AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY __, 2005
REGISTRATION NO.: 333-111405
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
POST EFFECTIVE AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
P-COM, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 77-0289371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
--------------------------
P-COM, INC.
3175 S. WINCHESTER BLVD.
CAMPBELL, CA 95008
(408) 866-3666
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
SAMUEL SMOOKLER
CHIEF EXECUTIVE OFFICER
P-COM, INC.
3175 S. WINCHESTER BOULEVARD
CAMPBELL, CA 95008
(408) 866-3666
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copy to:
C. Thomas Hopkins, Esq.
Sheppard, Mullin, Richter & Hampton LLP
800 Anacapa Street
Santa Barbara, CA 93101
(805) 568-1151
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PER UNIT PRICE REGISTRATION FEE(3)
------------------------------------------------------------------------------------------------------------------------------------
Common stock, par value $0.0001 per
share 15,108,378(4) $0.47(5) $7,100,937.66(5) $331.91
------------------------------------------------------------------------------------------------------------------------------------
Common stock, par value $0.0001 per
share, issuable upon exercise of
warrants 2,923,643(6) $3.78(7) $11,051,370.54(7) $372.23
====================================================================================================================================
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
Registration Statement also covers an additional indeterminate number of
shares of Common Stock that may be issued to prevent dilution resulting
from stock splits, stock dividends or similar transactions.
(2) Each share includes one right to purchase shares of the Registrant's
series A junior participating preferred stock pursuant to the Registrant's
rights agreement dated October 1, 1997, as amended.
(3) Pursuant to Rule 429 under the Securities Act of 1933, as amended,
13,242,309 shares of common stock (as adjusted to reflect the 1-for-30
reverse stock split effected on July 19, 2004) previously registered
pursuant to the Registration Statement on Form S-1 (File No. 333-111405)
are being included in the prospectus included in this Registration
Statement. A registration fee of $7756.98 was previously paid with respect
to such securities. The registration fee of $484.92 relates solely to the
registration of an additional 6,978,571 shares of common stock not
previously registered. The registration fee also includes $219.22 which
represents the difference between the proposed maximum aggregate offering
price per unit of $4.50 included in the fee table in the Registration
Statement on Form S-1 for the Series C-2 Warrants previously registered on
Form S-1 and the $5.40 exercise price for such warrants.
(4) Includes 5,569,524 shares of currently outstanding, 3,538,854 shares that
may be issued upon conversion of our convertible preferred stock and
6,000,000 shares that may be issued as payment of principal and interest
due under our outstanding promissory notes.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based upon the average of the bid and asked prices per share of the
registrant's common stock, as reported on the OTC Bulletin Board on
January 24, 2004.
(6) Includes 2,651,643 shares that may be issued upon exercise of outstanding
warrants and 272,000 shares that may be issued upon exercise of warrants
that will be outstanding prior to the effectiveness of this registration
statement.
(7) Based on the weighted average exercise price of outstanding warrants and
warrants that will be outstanding prior to the effectiveness of this
registration statement, pursuant to Rule 457(g) under the Securities Act.
The proposed maximum offering price per unit for the 500,000 warrants is
$1.50. The proposed maximum offering price per unit for the 178,571
warrants is $0.56.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT RELATES TO 6,978,571 SHARES
OF COMMON STOCK BEING REGISTERED UNDER THIS REGISTRATION STATEMENT AND TO
13,242,309 SHARES OF COMMON STOCK PREVIOUSLY REGISTERED UNDER THE REGISTRATION
STATEMENT ON FORM S-1 (FILE NO. 333-111405). AS SUCH, THIS REGISTRATION
STATEMENT CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO THE PREVIOUSLY FILED
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-111405).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated __________, 2005
[LOGO]
P COM
20,220,880 SHARES
P-COM, INC.
COMMON STOCK
--------------------------
This prospectus relates to the offering of 20,220,880 shares of our common
stock that may be sold from time to time by the selling stockholders named in
this prospectus. The shares covered by this prospectus consist of the following
shares that were previously registered on our Form S-1:
o 5,569,524 shares that are currently outstanding;
o 4,365,214 shares that may be issued upon conversion of our
outstanding convertible preferred stock;
o 1,945,072 shares that may be issued upon exercise of outstanding
warrants; and
o 1,362,499 shares that the Company is required to reserve and
register for resale under an agreement between the Company and the
holders of the Series C Convertible Preferred Stock, the Series D
Convertible Preferred Stock and the Series C Warrants.
The additional shares being registered consist of:
o 978,571 shares that may be issued upon exercise of outstanding
warrants or warrants that will be outstanding prior to the
effectiveness of the registration statement of which this prospectus
is a part; and
o 6,000,000 shares that may be issued as payment of principal and
interest due under our outstanding promissory notes.
As of December 31, 2004, the total number of shares of common stock that
are issued and outstanding and reserved for issuance under all plans and
commitments of P-Com, is approximately 28.7 million shares.
The selling stockholders are offering the shares of common stock pursuant
to this prospectus. The selling stockholders may sell all or any portion of the
shares from time to time in market transactions through any market on which our
common shares are then traded, in negotiated transactions or otherwise, and at
prices and on terms that will be determined by the then prevailing market price
or at negotiated prices directly or through a broker or brokers, who may act as
agent or as principal or by a combination of such methods of sale. The timing
and amount of any sale are within the sole discretion of the selling
stockholders. For additional information on the methods of sale, you should
refer to the section entitled "Plan of Distribution" beginning on page 20.
The selling stockholders will receive all proceeds from the sale of the
common stock. We will not receive any of the proceeds from the sale of the
shares of common stock by the selling stockholders. We may receive proceeds from
the exercise of warrants held by the selling stockholders if they opt to pay the
exercise price in cash rather than executing a cashless exercise. Any net
proceeds that we receive from the exercise of warrants will be used for general
corporate purposes, including working capital for our business.
Our common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. under the symbol "PCMC." The last sale
price of our common stock, as report on the OTC Bulletin Board on January 19,
2005, was $0.52 per share.
AN INVESTMENT IN THE SHARES OFFERED BY THIS PROSPECTUS ENTAILS A HIGH
DEGREE OF RISK. BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS,
YOU SHOULD CAREFULLY READ AND CONSIDER THE RISKS AND UNCERTAINTIES DISCUSSED IN
THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 6.
--------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January __, 2005.
-3-
TABLE OF CONTENTS
Page
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS...............................1
PROSPECTUS SUMMARY...........................................................2
RISK FACTORS.................................................................6
USE OF PROCEEDS.............................................................15
SELLING STOCKHOLDERS........................................................16
PLAN OF DISTRIBUTION........................................................23
DESCRIPTION OF CAPITAL STOCK................................................24
RECENT EVENTS...............................................................29
VALIDITY OF THE SHARES......................................................31
EXPERTS.....................................................................31
INCORPORATION BY REFERENCE..................................................31
WHERE YOU CAN FIND MORE INFORMATION.........................................32
--------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-i-
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. In some cases you can identify these
statements by forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "will," and "would" or similar
words. These statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties. The factors
discussed in the section entitled "Risk Factors," as well as any other
cautionary language in this prospectus and the information incorporated by
reference into this prospectus (see the section entitled "Incorporation by
Reference"), provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from any expectations that we describe.
Some of the risks, uncertainties and other factors that may cause the actual
results or outcomes to differ materially from those predicted in our
forward-looking include the following:
o our deteriorating cash position;
o our need to raise additional equity capital during the next ninety
days and whether that capital is available on acceptable terms, if
at all;
o our current sales levels and sales trends;
o our ability to achieve positive cash flow given our existing and
anticipated operating and other costs, and current sales trends;
o our ability to decrease our reliance on a limited number of
customers for a material portion of our sales, and to replace
customers;
o our ability to negotiate repayment terms with many of our creditors,
and settle outstanding claims;
o competitive market conditions, including continued erosion of
average selling prices in many of our product lines;
o our reliance upon subcontractors;
o the ability of our customers to finance their purchases;
o the timing of new technology and product introductions;
o the risk of early obsolescence; and
o our ability to obtain and maintain regulatory approval where
required.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. These forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus. We do not
intend to update any of these forward-looking statements to reflect
circumstances or events that occur after the statement is made.
You should read this prospectus and the documents that we reference in
this prospectus and have filed as exhibits to the registration statement, of
which this prospectus is a part, completely and with the understanding that our
actual future results may be materially different from what we expect. We
qualify all of our forward-looking statements by these cautionary statements.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and it may not contain all of the
information that you should consider before investing in the securities offered
by this prospectus. You should read this entire prospectus carefully, including
the section entitled "Risk Factors" and the information incorporated by
reference into to this prospectus (see the section entitled "Incorporation by
Reference") before making an investment decision.
THE COMPANY
We develop, manufacture, market and distribute microwave radios for
point-to-point, spread spectrum and point-to-multipoint applications for
telecommunications networks worldwide. Cellular and personal communications
service providers employ our point-to-point systems to transmit data between
remote tower sites and switching centers. Network service providers and Internet
service providers are able, through the deployment of our equipment and systems,
to respond to demands for high-speed wireless access services such as Internet
access associated with business-to-business and e-commerce business processes.
Through deployment of our systems, network providers can quickly and efficiently
establish integrated Internet, data, voice and video communications for their
customers, then expand and grow those services as demand increases.
On December 10, 2003, we acquired the Wave Wireless Networking division of
SPEEDCOM Wireless Corporation. Wave Wireless Networking specializes in
manufacturing, configuring and delivering custom broadband wireless access
networking equipment, including the SPEEDLAN family of wireless Ethernet bridges
and routers, for business and residential customers internationally. The
acquisition provides us with complementary unlicensed point-to-point and spread
spectrum wireless access systems.
Our executive offices are located at 3175 S. Winchester Boulevard,
Campbell, California 95008, and our telephone number is (408) 866-3666. In this
prospectus, references to "P-Com," the "Company," "we," "us" and "our" refer to
P-Com, Inc. and its subsidiaries.
THIS OFFERING
Shares offered by the selling 20,220,880 shares of common stock,
stockholders including 5,569,524 shares currently
outstanding, 4,365,214 shares issuable
upon conversion of outstanding
convertible preferred stock, 2,923,643
shares issuable upon exercise of
outstanding warrants and warrants that
will be outstanding prior to the
effectiveness of the registration
statement of which this prospectus is a
part, and 6,000,000 shares that may be
issued as payment of principal and
interest due under outstanding
promissory notes.
Plan of Distribution The selling stockholders are offering
these shares of common stock. The
selling stockholders may sell all or any
portion of the shares from time to time
in market transactions through any
market on which our common shares are
then traded, in negotiated transactions
or otherwise, and at prices and on terms
that will be determined by the then
prevailing market price or at negotiated
prices directly or through a broker or
brokers, who may act as agent or as
principal or by a combination of such
methods of sale. The timing and amount
of any sale are within the sole
discretion of the selling stockholders.
See the section entitled "Selling
Stockholders" on page 16 and the section
entitled "Plan of Distribution" on page
23.
Use of proceeds The selling stockholders will receive
all proceeds from the sale of the common
stock. We will not receive any of the
proceeds from the sale of the shares of
common stock by the selling
stockholders. We may receive proceeds
from the exercise of warrants held by
the selling stockholders if they opt to
pay the exercise price in cash rather
than executing a cashless exercise. Any
net proceeds that we receive from the
exercise of warrants will be used for
general corporate purposes, including
working capital for our business.
-2-
Risk factors The purchase of our common stock
involves a high degree of risk. You
should carefully review and consider
"Risk Factors" beginning on page 6.
OTC Bulletin Board Trading Symbol "PCMC"
Our selected financial data, set forth below, should be read in
conjunction with our "Consolidated Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in the Company's Annual Report on Form 10-K for the fiscal year ending
December 31, 2003, incorporated by reference into this prospectus. All share and
per share amounts have been restated to reflect the one for thirty reverse stock
split effective July 19, 2004.
-3-
STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 (2) 2002 (3) 2001 (4) 2000(5)(6) 1999(7)
----------- ----------- ----------- ----------- -----------
Sales $ 20,841 $ 29,686 $ 73,236 $ 183,606 $ 116,409
Cost of sales 20,604 30,777 94,890 160,965 107,378
----------- ----------- ----------- ----------- -----------
Gross profit (loss) 237 (1,091) (21,654) 22,641 9,031
Operating expenses:
Research and development 6,099 12,745 19,800 20,241 32,431
Selling and marketing 3,557 6,621 7,637 11,371 16,519
General and administrative 5,607 10,750 26,070 18,181 18,090
Goodwill impairment / amortization -- 11,409 8,034 19,550 6,547
Restructuring and other charges 3,712 -- -- -- 3,300
----------- ----------- ----------- ----------- -----------
Total operating expenses 18,975 41,525 61,540 69,343 76,887
----------- ----------- ----------- ----------- -----------
Income (loss) from operations (18,738) (42,614) (83,194) (46,702) (67,856)
Interest expense (2,249) (2,457) (1,946) (4,629) (8,175)
Gain on sale of a subsidiary(8) -- -- 9,814 -- --
Gain on redemption of notes 6,499 1,393 -- 1,890 13,239
Other income (expense), net 3,739 (1,314) (619) (3,736) (2,537)
----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations before income taxes,
and cumulative effect of change
in accounting principle (10,749) (44,992) (75,945) (53,177) (65,329)
Provision (benefit) for income
taxes -- (470) (618) 10,917 1,407
----------- ----------- ----------- ----------- -----------
Loss from continuing
operations before cumulative
effect of change in accounting principle (10,749) (44,522) (75,327) (64,094) (66,736)
Discontinued operations(9):
Loss from operations (581) (4,284) (211) (4,321) (9,412)
Loss on disposal (1,556) -- -- -- (26,901)
----------- ----------- ----------- ----------- -----------
(12,886) (48,806) (211) (4,321) (36,313)
Cumulative effect of change in
accounting principle(3) -- (5,500) -- (1,534) --
----------- ----------- ----------- ----------- -----------
Net loss (12,886) (54,306) (75,538) (69,949) (103,049)
----------- ----------- ----------- ----------- -----------
Preferred Stock accretions (1,521) -- -- -- --
Loss on Conversion of Preferred Stock
to Common Stock -- -- -- -- (18,521)
----------- ----------- ----------- ----------- -----------
Net loss attributable to Common
Stockholders $ (432,210) $(1,629,180) $(2,266,140) $(2,098,470) $(3,647,100)(10)
=========== =========== =========== =========== ===========
Basic income (loss) from Continuing
Operations (1)(10) $ (6.90) $ (52.20) $ (136.50) $ (123.30) $ (175.50)
Diluted income (loss) from Continuing
Operations (1)(10) $ (6.90) $ (52.20) $ (136.50) $ (123.30) $ (175.50)
Basic net loss applicable
to Common Stockholders (1)(10) $ (8.10) $ (63.90) $ (136.80) $ (134.40) $ (319.80)
Diluted net loss applicable
to Common Stockholders (1)(10) $ (8.10) $ (63.90) $ (136.80) $ (134.40) $ (319.80)
-4-
BALANCE SHEET DATA (IN THOUSANDS)
2003 2002 (3) 2001 (4) 2000 (5)(6) 1999 (7)
---------------------------------------------------------------------
Cash and cash equivalents $ 6,185 1,616 $ 7,103 $ 27,541 $ 11,629
Working capital (2,075) (2,356) (10,185) 76,823 31,984
Total assets 34,565 35,723 92,234 216,219 218,746
Long-term debt 0 24,488 769 30,290 39,858
Mandatory redeemable
Preferred Stock 4,231 -- -- -- --
Mandatory Redeemable
Common Stock Warrants -- -- -- -- 1,839
Accumulated deficit (363,174) (348,766) (294,460) (218,922) (148,973)
Stockholders' equity (deficit) 9,753 $ (15,350) $ 24,256 $ 95,247 $ 89,215
(1) See Note 10 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine share and per share amounts.
