxxxx.xxx expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving written notice of such extension to the
Exchange Agent and to the holders of the Private Placement Warrants. There
can be no assurance that Xxxxxxxx.xxx will exercise its right to extend the
Exchange Offer. Xxxxxxxx.xxx also expressly reserves the right, at any time or
from time to time, in its sole discretion and regardless of whether or not any
of the conditions specified in "The Exchange Offer -- Conditions of Exchange
Offer" shall have been satisfied, to amend the Exchange Offer in any respect
by making a written notice of such amendment.
If Xxxxxxxx.xxx shall decide to decrease or increase the consideration
offered pursuant to the Exchange Offer, and the Exchange Offer is scheduled to
expire at any time before the expiration of a period of 10 business days from
and including the date that notice of such increase or decrease is first sent
or given to Warrantholders, the Exchange Offer will be extended at least until
the expiration of such period of 10 business days.
In addition, if Xxxxxxxx.xxx makes a material change in the terms of the
Exchange Offer or in the information concerning the Exchange Offer, or waives
a material condition of the Exchange Offer, Xxxxxxxx.xxx will extend the
Exchange Offer if and to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Act or other applicable law. These rules
provide that a period sufficient to allow Warrantholders to consider the
amended terms of the Exchange Offer must be provided following material
changes in the terms of the offer or information concerning the offer. In a
published release, the Commission has stated that in its view an offer must
remain open for a minimum period of time following a material change in the
terms of such offer and that the waiver of a condition is a material change in
the terms of an offer. The release states that an offer should remain open for
a minimum of five business days from the date the material change is first
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published, sent or given to security holders, and that if material changes are
made with respect to the information contained herein, a minimum of 10
business days may be required to allow adequate dissemination and investor
response.
Xxxxxxxx.xxx also expressly reserves the right, in the event any of the
conditions specified under "The Exchange Offer -- Conditions of Exchange
Offer" shall not have been satisfied and so long as Private Placement Warrants
have not theretofore been exchanged, to delay (except as otherwise required by
applicable law) acceptance for exchange or delay exchange of Private Placement
Warrants or to terminate the Exchange Offer and not accept for exchange or not
exchange Private Placement Warrants.
If Xxxxxxxx.xxx extends the period of time during which the Exchange
Offer is open, is delayed in accepting for exchange or exchanging Private
Placement Warrants or is unable to accept for exchange or exchange Private
Placement Warrants pursuant to the Exchange Offer for any reason, then,
without prejudice to Xxxxxxxx.xxx's rights under the Exchange Offer, the
Exchange Agent may, on behalf of Xxxxxxxx.xxx, retain all Private Placement
Warrants tendered, and such Private Placement Warrants may not be withdrawn
except as otherwise provided in "The Exchange Offer -- Withdrawal Rights". The
reservation by Xxxxxxxx.xxx of the right to delay acceptance for exchange or
exchange Private Placement Warrants is limited by Rule 13e- 4(f)(5)
promulgated under the Act, which requires that Xxxxxxxx.xxx pay the
consideration offered or return the Private Placement Warrants deposited by or
on behalf of Stockholders promptly after the termination or withdrawal of the
Exchange Offer.
Any extension, termination or amendment of the Exchange Offer will be
followed as promptly as practicable by a written notice mailed no later than
the next business day after the previously scheduled Expiration Date.
CERTAIN CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, Xxxxxxxx.xxx
shall not be required to accept for exchange or to exchange any Private
Placement Warrants tendered and may terminate or amend the Exchange Offer or
may postpone (subject to the requirements of the Act for prompt exchange or
return of Private Placement Warrants) the acceptance for exchange of, and
exchange of, Private Placement Warrants tendered if any material change occurs
which is likely to affect the Exchange Offer or the value or market price of
the Private Placement Warrants or the Common Stock, including, but not limited
to, the following:
(a) there shall have been threatened, instituted or pending any action
or proceeding before any court, authority, agency or tribunal which challenges
the making of the Exchange Offer, the acquisition of some or all of the
Private Placement Warrants pursuant to the Exchange Offer or otherwise relates
in any manner to the Exchange Offer;
(b) there shall have been any action threatened, pending or taken, or
any approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
enforced or deemed to be applicable to the Exchange Offer or which, in
Xxxxxxxx.xxx's sole judgment, would or might directly or indirectly (1) make
the acceptance for exchange or exchange of some or all of the Private
Placement Warrants illegal or otherwise restrict, prohibit or delay materially
the consummation of the Exchange Offer, (2) materially impair the contemplated
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benefits of the Exchange Offer to Xxxxxxxx.xxx, or (3) materially affect the
business, condition (financial or other), income, operations or prospects of
Xxxxxxxx.xxx, or otherwise materially impair in any way the contemplated
future conduct of the business of Xxxxxxxx.xxx; or
(c) there shall have occurred any general suspension of, or limitation
on prices for, trading in securities on any national securities exchange or in
the over-the-counter market or any other change in the general political,
market, economic or financial conditions in the United States or abroad that
could, in the sole judgment of Xxxxxxxx.xxx, have a material adverse effect on
the business, condition (financial or other), income, operations or prospects
of Xxxxxxxx.xxx or the trading in the Common Stock.