(2) In 2003, we recorded charges to cost of sales of approximately $3.4 million
related to excess and obsolete inventory, offset by credits of $1.8 million
related to write-back of accounts payable and purchase commitment liabilities
arising from vendor settlements.
(3) In 2002, we recorded charges of approximately $5.8 million related to excess
and obsolete inventory and a write-down of goodwill carrying value relating to
services business of $16.9 million.
(4) In 2001, we recorded charges of approximately $30 million related to excess
inventory and inventory purchase commitments, $5.8 million related to a
write-down of goodwill and other intangibles, and a $11.6 million increase in
bad debt expense related to a customer bankruptcy.
(5) We recorded a non-cash charge of approximately $1.5 million on January 1,
2000 to account for the cumulative effect of the accounting change made to
comply with SAB 101. See Note 2 of Notes to Consolidated Financial Statements.
(6) In 2000, we recorded charges of approximately $21.7 million related to
excess inventory and inventory purchase commitments, $15.0 million related to a
write-down of goodwill, and a $9.9 million increase in the valuation allowance
against the carrying value of deferred tax assets.
(7) In 1999, we recorded restructuring and other charges of approximately $36.5
million.
(8) The gain on disposal in 2001 was from the sale of RT Masts in February 2001.
(9) Losses from discontinued operations in 1999 were in part attributable to
Technosystem, which was reclassified to discontinued operations in the third
quarter of 1999. The Company discontinued its services business unit, P-Com
Network Services in the first quarter of 2003, and accordingly reported its
results on one line as a discontinued operations.
(10) The per share numbers have been adjusted to reflect the one for thirty
reverse stock split effective July 19, 2004.
-5-
RISK FACTORS
You should consider carefully the following information about risks,
together with the other information contained in this prospectus and in the
documents referred to below in the sections entitled "Incorporation by
Reference" and "Where You Can Find More Information," before you decide whether
to buy our common stock. The risk factors described below are not the only ones
that may affect us. Additional risks and uncertainties that we do not currently
know about or that we currently deem immaterial may also adversely affect our
business, financial condition and results of operations. If any of the following
risks actually occur, our business, results of operations and financial
condition could suffer significantly. As a result, the market price of our
common stock could decline and you could lose all or a part of your investment
in our common stock.
OUR CURRENT BUSINESS AND FINANCIAL CONDITION RAISE DOUBTS ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Our core business product sales are still significantly below levels necessary
to achieve positive cash flow, and have deterioriated. From inception to
September 30, 2004, our aggregate net loss is approximately $364.9 million. Our
cash position has declined to $3.7 million at September 30, 2004, and is
deteriorating. We had positive working capital of $1.7 million as of September
30, 2004. We recently obtained a commitment for an additional $5.0 million in
debt financing (the "Debenture Facility"), and have borrowed $3.3 million as of
December 31, 2004 under the Debenture Facility. Existing borrowing availability
under our credit facility and the Debenture Facility, and available cash, are
anticipated to meet the Company's liquidity requirements for the next ninety
days. No assurances can be given that the Company will be successful in its
attempts to raise additional debt or equity financing to ensure its liquidity
beyond ninety days. If we are unable to raise additional debt or equity
financing, we will be unable to continue as a going concern.
Our independent accountants' opinion on our 2003 consolidated financial
statements includes an explanatory paragraph indicating substantial doubt about
our ability to continue as a going concern. The financial statements
incorporated by reference in this registration statement of which this
prospectus is a part have been prepared assuming that the Company will continue
as a going concern. The financial statements do not include adjustments that
might result if the Company were required to cease operations. These adjustments
would include, among other things, a write-down in the value of the Company's
assets from book value to liquidation value.
To continue as a going concern, we will have to significantly increase our
sales, decrease costs and possibly induce creditors to forebear or to convert to
equity, raise additional equity financing, and/or raise new debt financing. We
may not accomplish these tasks. If we are unable to raise additional debt or
equity financing, we will be unable to continue as a going concern.
WE MUST OBTAIN ADDITIONAL FINANCING TO SUSTAIN OUR BUSINESS AT THE CURRENTLY
DEPRESSED SALES LEVELS.
Our customers, particularly systems operators and integrated system providers,
have not significantly increased their capital spending and orders to suppliers
such as us, and in general are not currently building out any significant
additional infrastructure. We do not believe that our core products sales levels
can sufficiently recover unless there is significant improvement in the
worldwide telecommunications equipment industry, which may never happen. Until
product sales levels can sufficiently recover, our business, financial condition
and results of operations will continue to be adversely affected. We must obtain
additional financing to sustain our business at the currently depressed sales
levels.
OUR PROSPECTS FOR OBTAINING ADDITIONAL FINANCING ARE UNCERTAIN AND FAILURE TO
OBTAIN NEEDED FINANCING WILL AFFECT OUR ABILITY TO PURSUE FUTURE GROWTH, HARM
OUR BUSINESS OPERATIONS, AND AFFECT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
In the event we are unable to raise additional debt or equity financing during
the next quarter, or otherwise improve our liquidity position, we will not be
able to continue as a going concern. Our future capital requirements will depend
upon many factors, including the general state of the telecommunications
equipment industry, development costs of new products and related software
tools, potential acquisition opportunities, maintenance of adequate
manufacturing facilities and contract manufacturing agreements, progress of
research and development efforts, expansion of marketing and sales efforts, and
status of competitive products. Additional financing may not be available in the
future on acceptable terms or at all. The Company's history of substantial
operating losses could also severely limit the Company's ability to raise
additional financing.
-6-
If the Company is unable to increase sales, or obtain additional equity or debt
financing, the Company may be required to close business or product lines,
further restructure or refinance our debt or delay, or further scale back or
eliminate our research and development program, or manufacturing operations. We
may also need to obtain funds through arrangements with partners or others that
may require us to relinquish our rights to certain technologies or potential
products or other assets. Our inability to obtain capital, or our ability to
obtain additional capital only upon onerous terms, could seriously damage our
business, operating results and financial condition.
WE MAY NOT BE ABLE TO REPAY OUR EXISTING DEBT AND ANY REPAYMENT OF OUR DEBT WITH
SHARES OR BY RAISING ADDITIONAL FUNDS MAY RESULT IN SIGNIFICANT DILUTION TO OUR
STOCKHOLDERS.
At November 26, 2004, the Company owed, including accrued but unpaid interest,
an aggregate amount of $3.3 million to SDS Capital Group SPC, Ltd ("SDS"), and
it is anticipated that such indebtedness will increase to $5.0 million prior to
the end of the first quarter of 2005. Interest accrues on such debt at an annual
interest rate of 7%, increasing to 8% on July 1, 2005 and 10% on April 1, 2006
through the maturity date of the loan, December 31, 2006. If the Company is
unable to generate sufficient cash flow from its operations, secure funds from
the capital markets or lenders or restructure its debt to SDS, the Company will
not be able to continue as a going concern.
We may make the principal and interest payments under our Debenture Facility in
either shares of the Company's common stock, cash or a combination of both. The
number of shares of common stock that may be used to pay the quarterly
installments is capped at 6,000,000 shares of common stock. We currently do not
have enough cash to make the required payments under the Debenture Facility and
anticipate making the vast majority if not all of the payments in shares of our
common stock. In addition, given the recent price for our Common Stock, if we
make the required amortization payments on the Debenture Financing using our
Common Stock, or raise additional funds by issuing equity securities, additional
significant dilution to our stockholders will result.
WE MAY NOT BE ABLE TO REPAY THE DEBENTURE FACILITY INSTALLMENT PAYMENTS IN
SHARES OF OUR COMMON STOCK.
Under our Debenture Facility, we may not issue shares of common stock to make
the quarterly installment payments if the issuance of such shares would result
in SDS beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act) more than 9.9% of all of the common stock outstanding at such
time. SDS may waive this ownership blocker but it is not obligated to do so. In
the event that we are prevented from making an installment payment in shares of
common stock due to the ownership blocker and SDS does not waive compliance with
this provision, then we may default on our payment obligations under the
Debenture Facility. Also, the terms of the Debenture Facility limit the number
of shares of common stock that we may issue as quarterly installment payments to
6,000,000 shares. If we make the required payments in shares of common stock,
given the Company's current stock price, we will reach the share cap. In such
event, if SDS does not waive the share cap, then we may default on our payment
obligations under the Debenture Facility.
WE RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A MATERIAL PORTION OF OUR SALES AND
WITH RESPECT TO MANY OF OUR PRODUCTS, OUR SALES CYCLE IS LENGTHY. THE LOSS OF OR
REDUCTION IN SALES TO ANY OF OUR CUSTOMERS COULD HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATION.
For the year ended December 31, 2003 and nine-months ended September 30, 2004,
sales to our top four customers accounted for 56% and 68% of total sales,
respectively. One of those customers, representing approximately 15% of total
sales during the nine months ended September 30, 2004, has recently advised the
Company of its intent to purchase products from another provider. We expect that
a limited number of customers will continue to account for a significant portion
of our sales for the foreseeable future. The loss of any one of these customers
would have an immediate and material adverse effect on our sales. Our ability to
maintain or increase our sales in the future will depend, in part on our ability
to obtain orders from new customers as well as the financial condition and
success of our existing customers, the telecommunications equipment industry and
the global economy. The length of time it takes to establish a new customer
relationship with respect to our licensed products typically ranges from two to
over twelve months. If we are unsuccessful in obtaining significant new
customers or if one of our top customers or several small customers cancel or
delay their orders for our products, then our business and prospects could be
harmed which may cause the price of our common stock to decline. Our customer
concentration also results in concentration of credit risk. As of September 30,
2004, five customers accounted for 79% of our total accounts receivable
balances. If any one of these customers is unable to fulfill its payment
obligations to us, our revenue could decline significantly.
-7-
P-COM FACES SUBSTANTIAL COMPETITION AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
P-Com faces intense competition worldwide from a number of leading
telecommunications equipment and technology suppliers. These companies offer a
variety of competitive products and services. These companies include Alcatel
Network Systems, Alvarion, Stratex Networks, Ceragon, Ericsson Limited, Harris
Corporation-Farinon Division, NEC, Sagem, Nortel, Nokia Telecommunications,
SIAE, Siemens, and Proxim. Many of these companies have greater installed bases,
financial resources and production, marketing, manufacturing, engineering and
other capabilities than P-Com. P-Com faces actual and potential competition not
only from these established companies, but also from start-up companies that are
developing and marketing new commercial products and services. Some of P-Com's
current and prospective customers and partners have developed, are currently
developing or could manufacture products competitive with P-Com's products.
The principal elements of competition in P-Com's market and the basis upon which
customers may select its systems include price, performance, software
functionality, perceived ability to continue to be able to meet delivery
requirements, and customer service and support. Recently, certain competitors
have announced the introduction of new competitive products, including related
software tools and services, and the acquisition of other competitors and
competitive technologies. P-Com expects competitors to continue to improve the
performance and lower the price of their current products and services and to
introduce new products and services or new technologies that provide added
functionality and other features. New product and service offerings and
enhancements by P-Com's competitors could cause a decline in its sales or loss
of market acceptance of its systems. New offerings could also make P-Com's
systems, services or technologies obsolete or non-competitive. In addition,
P-Com is experiencing significant price competition and expects that competition
to intensify.
P-COM'S OPERATING RESULTS HAVE BEEN ADVERSELY AFFECTED BY DETERIORATING GROSS
MARGINS AND SALES VOLUMES.
The intense competition for P-Com's licensed products has resulted in a
continued reduction in its average selling prices. These reductions have not
been offset by a corresponding decrease in cost of goods sold, resulting in
deteriorating gross margins in some of its product lines. These deteriorating
gross margins will continue in the short term. Reasons for the decline include
the maturation of the systems, the effect of volume price discounts in existing
and future contracts, the intensification of competition, and the recent
decrease in sales volumes.
If P-Com cannot significantly reduce costs, develop new products in a timely
manner or in the event it fails to achieve increased sales of new products at a
higher average selling price, then we will be unable to offset declining average
selling prices in many of its product lines. If P-Com is unable to offset
declining average selling prices, or achieve corresponding decreases in
manufacturing operating expenses, its gross margins will continue to decline.
-8-
OUR OPERATING RESULTS HAVE BEEN ADVERSELY AFFECTED BY CONTINUED DECLINE IN
CAPITAL SPENDING IN THE TELECOMMUNICATIONS EQUIPMENT INDUSTRY.
The telecommunications equipment industry has experienced a decline in capital
spending in recent years, which may continue in the future. Our business has
suffered as a result of this decline and will continue to suffer if there is not
a significant increase in the amount of capital spending by our customers. We
believe that future growth in telecommunications infrastructure will be
generated by the entrance of new service providers. However, these new providers
may not have the financial resources of existing service providers and may be
unable to adequately finance their operations. As a result, these providers may
cancel or delay orders for our services and products. Moreover, we often accept
purchase orders for our services and products far in advance of shipment, and
typically permit orders to be modified or canceled with limited or no penalties.
As a result, we are at risk for curtailment or cancellation of purchase orders,
which can lead to adverse operating results. Ordering materials and building
inventory based on customer forecasts or non-binding orders can also result in
large inventory write-offs, such as what occurred in 2000, 2001, 2003 and 2004.
P-COM DOES NOT HAVE THE CUSTOMER BASE OR OTHER RESOURCES OF MORE ESTABLISHED
COMPANIES, WHICH MAKES IT DIFFICULT FOR IT TO ADDRESS THE LIQUIDITY AND OTHER
CHALLENGES IT FACES.
Although P-Com has installed and has in operation over 150,000 radio units
globally, it has not developed a large installed base of its equipment or the
kind of close relationships with a broad base of customers of a type enjoyed by
larger, more developed companies, which would provide a base of financial
performance from which to launch strategic initiatives and withstand business
reversals. In addition, P-Com has not built up the level of capital often
enjoyed by more established companies, so from time to time, it faces serious
challenges in financing its continued operations. P-Com may not be able to
successfully address these risks.
FAILURE TO MAINTAIN ADEQUATE LEVELS OF INVENTORY COULD RESULT IN A REDUCTION OR
DELAY IN SALES AND HARM P-COM'S RESULTS OF OPERATIONS.
P-Com's customers have increasingly been demanding short turnaround on orders
rather than submitting purchase orders far in advance of expected shipment
dates. This practice requires that P-Com keep inventory on hand to meet market
demands. Given the variability of customer needs and purchasing power, it is
difficult to predict the amount of inventory needed to satisfy customer demand.
If P-Com over-estimates or under-estimates inventory requirements to fulfill
customer needs, or if purchase orders are terminated by customers, P-Com's
results of operations could continue to be adversely affected. In particular,
increases in inventory or cancellation of purchase orders could adversely affect
operations if the inventory is ultimately not used or becomes obsolete. This
risk was realized in the large inventory write-downs from 1999 to 2004.
WE RELY ON THIRD PARTY MANUFACTURES AND SUPPLIERS AND ANY FAILURE OF OR
INTERRUPTION IN THE MANUFACTURING, SERVICES OR PRODUCTS PROVIDED BY THESE THIRD
PARTIES COULD HARM OUR BUSINESS.
We rely on third-party manufactures for the manufacturing of a substantial
portion of our products. We have limited internal manufacturing capacity, which
may not be sufficient to fulfill customers' orders, particularly in times of
high capital spending and rapid system deployment. Our contract manufacturers
may not be able to react to our demands on a timely basis. In addition, certain
components and subassemblies necessary for the manufacture of our systems are
obtained from a sole supplier or a limited group of suppliers. Many of these
suppliers are in difficult financial positions as a result of the significant
slowdown in the telecommunications equipment industry.
Our reliance on third-party manufacturers and suppliers involves risks. From
time to time, we have experienced an inability to obtain, or to receive in a
timely manner, an adequate supply of finished products and required components
and subassemblies. This inability has been due to a variety of factors,
including, in some cases, our financial condition. As a result of our reliance
on these third parties, we have reduced control over the price, timely delivery,
reliability and quality of finished products, components and subassemblies. Any
failure by us, or our contract manufacturers to manufacture, assemble and ship
systems and meet customer demands on a timely and cost-effective basis could
damage relationships with customers and have a material adverse effect on its
business, financial condition and results of operations.
-9-
P-COM'S BUSINESS DEPENDS ON THE ACCEPTANCE OF ITS PRODUCTS AND SERVICES, AND IT
IS UNCERTAIN WHETHER THE MARKET WILL ACCEPT AND DEMAND ITS PRODUCTS AND SERVICES
AT LEVELS NECESSARY FOR SUCCESS.
P-Com's future operating results depend upon the continued growth and increased
availability and acceptance of micro-cellular, personal communications
networks/personal communications services and wireless local loop access
telecommunications services, in the U.S. and internationally. The volume and
variety of wireless telecommunications services or the markets for and
acceptance of the services may not continue to grow as expected. The growth of
these services may also fail to create anticipated demand for P-Com's systems.
Predicting which segments of these markets will develop and at what rate these
markets will grow is difficult.
Certain current and prospective customers are delivering services and features
that use competing transmission media, such as fiber optic and copper cable,
particularly in the local loop access market. To successfully compete with
existing products and technologies, P-Com must offer systems with superior price
and performance characteristics and extensive customer service and support.
Additionally, P-Com must supply these systems on a timely and cost-effective
basis, in sufficient volume to satisfy these prospective customers'
requirements, in order to induce them to transition to P-Com's technologies. Any
delay in the adoption of P-Com's systems and technologies may result in
prospective customers using alternative technologies in their next generation of
systems and networks. P-Com's financial condition may prevent P-Com from meeting
this customer demand or may dissuade potential customers from purchasing from
P-Com. Prospective customers may design their systems or networks in a manner
that excludes or omits P-Com's products and technology. Existing customers may
not continue to include P-Com's systems in their products, systems or networks
in the future. P-Com's technology may not replace existing technologies and
achieve widespread acceptance in the wireless telecommunications market. Failure
to achieve or sustain commercial acceptance of P-Com's currently available radio
systems or to develop other commercially acceptable radio systems would
materially adversely affect P-Com's business, financial condition and results of
operations.
DUE TO OUR INTERNATIONAL SALES AND OPERATIONS, WE ARE EXPOSED TO BUSINESS,
POLITICAL, REGULATORY, OPERATIONAL, FINANCIAL AND ECONOMIC RISKS, ANY OF WHICH
COULD INCREASE OUR COSTS AND HINDER OUR GROWTH.
As a result of our current heavy dependence on international markets, especially
in the United Kingdom, the European continent, the Middle East, China, and Latin
America, we face business, political, regulatory, operational, financial and
economic risks that are often more volatile than those commonly experienced in
the United States. Approximately 92% and 90% of our sales in the year ended
December 31, 2003 and the nine-months ended September 30, 2004, respectively,
were made to customers located outside of the United States.
Risks inherent in our international business activities, include the following:
o availability of suitable export financing, particularly in the case
of large projects which we must ship in short periods;
o multiple, conflicting and changing laws and regulations, including
complications due to unexpected changes in regulatory requirements,
foreign laws, tax schemes, international import and export
legislation, trading and investment policies, foreign currency
fluctuations, exchange controls and tariff and other trade barriers;
o difficulties in enforcing our rights under foreign laws;
o costs and risks of localizing systems (homologation) in foreign
countries;
o timing and availability of export licenses, tariffs and other trade
barriers;
o difficulties in managing distributors;
o political, economic and social instability, including terrorist
activities and the consequences of future geopolitical events, which
may adversely affect the markets in which we operate and our ability
to insure against these risks;
o difficulty in accounts receivable collections;
-10-
o challenges caused by distance, language and cultural differences;
o protectionist laws and business practices that favor local
businesses in some countries;
o foreign tax consequences;
o foreign exchange controls that might prevent us from repatriating
income earned in countries outside the United States;
o price controls;
o higher costs associated with doing business internationally; and
o difficulties in staffing and managing international operations.
Due to political and economic instability in new markets, economic, political
and foreign currency fluctuations may be even more volatile than conditions in
developed countries. Countries in the Asia/Pacific, African, and Latin American
regions have in recent years experienced weaknesses in their currency, banking
and equity markets. These weaknesses have adversely affected and could continue
to adversely affect demand for our products.
WE FACE RISKS ASSOCIATED WITH CURRENCY EXCHANGE RATE FLUCTUATIONS.
Approximately 92% and 90% of our sales in the year ended December 31, 2003 and
the nine-months ended September 30, 2004 were made to customers located outside
of the United States and a larger portion of our revenues is denominated in
foreign currencies. Historically, our international sales have been denominated
in British pounds sterling, Euros or United States dollars. Conducting business
in currencies other than U.S. dollars subjects us to fluctuations in currency
exchange rates that could have a negative impact on our reported operating
results. Fluctuations in the value of the U.S. dollar relative to other
currencies impact our revenues, cost of revenues and operating margins and
result in foreign currency translation gains and losses. For example, a decrease
in the value of British pounds or Euros relative to United States dollars, if
not hedged, will result in an exchange loss for us if we have Euro or British
pounds sterling denominated sales. Conversely, an increase in the value of Euro
and British pounds sterling will result in increased margins for us on Euro or
British pounds sterling denominated sales as our functional currency is in
United States dollars. For international sales that we would require to be
United States dollar-denominated, such a decrease in the value of foreign
currencies could make our systems less price-competitive if competitors choose
to price in other currencies and could adversely affect our financial condition.
WE fund our Italian subsidiary's operating expenses, which are denominated in
Euros. The current strength of the value of the Euro relative to the U.S. dollar
results in more costly funding for our Italian operations, and, as a result,
higher cost of production to it as a whole. Conversely, a decrease in the value
of the Euro will result in cost savings for us.
Historically, we have not engaged in exchange rate hedging activities. Although
we may implement hedging strategies to mitigate this risk, these strategies may
not eliminate our exposure to foreign exchange rate fluctuations and involve
costs and risks of their own, such as ongoing management time and expertise,
external costs to implement the strategy and potential accounting implications.
OUR SUCCESS IN MANY FOREIGN MARKETS WILL DEPEND ON OUR ABILITY TO ESTABLISH
RELATIONSHIPS WITH LOCAL PROVIDERS OF TELECOMMUNICATIONS SERVICES.
In many cases, local regulatory authorities own or strictly regulate
international telephone companies. Established relationships between
government-owned or government-controlled telephone companies and their
traditional indigenous suppliers of telecommunications often limit access to
these markets. The successful expansion of our international operations in some
markets will depend on its ability to locate, form and maintain strong
relationships with established companies providing communication services and
equipment in designated regions. The failure to establish these regional or
local relationships or to successfully market or sell our products in specific
international markets could limit our ability to compete in today's highly
competitive local markets for broadband wireless equipment.
-11-
GOVERNMENTAL REGULATIONS AFFECTING MARKETS IN WHICH P-COM COMPETES COULD
ADVERSELY AFFECT ITS BUSINESS AND RESULTS OF OPERATIONS.
Radio communications are extensively regulated by the United States and foreign
governments as well as by international treaties. P-Com's systems must conform
to a variety of domestic and international requirements established to, among
other things, avoid interference among users of radio frequencies and to permit
interconnection of equipment. Historically, in many developed countries, the
limited availability of radio frequency spectrum has inhibited the growth of
wireless telecommunications networks. Each country's regulatory process differs.
To operate in a jurisdiction, P-Com must obtain regulatory approval for its
systems and comply with differing regulations.
Regulatory bodies worldwide continue to adopt new standards for wireless
telecommunications products. The delays inherent in this governmental approval
process may cause the cancellation, postponement or rescheduling of the
installment of communications systems by P-Com's customers and P-Com. The
failure to comply with current or future regulations or changes in the
interpretation of existing regulations could result in the suspension or
cessation of operations. Those regulations or changes in interpretation could
require P-Com to modify its products and services and incur substantial costs in
order to comply with the regulations and changes.
In addition, P-Com is also affected by domestic and international authorities'
regulation of the allocation and auction of the radio frequency spectra.
Equipment to support new systems and services can be marketed only if permitted
by governmental regulations and if suitable frequency allocations are auctioned
to service providers. Establishing new regulations and obtaining frequency
allocation at auction is a complex and lengthy process. If PCS operators and
others are delayed in deploying new systems and services, P-Com could experience
delays in orders. Similarly, failure by regulatory authorities to allocate
suitable frequency spectrum could have a material adverse effect on P-Com's
results. In addition, delays in the radio frequency spectra auction process in
the United States could delay P-Com's ability to develop and market equipment to
support new services.
P-Com operates in a regulatory environment subject to significant change.
Regulatory changes, which are affected by political, economic and technical
factors, could significantly impact P-Com's operations by restricting its
development efforts and those of its customers, making current systems obsolete
or increasing competition. Any such regulatory changes, including changes in the
allocation of available spectra, could have a material adverse effect on P-Com's
business, financial condition and results of operations. P-Com may also find it
necessary or advisable to modify its systems and services to operate in
compliance with these regulations. These modifications could be expensive and
time-consuming.
P-COM MAY ENTER INTO AGREEMENTS TO MERGE OR CONSOLIDATE WITH OTHER COMPANIES,
AND IT MAY INCUR SIGNIFICANT COSTS IN THE PROCESS, WHETHER OR NOT THESE
TRANSACTIONS ARE COMPLETED.
P-Com is currently evaluating options to consolidate, seek a strategic partner
or engage in some other corporate transaction intended to increase stockholder
value, any of which could be material to our business, operating results and
financial condition. Corporate transactions, including mergers and acquisitions,
are risky, are subject to a lengthy process to close and could divert
management's time and focus from operating our business. P-Com may not be able
to close any strategic transaction on the timetable it anticipates, if at all.
If P-Com is unable to complete a corporate transaction, P-Com will incur
significant non-recoverable expenses that may have a material adverse effect on
P-Com's financial position. If a transaction is completed, it could result in
unanticipated operating difficulties and expense and the anticipated benefits of
the transaction may not materialize.
THE NASDAQ SMALL CAP MARKET HAS DELISTED OUR STOCK AND OUR COMMON STOCK IS
DEEMED TO BE "PENNY STOCK," WHICH MAY SEVERELY LIMIT THE ABILITY OF STOCKHOLDERS
TO SELL OUR COMMON STOCK.
NASDAQ moved our stock listing from the NASDAQ National Market to the NASDAQ
Small Cap Market effective August 27, 2002 due to our failure to meet certain
listing requirements, including a minimum bid price of $1.00 per share. We
subsequently failed to meet certain NASDAQ Small Cap Market quantitative listing
standards, including a minimum $1.00 per share bid price requirement, and the
NASDAQ Listing Qualifications Panel determined that our stock would no longer be
listed on the NASDAQ Small Cap Market. Effective March 10, 2003, our Common
Stock commenced trading electronically on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. This move could result in a less liquid
market available for existing and potential stockholders to trade shares of our
Common Stock and could ultimately further depress the trading price of our
Common Stock.