The conditions referred to above are for the sole benefit of Xxxxxxxx.xxx
and may be asserted by Xxxxxxxx.xxx in its sole discretion regardless of the
circumstances (including any action or omission by Xxxxxxxx.xxx) giving rise
to any such conditions or may be waived by Xxxxxxxx.xxx in its sole discretion
in whole at any time or in part from time to time. The failure by Xxxxxxxx.xxx
or any other affiliate of Xxxxxxxx.xxx at any time to exercise its rights
under any of the foregoing conditions shall not be deemed a waiver of any such
right. The waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right which may
be asserted at any time or from time to time.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued in the Exchange
Offer. A Warrantholder who would be entitled to receive a fraction of a share
of Common Stock as part of the consideration to be received for the Private
Placement Warrants held by him shall, if he tenders all of the Private
Placement Warrants held by him, in lieu of such fraction, receive one full
share of Common Stock. In the event that a holder of Private Placement
Warrants makes only a partial tender of his Warrants, no fractional share
shall be issued, and any Private Placement Warrants which would be exchanged
for such fraction of a share shall be returned to the Warrantholder.
SOLICITATIONS OF TENDERS; FEES
Xxxxxxxx.xxx has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer.
Xxxxxxxx.xxx has retained American Securities Transfer & Trust, Inc. as
Exchange Agent in connection with the Exchange Offer. The Exchange Agent will
receive reasonable and customary compensation for its services in connection
with the Exchange Offer, will be reimbursed for its reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith.
Xxxxxxxx.xxx may contact holders of Private Placement Warrants by mail,
telephone, telecopy, telegraph and personal interview and may request brokers,
dealers and other nominee shareholders to forward materials relating to the
Exchange Offer to beneficial owners. Xxxxxxxx.xxx also will reimburse brokers,
dealers, commercial banks and trust companies for customary handling and
mailing expenses incurred in forwarding the Exchange Offer to their customers.
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INTERESTS OF CERTAIN PERSONS; TRANSACTIONS
Xxxxxxx X. XxXxxx, the Company's President, Chief Executive Officer and
Chairman of the Board, is the only Director, Officer or principal shareholder
who owns any Private Placement Warrants. Xx. XxXxxx holds 140,000 Private
Placement Warrants and has indicated that he does not intend to exchange such
warrants in the Exchange Offer.
During the 40 days preceding the date of this Offering Circular, neither
Xxxxxxxx.xxx nor, to its knowledge, any of its subsidiaries, executive
officers or directors or any associate of any such officer or director has
engaged in any transactions involving the Private Placement Warrants.
CERTAIN TAX CONSEQUENCES
This summary sets forth the principal anticipated federal income tax
consequences to Warrantholders of their exchange of Private Placement Warrants
for Common Stock pursuant to the Exchange Offer. The summary is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date hereof, and, in
particular, is based on the assumption that the Private Placement Warrants
have been held as "capital assets" within the meaning of Section 1221 of the
Code. Such laws or interpretations may differ on the date of the consummation
of the Exchange Offer, and relevant facts may also differ. This summary does
not address any foreign or local tax consequences, does not address state tax
consequences and does not address estate or gift tax considerations. The
consummation of the Exchange Offer is not conditioned upon the receipt of any
ruling from the Internal Revenue Service (the "IRS") or any opinion of counsel
as to tax matters.
This summary is for general information only. The tax treatment of each
Warrantholder will depend in part upon his particular situation. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, pension funds, mutual funds,
broker-dealers, persons who are not citizens or residents of the United States
or who are foreign corporations, foreign partnerships or foreign estates or
trusts, Warrantholders who own actually or constructively (under certain
attribution rules contained in the Code) 5% or more of the Private Placement
Warrants, Stockholders who acquired their Private Placement Warrants and
persons who received Private Placement Warrants as compensation.
ALL WARRANTHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISERS AS TO THE
PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE OFFER TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
No gain or loss will be recognized by a holder (an "Exchanging Holder")
of Private Placement Warrants as a result of the exchange of Private Placement
Warrants for shares of Common Stock. The tax basis of an Exchanging Holder in
its shares of Common Stock will be determined by allocating the holder's tax
basis in the Private Placement Warrants exchanged therefor pro rata among the
shares of Common Stock. For tax purposes, the holding period of an Exchanging
Holder in shares of Common Stock received pursuant to the Exchange Offer will
include the period during which such holder held the Private Placement
Warrants exchanged therefor.
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades in the over-the-counter market, under
the symbol "NETD". The following table sets forth the high and low bid
quotations for the Company's Common Stock for the periods indicated as
reported by the OTC Bulletin Board since April 1, 1997. These prices are
believed to be inter-dealer quotations and do not include retail mark-ups,
xxxx-xxxxx, or other fees or commissions, and may not necessarily represent
actual transactions.