-12-
Our Common Stock is subject to the Securities Exchange Commission's "penny
stock" regulation. For transactions covered by this regulation, broker-dealers
must make a special suitability determination for the purchase of the securities
and must have received the purchaser's written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a penny stock, the
rules generally require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer is also subject to additional sales practice requirements.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the company's Common Stock and may affect the ability of holders to sell
the Common Stock in the secondary market, and the price at which a holder can
sell the Common Stock.
OUR STOCK PRICE HAS BEEN VOLATILE AND HAS EXPERIENCED SIGNIFICANT DECLINE, AND
MAY CONTINUE TO BE VOLATILE AND DECLINE.
Our common stock currently trades sporadically on the OTC Bulletin Board. The
market for our common stock may continue to be an inactive market, and the
market price of our common stock may experience significant volatility. In
recent years, the stock market in general, and the market for shares of small
capitalization technology stocks in particular, have experienced extreme price
fluctuations. These fluctuations have often negatively affected small cap
companies such as ours, and may impact our ability to raise equity capital in
periods of liquidity crunch. Companies with liquidity problems also often
experience downward stock price volatility. We believe that factors such as
announcements of developments related to our business (including any financings
or any resolution of liabilities), announcements of technological innovations or
new products or enhancements by us or our competitors, developments in the
emerging countries' economies, sales by competitors, sales of significant
volumes of our Common Stock into the public market, developments in our
relationships with customers, partners, lenders, distributors and suppliers,
shortfalls or changes in revenues, gross margins, earnings or losses or other
financial results that differ from analysts' expectations, regulatory
developments, fluctuations in results of operations could and have caused the
price of our Common Stock to fluctuate widely and decline over the past two
years. The market price of our Common Stock may continue to decline, or
otherwise continue to experience significant fluctuations in the future,
including fluctuations that are unrelated to our performance, and our
stockholders may not be able to resell shares of our Common Stock at or above
the price paid for those shares.
ISSUING SECURITIES AS A MEANS OF RAISING CAPITAL AND THE FUTURE SALES OF THESE
SECURITIES IN THE PUBLIC MARKET COULD LOWER P-COM'S STOCK PRICE AND ADVERSELY
AFFECT ITS ABILITY TO RAISE ADDITIONAL CAPITAL IN SUBSEQUENT FINANCINGS.
P-Com has traditionally relied on debt and equity financings to meet its working
capital needs including the issuances of Series B Convertible Preferred Stock in
August 2003 and Series C Convertible Preferred Stock in October and December
2003. In addition, as a result of borrowings under the Debenture Facility, P-Com
anticipates issuing up to an additional 6.0 million shares of Common Stock in
connection with the scheduled amortization payments. When the shares of Common
Stock that are issuable upon conversion of our preferred stock, or paid in
connection with required amortization payments, are subsequently sold in the
public market, the trading price of P-Com Common Stock may be negatively
affected. As of December 31, 2004, the last reported sale price of P-Com common
stock was $0.44. Future sales of P-Com's Common Stock or the perception that
future sales will occur could have a significant negative effect on the market
price of P-Com's Common Stock. If the market price of P-Com Common Stock
continues to decrease, P-Com may not be able to conduct additional financings in
the future on acceptable terms or at all, and its ability to raise additional
capital will be significantly limited.
THE CONVERSION OR EXERCISE OF P-COM'S OUTSTANDING CONVERTIBLE SECURITIES WILL
HAVE A SIGNIFICANT DILUTIVE EFFECT ON P-COM'S EXISTING STOCKHOLDERS.
In March, May and July 2003, P-Com issued warrants to purchase approximately
293,333 shares of its Common Stock. In August 2003, P-Com's remaining 7%
Convertible Subordinated Notes due 2005 were converted into approximately one
million shares of Series B Convertible Preferred Stock, of which approximately
891,594 shares were converted into approximately 3.1 million shares of Common
Stock in December 2003. The remaining outstanding shares of Series B Convertible
Preferred Stock are convertible into approximately 381,916 shares of P-Com
Common Stock.
In October and December 2003, P-Com issued approximately 10,000 shares of Series
C Convertible Preferred Stock together with warrants to purchase approximately
4.64 million shares of Common Stock. These shares of Series C Convertible
Preferred Stock are convertible into approximately 5.8 million shares of Common
Stock. In December 2003, P-Com issued 2,000 shares of Series D Convertible
Preferred Stock, which, in turn, are convertible into approximately 444,444
million shares of Common Stock. The conversion or exercise of these securities
will result in substantial dilution to P-Com's existing stockholders.
-13-
In December 2003, P-Com also issued 2,116,667 shares of its Common Stock in
connection with the SPEEDCOM Acquisition. This issuance resulted in substantial
dilution to P-Com's existing stockholders.
P-Com may issue additional shares of common stock in the future, which would
further dilute its stockholders.
P-COM HAS ADOPTED ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN
ACQUISITION OF P-COM.
P-Com's stockholder rights plan, certificate of incorporation, equity incentive
plans, bylaws and Delaware law may have a significant effect in delaying,
deferring or preventing a change in control and may adversely affect the voting
and other rights of other holders of P-Com Common Stock.
The rights of the holders of P-Com Common Stock will be subject to, and may be
adversely affected by, the rights of any other preferred stock that may be
issued in the future, including the Series A Junior Participating Preferred
Stock that may be issued pursuant to the stockholder rights plan, upon the
occurrence of certain triggering events. In general, the stockholder rights plan
provides a mechanism by which the share position of anyone that acquires 15% or
more (or 20% or more in the case of the State of Wisconsin Investment Board and
Firsthand Capital Management) of P-Com's Common Stock will be substantially
diluted. Future issuance of stock or additional preferred stock could have the
effect of making it more difficult for a third party to acquire a majority of
P-Com's outstanding voting stock.
OUR OPERATING RESULTS HAVE FLUCTUATED IN THE PAST AND MAY DO SO IN THE FUTURE,
WHICH COULD MAKE OUR RESULTS OF OPERATIONS DIFFICULT TO PREDICT OR CAUSE THEM TO
FALL SHORT OF EXPECTATIONS.
Our prior operating results have fluctuated due to changes in our business
and our industry. Similarly, our future operating results may vary significantly
from quarter to quarter due to a variety of factors, many of which are beyond
our control and could cause our results to be below investors' expectations,
causing the price of our common stock to fall. Our historical operating results
may not be useful to you in predicting our future operating results. Factors
that may increase the volatility of our operating results include the following:
o the addition of new customers or the loss of existing customers;
o changes in demand and pricing for our products and services;
o changes in the economic prospects of our customers, which could
increase the time it takes us to close sales with customers;
o customer decisions to delay implementation of our products;
o the timing of new product introductions and product enhancements by
us and our competitors;
o the publication of opinions concerning us, our products or our
services by industry analysts;
o changes in foreign currency exchange rates; and
o domestic and international economic and political conditions.
One or more of these factors may cause our operating expenses to be
disproportionately high or the our gross revenues to be disproportionately low
during any given period, which could cause our net revenue and operating results
to fluctuate significantly.
-14-
OUR BUSINESS AND GROWTH MAY SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL WHO ARE IN HIGH DEMAND.
We depend on the continued contributions of our senior management and
other key personnel. The loss of the services of any of our key personnel could
harm our business. We do not maintain key person life insurance policies on any
of our executive officers. Competition for senior management in our industry is
intense and we may not be able to retain our senior management or attract and
retain new personnel in the future. Volatility or lack of performance in our
stock price may also affect our ability to attract and retain our key personnel.
Our future success also depends on our ability to identify, attract and retain
highly skilled technical, managerial, finance and marketing personnel. Qualified
individuals are in high demand, and we may incur significant costs to attract
them. If we are unable to attract or retain the personnel we need to succeed,
our business may suffer.
THIRD PARTIES MAY SUE US FOR INTELLECTUAL PROPERTY INFRINGEMENT WHICH, IF
SUCCESSFUL, COULD REQUIRE US TO PAY SIGNIFICANT DAMAGE AWARDS OR LICENSING FEES.
We cannot be certain that we do not and will not infringe the intellectual
property rights of others. We may be subject to legal proceedings and claims in
the ordinary course of our business and third parties may sue us for
intellectual property infringement or initiate proceedings to invalidate our
intellectual property. Any intellectual property claims, whether or not
meritorious, could result in costly litigation and could divert management
resources and attention. Moreover, should we be found liable for infringement,
we may be required to enter into licensing agreements (if available on
acceptable terms or at all), pay damages or limit or curtail our product or
service offerings. Moreover, we may need to redesign some of our products to
avoid future infringement liability. Any of the foregoing could prevent us from
competing effectively and harm our business and results of operations.
IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES, WE COULD LOSE
CUSTOMERS AND OUR SALES MAY DECLINE.
The telecommunications equipment industry is characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions and changing customer demands. The introduction of new
products and services embodying new technologies and the emergence of new
industry standards and practices can render existing products and services
obsolete and unmarketable or require unanticipated investments in technology.
Our future success will depend on our ability to internally develop, source or
license leading technologies to enhance our existing products and services, to
develop new products and services that address the changing demands of our
customers, and to respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis. We may experience
difficulties that could delay or prevent the successful design, development,
introduction or marketing of new products and services. Any new products,
services or enhancement that we develop will need to meet the requirements of
our current and prospective customers and may not achieve significant market
acceptance.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock
by the selling stockholders. If and when our outstanding convertible preferred
stock is converted by the selling stockholders into shares of our common stock,
we will not receive any proceeds from the conversion. If and when the warrants
are exercised by the selling stockholders for shares of our common stock, we
will receive the proceeds from the exercise of those warrants, but only to the
extent that the exercise price of the warrants is paid in cash. The warrants
held by the selling stockholders may be exercised through a cashless exercise,
in which event, we will not receive any proceeds from the exercise. If these
warrants are exercised and the exercise price is paid in cash, we will receive
net proceeds of approximately $1.2 million, which we will use for general
corporate purposes, including working capital for our business.
-15-
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders and
the number of shares of common stock being registered for sale as of the date of
this prospectus and sets forth the number of shares of common stock known by us
to be beneficially owned by the selling stockholders. The following table
assumes that each selling stockholder will sell all of the shares of common
stock being offered by this prospectus for its account. However, we are unable
to determine the exact number of shares that will actually be sold. The shares
of common stock offered by this prospectus may be offered from time to time by
the selling stockholders. This information is based upon information provided by
the selling stockholders, and is not necessarily indicative of beneficial
ownership for any other purpose. The number of shares of common stock
beneficially owned by the selling stockholders is determined in accordance with
the rules of the Securities and Exchange Commission.
For some of the selling stockholders, the number of shares of common stock
being sold in the offering will be greater than the number of shares of common
stock beneficially owned prior to the offering. This is due to a limitation on
the number of shares of common stock that these selling stockholders can hold at
any given time. Under the terms of our convertible preferred stock and some of
our warrants, no holder of these securities may convert or exercise these
securities into shares of our common stock, and we may not issue shares of our
common stock to any of these holders, if the conversion or exercise would cause
the holder or any of its affiliates, individually or in the aggregate, to
beneficially own more than 4.99% or 9.999%, as the case may be, of our
outstanding common stock. Due to this limitation, some of the selling
stockholders do not beneficially own all of the shares of common stock that are
issuable upon conversion of their convertible preferred stock or upon exercise
of some of their warrants. However, regardless of this limitation, we are
obligated to register the resale of all of the shares of common stock that are
issuable upon conversion or exercise of these securities. Consequently, some of
the selling stockholders are shown in the table below as selling a greater
number of shares of common stock than they beneficially own.
Except with respect to George Roberts, our Chairman of the Board, Samuel
Smookler, our Chief Executive Officer and one of our directors, Fred Fromm, one
of our directors, Brian Josling, one of our directors, and R. Craig Roos, one of
our directors, none of the selling stockholders has had a material relationship
with us within the past three years other than as a result of its ownership of
our securities.
The term "selling stockholder" includes the stockholders listed below and
their transferees, assignees, pledgees, donees or other successors. The percent
of beneficial ownership for each selling stockholder is based on 11,810,280
shares of common stock outstanding as of January 10, 2005. Shares of common
stock subject to warrants, options and other convertible securities that are
currently exercisable or exercisable within 60 days of January 10, 2005, are
considered outstanding and beneficially owned by the selling stockholder who
holds those warrants, options or other convertible securities for the purpose of
computing the percentage ownership of that selling stockholder but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other selling stockholder.
-16-
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES OF COMMON STOCK
OFFERING BEING SOLD IN THE OFFERING
--------------------- ------------------------------------------------
UPON CONVERSION UPON
OF SERIES C EXERCISE OF C
PREFERRED STOCK WARRANTS
NAME OF SELLING STOCKHOLDER NUMBER (2) % COMMON STOCK (2)(3) (2)(3)
---------------------------------- ----------- -------- ------------ ------------ ------------
North Sound Legacy Fund LLC(5)(6) 1,621,031 13.73% 78,733 62,147 --
North Sound Legacy Institutional
Fund LLC (5)(6) 1,621,031 13.73% 708,875 573,990 --
North Sound Legacy International
Ltd. (5)(6) 1,621,031 13.73% 833,423 724,197 --
SDS Capital Group SPC, Ltd. 1,274,548 9.98% 319,548 155,000 --
CGA Resources LLC 338,319 4.29% 338,319 -- --
SF Capital Partners 464,166 3.86% 259,998 204,168 --
Alpha Capital 336,666 2.79% 91,665 136,112 108,889
Crestview Capital Fund II LP 313,099 2.61% 124,799 148,167 40,133
Castle Creek Technology Partners
LLC 301,350 2.49% -- 167,417 133,933
Cagan McAfee Capital Partners 253,333 2.10% -- -- 133,333
Jerdan Enterprises 216,610 1.83% 216,610 -- --
Sam Eyde 185,666 1.56% 103,999 81,667 --
Agilent Financial Services, Inc. 178,571 1.49% -- -- --
Samuel Smookler & Miriam
Smookler (7) 175,889 1.48% 9,167 13,611 10,889
Brian M. Herman 117,925 * 56,999 27,222 --
Bryan Family Partnership LLP II 116,123 * 33,333 45,994 36,795
Paul A. Kruger 96,831 * 23,331 40,834 32,667
Gamma Opportunity Capital
Partners, LP 93,667 * 22,778 33,334 37,556
Charles P Strogen 92,833 * 52,000 40,834 --
Platinum Partners Arbitrage Fund LP 87,111 * -- -- 87,111
Julie L. Michel 86,166 * 45,332 40,834 --
HeliOss Communications, Inc. 80,000 * 80,000 -- --
George Roberts (8) 78,966 * 17,333 13,611 --
Michel Pokel 67,671 * 67,671 -- --
Allan Rothstein 49,000 * -- 27,222 21,778
Arnold E. Ditri 49,000 * -- 27,222 21,778
Bridges & Pipes LLC 67,333 * 18,333 27,222 21,778
Wardenclyffe Micro Cap Fund 67,333 * 18,333 27,222 21,778
Global eMedicine, Inc., MPPP 67,333 * 45,555 -- 21,778
Bristol Investment Fund 66,669 * -- 66,669 --
RHP Master Fund LTD 66,122 * 66,122 -- --
Harry Falterbauer 65,334 * 24,500 40,834 --
Stuart Jacobson 64,027 * 64,027 -- --
Bullbear Capital Partners LLC 61,889 * 34,666 27,222 --
SHARES
BENEFICIALLY
SHARES OF COMMON STOCK OWNED AFTER
BEING SOLD IN THE OFFERING THE OFFERING(1)
------------------------------------------------ ---------------
UPON CONVERSION
UPON OF SERIES B OR UPON
EXERCISE OF SERIES D PAYMENT OF
OTHER PREFERRED STOCK DEBENTURE
NAME OF SELLING STOCKHOLDER WARRANTS (2)(3) FACILITY (4) NUMBER %
---------------------------------- ---------- ---------------- ------------ --------- ----
North Sound Legacy Fund LLC(5)(6) -- 48,741 -- *
North Sound Legacy Institutional
Fund LLC (5)(6) -- 368,679 -- *
North Sound Legacy International
Ltd. (5)(6) -- 408,940 -- *
SDS Capital Group SPC, Ltd. 800,000 -- 6,000,000 -- *
CGA Resources LLC -- -- -- *
SF Capital Partners -- -- -- *
Alpha Capital -- -- -- *
Crestview Capital Fund II LP -- -- -- *
Castle Creek Technology Partners
LLC -- -- -- *
Cagan McAfee Capital Partners 120,000 -- -- *
Jerdan Enterprises -- -- -- *
Sam Eyde -- -- -- *
Agilent Financial Services, Inc. 178,571 -- -- *
Vitel Ventures Corporation -- -- -- *
Leviticus Partners LP -- -- -- *
Samuel Smookler & Miriam
Smookler (7) 86,667 -- -- *
Brian M. Herman 33,703 -- -- *
Bryan Family Partnership LLP II -- -- -- *
Ellis International -- -- -- *
Paul A. Kruger -- -- -- *
Gamma Opportunity Capital
Partners, LP -- -- -- *
Charles P Strogen -- -- -- *
Platinum Partners Arbitrage Fund
LP -- -- -- *
Julie L. Michel -- -- -- *
HeliOss Communications, Inc. -- -- -- *
George Roberts (8) -- -- -- *
Michel Pokel -- -- -- *
Allan Rothstein -- -- -- *
Arnold E. Ditri -- -- -- *
Bridges & Pipes LLC -- -- -- *
Wardenclyffe Micro Cap Fund -- -- -- *
Global eMedicine, Inc., MPPP -- -- -- *
Bristol Investment Fund -- -- -- *
RHP Master Fund LTD -- -- -- *
Harry Falterbauer -- -- -- *
Stuart Jacobson -- -- -- *
Bullbear Capital Partners LLC -- -- -- *
-17-
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES OF COMMON STOCK
OFFERING BEING SOLD IN THE OFFERING
--------------------- ------------------------------------------------
UPON CONVERSION UPON
OF SERIES C EXERCISE OF C
PREFERRED STOCK WARRANTS
NAME OF SELLING STOCKHOLDER NUMBER (2) % COMMON STOCK (2)(3) (2)(3)
---------------------------------- ----------- -------- ------------ ------------ ------------
Capela Overseas LTD 61,889 * 34,666 27,222 --
John M. Somody 61,889 * 34,666 27,222 --
Ralph Rybaki 61,889 * 34,666 27,222 --
Richard & Beverly Mehrlich 61,888 * 61,888 -- --
Alfred J. Anzalone Family
Limited Partnership 61,500 * 8,250 12,250 41,000
Spectra Capital Management LLC 60,000 * -- 33,333 26,667
First Mirage, Inc. 59,850 * 33,250 -- 26,600
Frederic M. Bauthier 56,889 * 29,666 27,222 --
Eric T. Singer 56,213 * 10,519 15,619 12,495
Jules Nordlicht 54,445 * -- -- 54,445
Stonestreet LP 54,445 * -- -- 54,445
Joseph R. McCandless 50,500 * 34,167 -- 16,333
Liviakis Financial Communications 50,000 * 50,000 -- --
George Manos 49,511 * 27,733 21,778 --
Dana Ennis 46,417 * 26,000 20,417 --
UMAI 45,455 * 45,455 -- --
Vitel Ventures Corporation 43,556 * -- -- 43,556
Carlos Belfiore 43,134 * -- -- --
Al Pokel 41,606 * 41,606 -- --
Robert and Sandra Neborsky 41,458 * 27,030 14,428 --
Harry Rosen FBO Rosen Rosen
Kreiling PA 401K PSP 40,400 * 11,000 16,333 13,067
Leviticus Partners LP 39,200 * -- -- 39,200
Fred & Delay Vallen 37,133 * 20,800 16,333 --
Robert W. Duggan 35,933 * -- -- 35,933
Ronald Shear 35,350 * 9,625 14,292 11,433
Scot A. Kane 34,039 * 19,067 14,972 --
Philip C. Bird 33,888 * 16,874 17,014 --
Charles Pradilla 33,667 * 9,167 13,611 10,889
Daryl Demsko 33,666 * 22,778 -- 10,889
Robert Melnick 33,666 * 22,778 -- 10,889
WEC Partners LLC 33,666 * 22,778 -- 10,889
West End Convertible Fund LP 33,666 * 22,778 -- 10,889
Whalehaven Fund Ltd. 32,667 * -- -- 32,667
Ellis International 32,667 * -- -- 32,667
James K. Lehman 31,660 * 31,660 -- --
Christopher P. Choma 30,944 * 17,333 13,611 --
Craig Roos (11) 30,944 * 17,333 13,611 --
David Wilstein and Susan
Wilstein (12) 30,944 * 17,333 13,611 --
Don Zoltan 30,944 * 17,333 13,611 --
John O. Johnston 30,944 * 17,333 13,611 --
Doug Levine 30,944 * 30,944 -- --
Michael Rucker (13) 30,944 * 30,944 -- --
Jack Gilbert 30,944 * 30,944 -- --
Michael Liss 30,944 * 30,944 -- --
SHARES
BENEFICIALLY
SHARES OF COMMON STOCK OWNED AFTER
BEING SOLD IN THE OFFERING THE OFFERING(1)
------------------------------------------------ ---------------
UPON CONVERSION
UPON OF SERIES B OR UPON
EXERCISE OF SERIES D PAYMENT OF
OTHER PREFERRED STOCK DEBENTURE
NAME OF SELLING STOCKHOLDER WARRANTS (2)(3) FACILITY (4) NUMBER %
---------------------------------- ---------- ---------------- ------------ --------- ----
Capela Overseas LTD -- -- -- *
John M. Somody -- -- -- *
Ralph Rybaki -- -- -- *
Richard & Beverly Mehrlich -- -- -- *
Alfred J. Anzalone Family
Limited Partnership -- -- -- *
Spectra Capital Management LLC -- -- -- *
First Mirage, Inc. -- -- -- *
Frederic M. Bauthier -- -- -- *
Eric T. Singer 17,581 -- -- *
Jules Nordlicht -- -- -- *
Stonestreet LP -- -- -- *
Joseph R. McCandless -- -- -- *
Liviakis Financial Communications -- -- -- *
George Manos -- -- -- *
Dana Ennis -- -- -- *
Margaret Josling (9) -- -- -- *
TKB Ventures Ltd. (Brian
Josling) (9) -- -- -- *
UMAI -- -- -- *
Al Pokel -- -- -- *
Robert and Sandra Neborsky -- -- -- *
Fred Fromm (10) -- -- -- *
Harry Rosen FBO Rosen Rosen
Kreiling PA 401K PSP -- -- -- *
Fred & Delay Vallen -- -- -- *
Robert W. Duggan -- -- -- *
Ronald Shear -- -- -- *
Scot A. Kane -- -- -- *
Philip C. Bird -- -- -- *
Charles Bradley -- -- -- *
Charles Pradilla -- -- -- *
Justin Yue Tang -- -- -- *
Daryl Demsko -- -- -- *
David & Marilyn Balk JT WR0S -- -- -- *
Jeffrey Schnipper -- -- -- *
Mark Capital LLC -- -- -- *
Richard Melnick -- -- -- *
Robert Melnick -- -- -- *
WEC Partners LLC -- -- -- *
West End Convertible Fund LP -- -- -- *
Strategic Partners Ltd. -- -- -- *
Whalehaven Fund Ltd. -- -- -- *
James K. Lehman -- -- -- *
Christopher P. Choma -- -- -- *
Craig Roos (11) -- -- -- *
David Wilstein and Susan
Wilstein (12) -- -- -- *
Don Zoltan -- -- -- *
John O. Johnston -- -- -- *
Doug Levine -- -- -- *
Michael Rucker (13) -- -- -- *
Jack Gilbert -- -- -- *
Michael Liss -- -- -- *
-18-
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES OF COMMON STOCK
OFFERING BEING SOLD IN THE OFFERING
--------------------- ------------------------------------------------
UPON CONVERSION UPON
OF SERIES C EXERCISE OF C
PREFERRED STOCK WARRANTS
NAME OF SELLING STOCKHOLDER NUMBER (2) % COMMON STOCK (2)(3) (2)(3)
---------------------------------- ----------- -------- ------------ ------------ ------------
Michael P. Rucker 30,944 * 30,944 -- --
Philip R. Clark 30,944 * 30,944 -- --
Thomas Contino 30,944 * 30,944 -- --
Alan Ennis, Sandra Ennis 30,750 * 4,125 6,125 20,500
Ronald H. Wise 27,850 * 15,600 12,250 --
Peter & Janis Hillcoff 27,822 * 15,584 12,238 --
F. Berdon Defined Benefit Plan 27,332 * 10,999 16,333 --
Allen Solomon (14) 26,933 * 18,222 -- 8,711
Matthew Balk 25,471 * -- -- --
David Wiener (15) 24,756 * 13,867 10,889 --
Paul Blizman 24,756 * 13,867 10,889 --
Charles Bradley 24,500 * -- 13,611 10,889
Justin Yue Tang 24,500 * -- 13,611 10,889
Randy Tuggle 23,832 * 12,943 -- 10,889
Allen Weiss 22,443 * 22,443 -- --
Gerald Ferro 21,778 * 8,167 13,611 --
Platinum Partners Global Macro
Fund LP 21,778 * -- -- 21,778
Walter Kuharchik 21,778 * 8,167 13,611 --
Dennis & Cindy Pak 21,777 * 8,166 13,611 --
Rodd Friedman 21,000 * 11,667 -- 9,333
Fred Fromm (10) 20,883 * 6,925 5,438 --
Brad Reifler 20,237 * -- -- --
Hilary Bergman 20,237 * -- -- --
Elaine Dines 20,200 * 13,667 -- 6,533
Michael Loew 20,200 * 13,667 -- 6,533
Rudolf Konegan 20,200 * 5,500 8,167 6,533
Greenwich Growth Fund LTD 20,055 * 9,167 -- 10,889
Nathaniel Orme (IRA) 19,556 * 12,750 6,806 --
C/F Sean M. Callahan SEP/IRA 19,038 * 8,149 10,889 --
Dan Foley 18,900 * 10,500 -- 8,400
Dana Bowler 18,567 * 10,400 8,167 --
Louis Cristan, Kathy Cristan 18,567 * 10,400 8,167 --
Thomas K. Beard 18,567 * 10,400 8,167 --
Nathaniel Orme 17,695 * 4,083 13,611 --
Riaz Don 17,448 * 17,448 -- --
James R and Diane R Fisher (16) 17,019 * 9,533 7,486 --
Scott C. Paston 5,444 * -- -- 5,444
Salvatore Ianuzzi, Bonita Ianuzzi 16,833 * 4,583 6,806 5,444
Gregg Sedun 16,823 * 4,581 6,802 5,441
Bruce Newberg (17) 16,667 * 16,667 -- --
Woodmont Investments Limited 16,667 * 16,667 -- --
Julius H. Roma (18) 15,944 * 10,500 -- 5,444
Mark Collins 15,622 * 10,569 -- 5,052
Andrew J. Dauro 15,473 * 15,473 -- --
SHARES
BENEFICIALLY
SHARES OF COMMON STOCK OWNED AFTER
BEING SOLD IN THE OFFERING THE OFFERING(1)
------------------------------------------------ ---------------
UPON CONVERSION
UPON OF SERIES B OR UPON
EXERCISE OF SERIES D PAYMENT OF
OTHER PREFERRED STOCK DEBENTURE
NAME OF SELLING STOCKHOLDER WARRANTS (2)(3) FACILITY (4) NUMBER %