QUARTER ENDED HIGH BID LOW BID
------------------ -------- -------
June 30, 1997 $25.62 $ 3.12
September 30, 1997 $ 5.80 $ 2.60
December 31, 1997 $ 9.40 $ 3.45
March 31, 1998 $ 6.13 $ 2.50
June 30, 1998 $ 7.94 $ 4.00
September 30, 1998 $ 4.94 $ 1.00
December 31, 1998 $ 1.31 $ 0.63
March 31, 1999 $ 4.00 $ 1.06
June 30, 1999 $ 5.12 $ 2.41
July 1, 1999 through
August 24, 1999 $ 4.97 $ 2.81
A 1 for 10 reverse stock split became effective February 9, 1998. Share bid
prices have been adjusted to reflect this split.
DESCRIPTION OF CAPITAL STOCK
AND PRIVATE PLACEMENT WARRANTS
Xxxxxxxx.xxx has 55,000,000 authorized shares of stock, consisting of
50,000,000 shares of common stock, having a par value of $.01 per share, and
5,000,000 shares of preferred stock, having a par value of $.001 per share.
COMMON STOCK
As of July 31, 1999, there were 3,316,716 shares of common stock
outstanding. All such outstanding shares of common stock are fully paid and
nonassessable. Each share of common stock has an equal and ratable right to
receive dividends when declared by the Board of Directors of Xxxxxxxx.xxx out
of assets legally available for that purpose and subject to the dividend
obligations of Xxxxxxxx.xxx to holders of any preferred stock then
outstanding.
In the event of a liquidation, dissolution or winding up of Xxxxxxxx.xxx,
the holders of common stock are entitled to share equally and ratably in the
assets available for distribution after payment of all liabilities, and
subject to any prior rights of any holders of preferred stock outstanding at
that time.
The holders of common stock have no preemptive, subscription, conversion
or redemption rights, and are not subject to further calls or assessments of
Xxxxxxxx.xxx. Each share of common stock is entitled to one vote in the
election of directors and on all other matters, submitted to a vote of
stockholders.
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Xxxxxxxx.xxx's Articles of Incorporation provide that a holder of any
class or series of stock entitled to vote in the election of directors shall
be entitled to cumulate his votes, and may cast votes equal to the number of
votes which (except for cumulative voting) he would be entitled to cast for
the election of directors with respect to his shares of stock multiplied by
the number of directors to be elected. Such shareholders may cast all such
votes for a single director or allocate such votes to two or more directors as
such shareholder sees fit. Under Nevada law, to exercise the right to
cumulative voting, a shareholder must give Xxxxxxxx.xxx written notice of his
intent to do so at least 48 hours before the time fixed for the annual
meeting. Such written notice must be given to the president or secretary of
Xxxxxxxx.xxx.
PREFERRED STOCK
Preferred stock may be issued from time to time in one or more series,
and the board of directors, without further approval of the stockholders, is
authorized to fix the dividend rates and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences and any other
rights, preferences, privileges and restrictions applicable to each series of
preferred stock. The purpose of authorizing the board of directors to
determine such rights, preferences, privileges and restrictions is to
eliminate delays associated with a stockholder vote on specific issuances.
The issuance of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of common stock and,
under some circumstances, make it more difficult for a third party to gain
control of Xxxxxxxx.xxx.
As of June 21, 1999, Xxxxxxxx.xxx had 2,022,465 shares of preferred stock
outstanding, which shares have been designated series A convertible preferred
stock. The preferred stock is convertible into common stock on a 1 for 1
basis. Holders of preferred stock are entitled to receive dividends equal to
any dividends paid on the common stock. In the event of a liquidation of
Xxxxxxxx.xxx, holders of preferred stock are entitled to receive $3.75 per
share prior to any distributions to be made to holders of common stock. The
preferred stock is not redeemable. Holders of preferred stock are entitled to
vote together with the holders of common stock on an "as-converted" basis.
The preferred stock will be automatically converted into an equal number
of shares of common stock in the event that the closing market price of the
common stock equals or exceeds $10.00 per share for 30 consecutive trading
days and a registration statement covering the resale of the common stock is
then effective.
No other series of preferred stock has been designated by Xxxxxxxx.xxx.
PRIVATE PLACEMENT WARRANTS
As part of a private placement that was completed in November 1997,
Xxxxxxxx.xxx issued 1,369,927 warrants. Each warrant gives the holder the
right to purchase one share of common stock at $5.00 per share. These
warrants are exercisable at any time until November 5, 2002. Xxxxxxxx.xxx may
redeem these warrants on at least thirty days' notice in the event that the
average closing bid price for the common stock exceeds $12.50 over 30
consecutive trading days ending with the date of notice of redemption. The
redemption price would be $.50 per warrant.
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