---------------------------------- ---------- ---------------- ------------ --------- ----
Michael P. Rucker -- -- -- *
Philip R. Clark -- -- -- *
Thomas Contino -- -- -- *
Alan Ennis, Sandra Ennis -- -- -- *
Ronald H. Wise -- -- -- *
Peter & Janis Hillcoff -- -- -- *
F. Berdon Defined Benefit Plan -- -- -- *
Allen Solomon (14) -- -- -- *
Matthew Balk 25,471 -- -- *
David Wiener (15) -- -- -- *
Paul Blizman -- -- -- *
Randy Tuggle -- -- -- *
Allen Weiss -- -- -- *
Gerald Ferro -- -- -- *
Platinum Partners Global Macro
Fund LP -- -- -- *
Walter Kuharchik -- -- -- *
Dennis & Cindy Pak -- -- -- *
Rodd Friedman -- -- -- *
Brad Reifler 20,237 -- -- *
Hilary Bergman 20,237 -- -- *
Elaine Dines -- -- -- *
Michael Loew -- -- -- *
Rudolf Konegan -- -- -- *
Greenwich Growth Fund LTD -- -- -- *
Nathaniel Orme (IRA) -- -- -- *
Hudson Valley Capital Management -- -- -- *
C/F Sean M. Callahan SEP/IRA -- -- -- *
Dan Foley -- -- -- *
Dana Bowler -- -- -- *
Louis Cristan, Kathy Cristan -- -- -- *
Thomas K. Beard -- -- -- *
Nathaniel Orme -- -- -- *
Riaz Don -- -- -- *
James R and Diane R Fisher (16) -- -- -- *
Alan Sheinwald -- -- -- *
Gary Ziegler -- -- -- *
Jared Shaw -- -- -- *
Jeff Hermanson -- -- -- *
John C. Buser -- -- -- *
Michael J. Weiss -- -- -- *
Michael Kooper -- -- -- *
Northbar Capital Inc. -- -- -- *
RA Schafer -- -- -- *
Richard L. Taney -- -- -- *
Scott C. Paston -- -- -- *
Salvatore Ianuzzi, Bonita Ianuzzi -- -- -- *
Gregg Sedun -- -- -- *
Bruce Newberg (17) -- -- -- *
Woodmont Investments Limited -- -- -- *
Julius H. Roma (18) -- -- -- *
Mark Collins -- -- -- *
Andrew J. Dauro -- -- -- *
-19-
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES OF COMMON STOCK
OFFERING BEING SOLD IN THE OFFERING
--------------------- ------------------------------------------------
UPON CONVERSION UPON
OF SERIES C EXERCISE OF C
PREFERRED STOCK WARRANTS
NAME OF SELLING STOCKHOLDER NUMBER (2) % COMMON STOCK (2)(3) (2)(3)
---------------------------------- ----------- -------- ------------ ------------ ------------
Brian Judge & Diana Garehitorena 15,473 * 15,473 -- --
Mario Cassara & Iris Cassara 15,473 * 15,473 -- --
Norbert Olinger 15,473 * 15,473 -- --
North Metropolitan Radiology
Assoc, LLP 401K Profit Sharing
Plan FBO: Stuart Jacobson 15,473 * 15,473 -- --
Oscar Garza 15,473 * 15,473 -- --
Paul Russo III 15,473 * 15,473 -- --
Robert B. Kinney 15,473 * 15,473 -- --
Gene Salkind 15,472 * 8,667 6,806 --
Jeffrey Cox 15,472 * 8,667 6,806 --
Jerome L. Dreyfuss 15,472 * 8,667 6,806 --
Richard Weiner 15,472 * 8,667 6,806 --
Steven J. Cooper 15,472 * 8,667 6,806 --
Thomas J. Franco 15,472 * 8,667 6,806 --
Judith Ellen Olinger (19) 15,471 * 15,471 -- --
Margaret Josling (9) 15,414 * 4,555 -- 2,178
TKB Ventures Ltd. (Brian
Josling) (9) 15,414 * 4,555 -- 2,178
Hudson Valley Capital Management 14,476 * 14,476 -- --
Monad Realty Inc. 13,925 * 7,800 6,125 --
W.M. Sherman 13,925 * 7,800 6,125 --
Michael Rapp 13,333 * -- -- --
Ashraf Abdelaal 13,221 * 7,777 -- 5,444
Robert Klein and Myriam Gluck 13,067 * 13,067 -- --
Broadband Capital Management 12,998 * -- -- --
Greg Downes 12,378 * 6,933 5,444 --
Margaret & Donald Wisnasky 12,378 * 6,933 5,444 --
Peter Yaskowitz 12,378 * 6,933 5,444 --
David & Marilyn Balk JT WROS 10,889 * -- -- 10,889
Jeffrey Schnipper 10,889 * -- -- 10,889
Mark Capital LLC 10,889 * -- -- 10,889
Richard Melnick 10,889 * -- -- 10,889
SDIRA FBO Davina Lockhart 10,889 * 4,083 6,806 --
SDIRA FBO Roger Lockhart 10,889 * 4,083 6,806 --
William M. Levin 10,889 * 4,083 6,806 --
Strategic Partners Ltd. 10,886 * -- -- 10,886
Reginald T. Grzeskowiak & Nancy
Grzeskowiak 10,100 * 2,750 4,083 3,267
Silicon Valley Bank 10,000 * -- -- --
SDIRA FBO Alan E. Ennis (SEP/IRA) 9,800 * 3,675 6,125 --
Mark Ford 9,644 * -- -- --
James St. Clair 9,406 * 1,633 2,722 --
John Jay Gebhardt 9,333 * 9,333 -- --
Allan L. Sparlin 9,283 * 5,200 4,083 --
SDIRA FBO Robert Vaughan 9,283 * 5,200 4,083 --
Alan Cohen 9,044 * 3,600 5,444 --
Sean Callahan 8,750 * -- -- --
John Simonelli 8,702 * 3,263 5,439 --
Bedding Discounts 8,417 * 5,695 -- 2,722
Thomas A.Counts 8,166 * 8,166 -- --
Alan Robbins 7,736 * 7,736 -- --
Louis Berrick 7,736 * 7,736 -- --
Ronald L. Nilsen 7,736 * 7,736 -- --
James E. Ducharme 7,736 * 4,333 3,403 --
John A. Marrone 7,736 * 4,333 3,403 --
Robert Dombrowski 7,672 * 1,633 2,722 --
John Green 7,418 * -- -- 2,178
Samson Consulting Corp 6,733 * 4,555 -- 2,178
Phil Wagenheim 6,667 * -- -- --
SHARES
BENEFICIALLY
SHARES OF COMMON STOCK OWNED AFTER
BEING SOLD IN THE OFFERING THE OFFERING(1)
------------------------------------------------ ---------------
UPON CONVERSION
UPON OF SERIES B OR UPON
EXERCISE OF SERIES D PAYMENT OF
OTHER PREFERRED STOCK DEBENTURE
NAME OF SELLING STOCKHOLDER WARRANTS (2)(3) FACILITY (4) NUMBER %
---------------------------------- ---------- ---------------- ------------ --------- ----
Brian Judge & Diana Garehitorena -- -- -- *
Mario Cassara & Iris Cassara -- -- -- *
Norbert Olinger -- -- -- *
North Metropolitan Radiology
Assoc, LLP 401K Profit Sharing
Plan FBO: Stuart Jacobson -- -- -- *
Oscar Garza -- -- -- *
Paul Russo III -- -- -- *
Robert B. Kinney -- -- -- *
Gene Salkind -- -- -- *
Jeffrey Cox -- -- -- *
Jerome L. Dreyfuss -- -- -- *
Richard Weiner -- -- -- *
Steven J. Cooper -- -- -- *
Thomas J. Franco -- -- -- *
Judith Ellen Olinger (19) -- -- -- *
Monad Realty Inc. -- -- -- *
W.M. Sherman -- -- -- *
Michael Rapp 13,333 -- -- *
Ashraf Abdelaal -- -- -- *
Robert Klein and Myriam Gluck -- -- -- *
Broadband Capital Management 12,998 -- -- *
Greg Downes -- -- -- *
Margaret & Donald Wisnasky -- -- -- *
Peter Yaskowitz -- -- -- *
Carlos Belfiore 11,667 -- -- *
SDIRA FBO Davina Lockhart -- -- -- *
SDIRA FBO Roger Lockhart -- -- -- *
William M. Levin -- -- -- *
Reginald T. Grzeskowiak & Nancy
Grzeskowiak -- -- -- *
Silicon Valley Bank 10,000 -- -- *
SDIRA FBO Alan E. Ennis (SEP/IRA) -- -- -- *
Mark Ford 9,644 -- -- *
James St. Clair 5,050 -- -- *
John Jay Gebhardt -- -- -- *
Allan L. Sparlin -- -- -- *
SDIRA FBO Robert Vaughan -- -- -- *
Alan Cohen -- -- -- *
Sean Callahan 8,750 -- -- *
John Simonelli -- -- -- *
Bedding Discounts -- -- -- *
Thomas A.Counts -- -- -- *
Alan Robbins -- -- -- *
Louis Berrick -- -- -- *
Ronald L. Nilsen -- -- -- *
James E. Ducharme -- -- -- *
John A. Marrone -- -- -- *
Robert Dombrowski 3,317 -- -- *
John Green 5,240 -- -- *
Samson Consulting Corp -- -- -- *
Phil Wagenheim 6,667 -- -- *
-20-
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES OF COMMON STOCK
OFFERING BEING SOLD IN THE OFFERING
--------------------- ------------------------------------------------
UPON CONVERSION UPON
OF SERIES C EXERCISE OF C
PREFERRED STOCK WARRANTS
NAME OF SELLING STOCKHOLDER NUMBER (2) % COMMON STOCK (2)(3) (2)(3)
---------------------------------- ----------- -------- ------------ ------------ ------------
James C. Craig Jr 6,533 * 2,450 4,083 --
Martin & Linda Mennes 6,533 * 2,450 4,083 --
Claude Ware 6,288 * -- -- --
Claude & Hee Jin Ware 6,189 * 3,467 2,722 --
Jacob Kohannim 6,189 * 3,467 2,722 --
Jean Zurstrassen 6,189 * 3,467 2,722 --
Robert E. Dettle 6,189 * 3,467 2,722 --
SDIRA FBO John Green (Roth/IRA) 6,189 * 3,467 2,722 --
Tracy Standridge, Kay L
Standridge 6,189 * 3,467 2,722 --
Gregoire Dstreel 6,189 * 6,189 -- --
Wolfe LP 5,693 * 5,693 -- --
Byron Rosenstein 5,444 * -- -- 5,444
Alan Sheinwald 5,444 * -- -- 5,444
Gary Ziegler 5,444 * -- -- 5,444
Jared Shaw 5,444 * -- -- 5,444
Jeff Hermanson 5,444 * -- -- 5,444
John C. Buser 5,444 * -- -- 5,444
Michael J. Weiss 5,444 * -- -- 5,444
Michael Kooper 5,444 * -- -- 5,444
Northbar Capital Inc. 5,444 * -- -- 5,444
RA Schafer 5,444 * -- -- 5,444
Richard L. Taney 5,444 * -- -- 5,444
Earl P. Correa 4,642 * 2,600 2,042 --
Paul Sanberg 4,642 * 2,600 2,042 --
Michael J. Leja (20) 4,556 * 1,833 2,722 --
David P. Garmus, Caren M. Garmus 4,414 * 4,414 -- --
SDIRA FBO Rosa Maria Lukens 4,373 * 2,331 2,042 --
Kimball & Cross Investment
Management Corp. 3,686 * -- -- --
Market Pathways Financial 3,094 * 1,733 1,361 --
William Tonyes 3,094 * 1,733 1,361 --
SDIRA FBO David W. Komar ROL IRA 3,094 * 1,733 1,361 --
David & Michael Lega 2,722 * -- 2,722 --
Gary Miller 2,450 * 2,450 -- --
William King 2,041 * 2,041 -- --
Elliott Smith 1,667 * -- -- --
Jeffrey Meshel 1,667 * -- -- --
Karl Brenza 1,667 * -- -- --
Chris Shufeldt 1,519 * -- -- --
Daniel Pietro 833 * -- -- --
Roger Lockhart 833 * -- -- --
Thomas Corona 400 * -- -- --
Gene Super 340 * -- -- --
SHARES
BENEFICIALLY
SHARES OF COMMON STOCK OWNED AFTER
BEING SOLD IN THE OFFERING THE OFFERING(1)
------------------------------------------------ ---------------
UPON CONVERSION
UPON OF SERIES B OR UPON
EXERCISE OF SERIES D PAYMENT OF
OTHER PREFERRED STOCK DEBENTURE
NAME OF SELLING STOCKHOLDER WARRANTS (2)(3) FACILITY (4) NUMBER %
---------------------------------- ---------- ---------------- ------------ --------- ----
James C. Craig Jr -- -- -- *
Martin & Linda Mennes -- -- -- *
Claude Ware 6,288 -- -- *
Claude & Hee Jin Ware -- -- -- *
Jacob Kohannim -- -- -- *
Jean Zurstrassen -- -- -- *
Robert E. Dettle -- -- -- *
SDIRA FBO John Green (Roth/IRA) -- -- -- *
Tracy Standridge, Kay L
Standridge -- -- -- *
Gregoire Dstreel -- -- -- *
Wolfe LP -- -- -- *
Byron Rosenstein -- -- -- *
Earl P. Correa -- -- -- *
Paul Sanberg -- -- -- *
Michael J. Leja (20) -- -- -- *
David P. Garmus, Caren M. Garmus -- -- -- *
SDIRA FBO Rosa Maria Lukens -- -- -- *
Kimball & Cross Investment
Management Corp. 3,686 -- -- *
Market Pathways Financial -- -- -- *
William Tonyes -- -- -- *
SDIRA FBO David W. Komar ROL IRA -- -- -- *
David & Michael Lega -- -- -- *
Gary Miller -- -- -- *
William King -- -- -- *
Elliott Smith 1,667 -- -- *
Jeffrey Meshel 1,667 -- -- *
Karl Brenza 1,667 -- -- *
Chris Shufeldt 1,519 -- -- *
Daniel Pietro 833 -- -- *
Roger Lockhart 833 -- -- *
Thomas Corona 400 -- -- *
Gene Super 340 -- -- *
* Less than 1%.
(1) Assumes that all shares being offered by each selling stockholder under this
prospectus are sold and that each selling stockholder acquires no additional
shares of common stock before the completion of this offering.
(2) The holders of the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock and the Series D Convertible Preferred Stock are
subject to a conversion blocker that caps the number of shares eligible for
conversion so that the holder will not beneficially own more than 9.999% of the
outstanding Common Stock after such conversion. The 9.999% conversion blocker
currently prevents North Sound Legacy Fund LLC, North Sound Legacy Institutional
Fund LLC, North Sound Legacy International Ltd, and SDS Capital Group SPC, Ltd.
from converting any of their Convertible Preferred Stock into shares of common
stock. North Sound Legacy Fund LLC, North Sound Legacy Institutional Fund LLC
and North Sound Legacy International Ltd. are the only holders of the Series B
Convertible Preferred Stock and the Series D Convertible Preferred Stock.
(3) Under an agreement between P-Com and the holders of the Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock and P-Com's Series C
Warrants, P-Com is required to register the resale of a number of shares equal
to 125% of the shares of common stock initially issuable upon conversion or
exercise of these securities. This results in the following additional shares
being registered for resale by the selling stockholders, which are not reflected
in the table above:
Series C Convertible Preferred Stock 884,713
Series D Convertible Preferred Stock 111,111
Series C Warrants 366,675
---------
Total Additional Shares Being Registered 1,362,499
-21-
(4) Under an agreement between P-Com and SDS Capital Group SPC, Ltd., P-Com is
required to register the resale of a number of shares equal to 6,000,000 shares
of Common Stock which shares may be used to make quarterly installment payments
to SDS Capital Group SPC, Ltd. under the Promissory Notes, dated November 26,
2004 and January __, 2005. The warrants consist of 528,000 shares which have
been issued and include an additional 272,000 shares which shall be issued on
January __, 2005. In the event that P-Com elects to make amortization payments
in shares of Common Stock, P-Com is limited to the number of shares it may use
in the event that such payment would cause SDS Capital Group SPC, Ltd. to
beneficially own more than 9.9% of the outstanding Common Stock.
(5) Convertible securities include shares of Series B Convertible Preferred
Stock and Series D Convertible Preferred Stock of P-Com.
(6) For purposes of determining beneficial ownership in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended, this total includes
shares beneficially owned by North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd.
(7) Mr. Smookler is a Director of P-Com and is the President and Chief Executive
Officer of P-Com.
(8) Mr. Roberts is Chairman of the Board of Directors of P-Com.
(9) For purposes of determining beneficial ownership in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended, this total includes
shares beneficially owned by Margaret Josling and TKB Ventures. Mr. Josling is a
Director of P-Com.
(10) Mr. Fromm is a Director of P-Com.
(11) Mr. Roos is a Director of P-Com.
(12) Represents 30,944 shares held by the Century Trust dated 12/19/94. David
Wilstein and Susan Wilstein, trustees of the Century Trust dated 12/19/94, have
voting and dispositive power over the shares of common stock held by the trust.
(13) Represents 30,944 shares held by the Helen Jones Marital Trust. Michael
Rucker, trustee of the Helen Jones Marital Trust, has voting and dispositive
power over the shares of common stock held by the trust.
(14) Represents 26,933 shares held by the Allen Solomon Trust. Allen Solomon,
trustee of the Allen Solomon Trust, has voting and dispositive power over the
shares of common stock held by the trust.
(15) Represents 24,756 shares held by the David Wiener Revocable Trust - 96.
David Wiener, trustee of the David Wiener Revocable Trust - 96, has voting and
dispositive power over the shares of common stock held by the trust.
(16) Represents 17,049 shares held by the James R and Diane R. Fisher Living
Trust. James R. and Diane R. Fisher, trustees of the james R. and Diane R.
Fisher Living Trust, have voting and dispositive power over the shares of common
stock held by the trust.
(17) Represents 16,667 shares held by the Newberg Family Trust. Bruce Newberg,
trustee of the Newberg Family Trust, has voting and dispositive power over the
shares of common stock held by the trust.
(18) Represents 15,944 shares held by the Julius H. Roma Revocable Trust. Julius
H. Roma, trustee of the Julius H. Roma Revocable Trust, has voting and
dispositive power over the shares of common stock held by the trust.
(19) Represents 15,471 shares held by the Judith Ellen Olinger Revocable Trust.
Judith Ellen Olinger, trustee of the Judith Ellen Olinger Revocable Trust, has
voting and dispositive power over the shares of common stock held by the trust.
(20) Represents 4,556 shares held by the Michael J. Leja Revocable Trust.
Michael J.Leja, trustee of the Michael J. Leja Revocable Trust, has voting and
dispositive power over the shares of common stock held by the trust.
-22-
PLAN OF DISTRIBUTION
We are registering, on behalf of the selling stockholders, 5,569,524
shares of common stock that are currently outstanding, 4,365,214 shares of
common stock that are issuable upon conversion of our outstanding convertible
preferred stock, 2,923,643 shares of common stock that are issuable upon
exercise of outstanding warrants and warrants that will be outstanding prior to
the effectiveness of the registration statement of which this prospectus is a
part and 6,000,000 shares of common stock that may be issued as payment under
our outstanding promissory notes. We issued these securities to the selling
stockholders in private placement transactions. The selling stockholders named
in the table above or their pledgees, donees, transferees or other
successors-in-interest who receive convertible securities from the selling
stockholders as a gift, partnership distribution or other non-sale related
transfer after the date of this prospectus may sell the shares of common stock
listed in the table above from time to time. Each selling stockholder will act
independently in making decisions regarding the timing, manner and size of each
sale. The sales may be made on the OTC Bulletin Board or on any stock exchange
or automated interdealer quotation system on which the common shares are listed
or quoted at the time of sale, in the over-the-counter market, through put or
call option transactions relating to the shares, in negotiated transactions, or
a combination of such methods of sale or otherwise, at prices and on terms then
prevailing or at prices related to the then current market price. The selling
stockholders may effect these transactions by selling the shares of common stock
to or through broker-dealers, or not. The shares of common stock may be sold
through one or more of, or a combination of, the following:
o a block trade in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account under this prospectus;
o "at the market" to or through market makers into an existing market
for the shares;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o through transactions in options, swaps or other derivative
securities (whether exchange-listed or otherwise);
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o in privately negotiated transactions; and
o any other method permitted by applicable law.
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 stockholders may arrange for other
broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares. In these
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also sell shares short and redeliver the shares to
close out those short positions. The selling stockholders may enter into options
or other transactions with broker-dealers that require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares covered by this prospectus. The selling stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon default the broker-dealer may sell the pledged shares
under this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders.
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 stockholders may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act of 1933, as amended, 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 the selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling stockholders
will be subject to the prospectus delivery requirements of the Securities Act.
In addition, any shares covered by this prospectus which qualify for sale in
compliance with Rule 144 promulgated under the Securities Act may be sold under
Rule 144 rather than under this prospectus. The selling stockholders have
advised us that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of their
shares, and that there is no underwriter or coordinating broker acting in
connection with the proposed sale of the shares by the selling stockholders.
-23-
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 Securities Exchange Act
of 1934, as amended (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 restricted period before the commencement of
the distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, provisions of which
may limit the timing of purchases and sales of the shares of our common stock by
the selling stockholders.
We will make copies of this prospectus available to the selling
stockholders and have informed the selling stockholders of the need to deliver
copies of this prospectus to purchasers at or before the time of any sale of the
shares.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against various liabilities,
including liabilities arising under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
This section describes the material terms of our capital stock and related
terms of our certificate of incorporation and bylaws as currently in effect.
This summary is not complete. For more detailed information, please see our
certificate of incorporation and bylaws. All share numbers relating to our
common stock have been adjusted to reflect the 1-for-30 reverse split of our
common stock effected on July 19, 2004.
AUTHORIZED CAPITAL STOCK
We are currently authorized to issue a total of 37,000,000 shares of
capital stock consisting of:
o 35,000,000 shares of common stock, par value $0.0001 per share; and
o 2,000,000 shares of preferred stock, par value $0.0001 per share.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held
on all matters submitted to a vote of our stockholders. Holders of common stock
are entitled to receive dividends, ratably, if any, as may be declared by our
board of directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock. If we liquidate, dissolve or
wind up, the holders of our common stock are entitled to share ratably in all
assets remaining after satisfaction of liabilities and the liquidation
preference of any shares of preferred stock that are outstanding at that time.
Holders of common stock have no preemptive rights and no right to convert their
common stock onto any other securities. There are no redemption or sinking fund
provisions applicable to our common stock. The rights, preferences and
privileges of holders of our common stock are subject to, and may be adversely
affected by, the rights of holders of shares of any series of preferred stock
that we may designate and issue in the future without further stockholder
approval. As of December 7, 2004, 11,810,280 shares of our common stock were
issued and outstanding.
-24-
PREFERRED STOCK
Our board of directors is authorized to issue from time to time, without
further stockholder approval, up to an aggregate of 2,000,000 shares of
preferred stock in one or more series and to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each series, including the dividend rights, dividend rates, conversion
rights, voting rights, term of redemption, including sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of any series. We may issue preferred
stock in ways that may delay, defer or prevent a change in control of the
company without further action by our stockholders and may adversely affect the
voting and other rights of the holders of our common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of our common stock, including the loss of voting
control to others.
Series A Junior Participating Preferred Stock
We have designated 500,000 shares of our preferred stock as Series A
Junior Participating Preferred Stock, which are issuable under certain
circumstances pursuant to our stockholder rights plan, which is described in
more detail below. No shares of Series A Junior Participating Preferred Stock
are currently issued or outstanding.
Series B Convertible Preferred Stock
We have designated 1,000,000 shares of our preferred stock as Series B
Convertible Preferred Stock, of which approximately 108,406 shares were issued
and outstanding as of December 7, 2004. The holders of Series B Convertible
Preferred Stock are entitled to certain rights and preferences with respect to
the holders of our common stock, including the following:
o Voting. Except as required by the Delaware law, the holders of
Series B Convertible Preferred Stock are not entitled to any voting
rights.
o Conversion. The Series B Convertible Preferred Stock has a stated
value of $21.138 per share. Each share of Series B Convertible
Preferred Stock is convertible into a number of shares of common
stock equal to the stated value plus any accrued and unpaid
dividends divided by an initial conversion price of $6.00. This
conversion price is subject to adjustment for any stock splits,
stock dividends or similar transactions. Pursuant to an agreement
with us, the holders of Series B Convertible Preferred Stock are
obligated to convert their shares into shares of common stock as
soon as reasonably practicable. However, no holder of Series B
Convertible Preferred Stock will be required to convert its shares
into shares of common stock if the conversion would cause the holder
or any of its affiliates, individually or in the aggregate, to
beneficially own more than 9.999% of our outstanding common stock.
o Dividends. Holders of Series B Convertible Preferred Stock are
entitled to receive dividends, if any, as may be declared by our
board of directors out of legally available funds. Holders of Series
B Convertible Preferred Stock are also entitled to share pro-rata,
on an as-converted basis, in any dividends or other distributions
that may be declared by the board of directors with respect to the
common stock.
o Liquidation. If we liquidate, dissolve or wind up, the holders of
Series B Convertible Preferred Stock are entitled to receive the
stated value of their shares plus all accrued and unpaid dividends
prior to any amounts being paid to the holders of our common stock.
In addition, the holders of Series B Convertible Preferred Stock are
entitled to share ratably together with the holders of common stock
in all remaining assets after the satisfaction of all other
liquidation preferences.
o Redemption. The holders of Series B Convertible Preferred Stock have
the right to require us to purchase all of their shares of Series B
Convertible Preferred Stock upon the occurrence of certain events,
such as the following:
o We fail to remove any restrictive legend from certificates
representing shares of our common stock that are issued to
holders who convert their shares of Series B Convertible
Preferred Stock;
o We make an assignment for the benefit of creditors or apply
for or consent to the appointment of a receiver or trustee;
o Any bankruptcy, insolvency, reorganization or other proceeding
for the relief of debtors is instituted by or against us and
is not dismissed within 60 days;
-25-
o We sell substantially all of our assets, merge or consolidate
with any other entity or engage in a transaction that results
in any person or entity acquiring more than 50% of our
outstanding common stock on a fully diluted basis;
o We fail to pay when due any payment with respect to any of its
indebtedness in excess of $250,000;
o We breach any agreement for monies owed or owing in an amount
in excess of $250,000 and the breach permits the other party
to declare a default or otherwise accelerate the amounts due
under that agreement; or
o We permit a default under any agreement to remain uncured and
the default would or is likely to have a material adverse
effect on our business, operations, properties or financial
condition.
Series C Convertible Preferred Stock
We have designated 10,000 shares of our preferred stock as Series C
Convertible Preferred Stock, of which approximately 6,066 shares were issued and
outstanding as of December 7, 2004. The holders of Series C Convertible
Preferred Stock are entitled to certain rights and preferences with respect to
the holders of our common stock, including the following:
o Voting. The holders of Series C Convertible Preferred Stock are
entitled to vote together with the holders of our common stock, as a
single class, on all matters submitted to a vote of our
stockholders. The holders of Series C Convertible Preferred Stock
are entitled to a number of votes equal to the number of shares of
common stock that would be issued upon conversion of their shares of
Series C Convertible Preferred Stock.
o Conversion. The Series C Convertible Preferred Stock has a stated
value of $1,750 per share. Each share of Series C Convertible
Preferred Stock is convertible into a number of shares of common
stock equal to the stated value, plus any accrued and unpaid
dividends, divided by an initial conversion price of $3.00. This
conversion price is subject to adjustment for any stock splits,
stock dividends or similar transactions. The conversion price is
also subject to adjustment in the event that we make a dilutive
issuance of common stock or other securities that are convertible
into or exercisable for common stock at an effective per share
purchase price that is less than the conversion price of the Series
C Convertible Preferred Stock that is in effect at the time of the
dilutive issuance. The holders of Series C Convertible Preferred
Stock may convert their shares into shares of common stock at any
time. However, no holder of Series C Convertible Preferred Stock may
convert its shares into shares of common stock if the conversion
would cause the holder or any of its affiliates, individually or in
the aggregate, to beneficially own more than 9.999% of our
outstanding common stock.
o Dividends. Holders of Series C Convertible Preferred Stock are
entitled to receive, out of legally available funds, dividends at
the rate of 6% per annum beginning on the first anniversary of their
date of issuance and 8% per annum beginning on the second
anniversary of their date of issuance. Dividends are payable
semi-annually, either in cash or shares of our common stock.
o Liquidation. If we liquidate, dissolve or wind up, the holders of
Series C Convertible Preferred Stock are entitled to receive the
stated value of their shares plus all accrued and unpaid dividends
prior to any amounts being paid to the holders of Series B
Convertible Preferred Stock and common stock. In addition, the
holders of Series C Convertible Preferred Stock are entitled to
share ratably together with the holders of Series B Convertible
Preferred Stock and common stock in all remaining assets after the
satisfaction of all other liquidation preferences.
o Redemption. The holders of Series C Convertible Preferred Stock have
the right to require us to purchase all of their shares of Series C
Convertible Preferred Stock upon the occurrence of certain events,
such as the following:
o We fail to remove any restrictive legend from certificates
representing shares of our common stock that are issued to
holders who convert their shares of Series C Convertible
Preferred Stock;
o We make an assignment for the benefit of creditors or apply
for or consent to the appointment of a receiver or trustee;
-26-
o Any bankruptcy, insolvency, reorganization or other proceeding
for the relief of debtors is instituted by or against us and
is not dismissed within 60 days;
o We sells substantially all of our assets, merge or consolidate
with any other entity or engages in a transaction that results
in any person or entity acquiring more than 50% of our
outstanding common stock on a fully diluted basis;
o We fail to pay when due any payment with respect to any of its
indebtedness in excess of $250,000;
o We breach any agreement for monies owed or owing in an amount
in excess of $250,000 and the breach permits the other party
to declare a default or otherwise accelerate the amounts due
under that agreement; or
o We permit a default under any agreement to remain uncured and
the default would or is likely to have a material adverse
effect on our business, operations, properties or financial
condition.
Series D Convertible Preferred Stock
We have designated 2,000 shares of our preferred stock as Series D
Convertible Preferred Stock, of which 2,000 shares were issued and outstanding
as of December 7, 2004. The holders of Series D Convertible Preferred Stock are
entitled to certain rights and preferences with respect to the holders of our
common stock, including the following:
o Voting. The holders of Series D Convertible Preferred Stock are
entitled to vote together with the holders of our common stock and
holders of Series C Convertible Preferred Stock, as a single class,
on all matters submitted to a vote of our stockholders. The holders
of Series D Convertible Preferred Stock are entitled to a number of
votes equal to the number of shares of common stock that would be
issued upon conversion of their shares of Series D Convertible
Preferred Stock.
o Conversion. The Series D Convertible Preferred Stock has a stated
value of $1,000 per share. Each share of Series D Convertible
Preferred Stock is convertible into a number of shares of common
stock equal to the stated value divided by an initial conversion
price of $4.50. This conversion price is subject to adjustment for
any stock splits, stock dividends or similar transactions. The
holders of Series D Convertible Preferred Stock may convert their
shares into shares of common stock at any time. However, no holder
of Series D Convertible Preferred Stock may convert its shares into
shares of common stock if the conversion would cause the holder or
any of its affiliates, individually or in the aggregate, to
beneficially own more than 9.999% of our outstanding common stock.
o Dividends. Holders of Series D Convertible Preferred Stock are
entitled to share pro-rata, on an as-converted basis, in any
dividends or other distributions that may be declared by the board
of directors with respect to the common stock.
o Liquidation. If we liquidate, dissolve or wind up, the holders of
Series D Convertible Preferred Stock and the holders of Series C
Convertible Preferred Stock are entitled to receive the stated value
of their respective shares plus all accrued and unpaid dividends,
pari passu, and prior to any amounts being paid to the holders of
Series B Convertible Preferred Stock and common stock. In addition,
the holders of Series D Convertible Preferred Stock are entitled to
share ratably together with the holders of Series C Convertible
Preferred Stock, Series B Convertible Preferred Stock and common
stock in all remaining assets after the satisfaction of all other
liquidation preferences.
o Redemption. The holders of Series D Convertible Preferred Stock have
the right to require us to purchase all of their shares of Series D
Convertible Preferred Stock upon the occurrence of certain events,
such as the following:
o We fail to remove any restrictive legend from certificates
representing shares of our common stock that are issued to
holders who convert their shares of Series D Convertible
Preferred Stock;
o We make an assignment for the benefit of creditors or apply
for or consent to the appointment of a receiver or trustee;
-27-
o Any bankruptcy, insolvency, reorganization or other proceeding
for the relief of debtors is instituted by or against us and
is not dismissed within 60 days;
o We sell substantially all of our assets, merge or consolidate
with any other entity or engages in a transaction that results
in any person or entity acquiring more than 50% of our
outstanding common stock on a fully diluted basis;
o We fail to pay when due any payment with respect to any of its
indebtedness in excess of $250,000;
o We breach any agreement for monies owed or owing in an amount
in excess of $250,000 and the breach permits the other party
to declare a default or otherwise accelerate the amounts due
under that agreement; or
o We permit a default under any agreement to remain uncured and
the default would or is likely to have a material adverse
effect on our business, operations, properties or financial
condition.
ANTI-TAKEOVER PROVISIONS
Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws.
Provisions of our certificate of incorporation and bylaws may delay, defer
or discourage another party from acquiring control of us. We expect that these
provisions, which are summarized below, discourage coercive takeover practices
or inadequate takeover bids. These provisions are also designed to encourage
persons seeking to acquire control of us to first negotiate with our board of
directors, which we believe may result in an improvement of the terms of any
such acquisition in favor of our stockholders. However, they also give the board
the power to discourage acquisitions that some stockholders may favor.
Undesignated Preferred Stock. The ability to authorize undesignated
preferred stock makes it possible for our board of directors to issue
preferred stock with super voting, special approval, dividend or other
rights or preferences that could impede the success of any attempt to
acquire us. These and other provisions may have the effect of deferring,
delaying or discouraging hostile takeovers, or changing control or
management of us.
Classified Board of Directors. Our certificate of incorporation provides
for the board of directors to be divided into three classes, each with a
staggered three-year term. As a result, only one class of directors is
elected at each annual meeting of stockholders, and each of the two other
classes of directors continue to serve for the remainder of their
respective three-year term. The classification of directors has the effect
of making it more difficult for stockholders to change the composition of
our board. Our certificate of incorporation provides that the number of
directors is fixed in the manner provided in the bylaws. Our bylaws
provide that the number of directors will be fixed from time to time by
the board or by the stockholders at an annual meeting.
Requirements for Advance Notification of Stockholder Meetings, Vacancies
and Newly Created Directorships. Our bylaws prohibit the conduct of any
business at a special meeting of the stockholders other than as specified
in the notice of special meeting. This provision may have the effect of
deferring, delaying or discouraging hostile takeovers, or changes in
control or management of our company. Additionally, vacancies and newly
created directorships may be filled by a majority of the directors then in
office, even though less than a quorum. This provision may defer, delay or
discourage a potential acquiror from conducting a solicitation of proxies
to elect the acquiror's own slate of directors or otherwise attempting to
obtain control of us.
Amendment Provisions. Our certificate of incorporation grant our board of
directors the authority to amend and repeal our bylaws without a
stockholder vote in any manner not inconsistent with the laws of the State
of Delaware or our certificate of incorporation.
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Stockholder Rights Plan
We currently have in effect a stockholder rights plan, which is governed
by the terms and conditions contained in the Amended and Restated Rights
Agreement, dated as of January 24, 2001, between us and Fleet National Bank, as
rights agent. In the event that we are acquired in a asset purchase or other
business combination transaction or 50% or more of our consolidated assets or
earning power is sold, each holder of our common stock will have the right to
receive that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the right. In the event that any person becomes the beneficial owner of
15% or more of the outstanding shares of our common stock proper provision shall
be made so that each holder of our common stock, other than the acquiring
person, will thereafter have the right to receive that number of shares of our
common stock or preferred stock (or cash, other securities or property) of
having a market value of two times the exercise price of the right.
The rights plan has certain anti-takeover effects. The rights plan will
cause substantial dilution to a person or group that attempts to acquire us on
terms not approved by our board of directors. The rights plan should not
interfere with any asset purchase or other business combination approved by the
board of directors because the rights granted to each holder of common stock may
be redeemed by us prior to such asset purchase or other business combination.
RECENT EVENTS
EMPLOYMENT AGREEMENTS
On November 3, 2004, P-Com entered into retention agreements with two of
its senior executives, Don Meiners, its Vice President of Operations, and
Randall L. Carl, its Vice President of Sales and Marketing - Licensed Products.
Under the terms of the agreements, in the event that either Messrs. Meiners or
Carl are terminated without cause, the Company is obligated to pay their base
salary for a period of six months, and all options previously granted shall vest
in accordance with their terms for a period of two years following the date of
such termination.
In the event that Messrs. Meiners or Carl are terminated within twelve
months of a change in control, P-Com is obligated to pay their salary for a
period of one year following such termination and all options granted shall
automatically accelerate so that each option will become fully vested and
immediately exercisable for the total number of shares of Common Stock subject
to those options ("Severance Benefits"). For purposes of the agreements, a
Change of Control shall mean any of the following transactions effecting a
change in ownership or control of the Company: (a) a merger or consolidation in
which the Company is not the surviving entity; (b) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in complete
liquidation or dissolution of the Company; (c) any reverse merger in which the
Company is the surviving entity but in which securities representing 50% or more
of the total combined voting power of the Company outstanding securities are
transferred to a person(s) different from the person(s) holding those securities
immediately prior to such merger; or (d) the acquisition, directly or indirectly
by a person or related group of persons of beneficial ownership of securities
possessing more than 30% of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made directly to
the Company's stockholders.
Messrs. Meiners and Carl shall be entitled to receive their Severance
Benefits if, at any time within twelve months of a Change of Control: (a) his
level of responsibility at the Company is materially reduced; (b) his place of
employment is moved to a location that is more than 50 miles from his place of
employment immediately prior to a Change in Control; or (c) his salary or bonus
plan is reduced without his prior written consent.
DEBENTURE FINANCING
On November 3, 2004, the Company entered into a Note and Warrant Purchase
Agreement (the "Purchase Agreement") with a purchaser ("Purchaser") whereby the
Purchaser has agreed to purchase debentures from the Company in the aggregate
principal amount of up to $5,000,000 (the "Notes"). In addition, the Company has
agreed to issue warrants to purchase in the aggregate up to 800,000 shares of
the Company's common stock (the "Warrants"). The Warrants will have an initial
exercise price of $1.50 and a term of five years. The Notes and Warrants shall
be issued in two closings. The first closing took place on November 26, 2004 and
consisted of $3,300,000 principal amount of Notes. The Purchase Agreement
originally contemplated that the second closing would take place no later than
December 30, 2004. The parties have agreed to extend the second closing until
January 28, 2005, which date shall be prior to the effectiveness of the
registration statement of which this prospectus is a part, and shall consist of
$1,700,000 principal amount of Notes. For the period beginning on the first
closing and ending on the second closing, the Company has agreed not to pay more
than $250,000 in proceeds from the first closing to satisfy the indebtedness
owed to Agilent Financial Services, Inc. ("Agilent") among other conditions. The
second closing is conditioned on P-Com entering into an agreement with Agilent
limiting the remaining payments to Agilent to no more than $100,000 per month
over a period of sixteen months following the second closing.
-29-
The Notes are payable in eight equal quarterly installments. The Notes
shall bear interest at an interest rate equal to seven percent (7%) per annum,
increasing to eight percent (8%) on July 1, 2005, and ten percent (10%) on April
1, 2006 through the maturity date. The principal and interest payments due may
be paid in either shares of the Company's common stock, cash or a combination of
both. The number of shares of common stock that may be used to pay the quarterly
installments is capped at 6,000,000 shares of common stock.
The Company also entered into a Registration Rights Agreement with the
Purchaser that obligates the Company to register the 6,000,000 shares of common
stock that may be used to make the quarterly payments and the 800,000 shares of
common stock issuable upon exercise of the Warrants. The Company is obligated to
register such shares with the Securities and Exchange Commission within
forty-five (45) days after the first closing. The Company has received a waiver
of this requirement and has received an extension through January 28, 2005.
In the event that the Company enters into a definitive agreement relating
to any transaction in which the Company issues greater than forty percent (40%)
of its common stock outstanding or enters into a transaction resulting in a
change of control, as such term is defined in the Purchase Agreement (an
"Organic Change Transaction"), then the Purchaser's obligation to fund the
second closing shall terminate. In the event that the Purchaser has already
funded the second closing upon the Organic Change Transaction, then the
Purchaser shall have the right to demand cash payment of the amount funded under
the second closing.
Under the terms of the Note, in the event that the Company shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or assets, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the United States
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic), (iv) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the
enforcement of creditors' rights generally, (v) acquiesce in writing to any
petition filed against it in an involuntary case under United States Bankruptcy
Code or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing, or a
proceeding shall be commenced regarding the Company, without its application or
consent, in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Company or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of sixty
(60) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic) against the Company or action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing shall be
taken with respect to the Company and shall continue undismissed, or unstayed
and in effect for a period of sixty (60) days, then the outstanding principal
balance and accrued interest shall be automatically due and payable.
In connection with the issuance of the $3.3 million Note, P-Com issued a
warrant to purchase 528,000 shares of the Company's common stock.
RESTRUCTURING OF AGILENT FINANCIAL SERVICES OBLIGATION
On November 30, 2004, the Company and Agilent entered into a Stipulation
to Amend the Stipulation for Entry of Judgment (Endorsed July 9, 2003) and the
June 30, 2003 Order Setting Dismissal Review ("Stipulation to Amend"). Under the
terms of the Stipulation to Amend, the payment of the $1.725 million obligation
due to Agilent on December 1, 2004, has been restructured. P-Com shall pay
Agilent in accordance with the following schedule: (a) an initial payment of
$250,000 no later than December 1, 2004; (b) monthly payments of $92,187.50 for
sixteen months, from January 1, 2005, up to and including April 1, 2006; and (c)
on the earlier of (i) May 1, 2006 or (ii) within thirty (30) days of full
payment by P-Com to Agilent of the $1.725 million, P-Com shall pay any and all
interest that has accrued pursuant to the Stipulation to Amend. Interest shall
accrue on the $1.725 million at the rate of 10.25% per annum from December 1,
2004. In connection with the Stipulation to Amend, P-Com issued a warrant to
purchase 178,571 shares of the Company's common stock to Agilent. The warrants
have an initial exercise price of $0.56 and a term of five years.
-30-
VALIDITY OF THE SHARES
The validity of the shares of our common stock offered by this prospectus
will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP.
EXPERTS
The consolidated financial statements of P-Com, Inc. as of December 31,
2003, and for the year then ended, have been incorporated by reference into this
prospectus and in the registration statement to which this prospectus relates in
reliance upon the report of Aidman, Piser & Company, P.A., the Company's
independent registered public accounting firm, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Speedcom Wireless Corporation as of December
31, 2002, and for the year then ended, have been incorporated by reference into
this prospectus and in the registration statement to which this prospectus
relates in reliance upon the report of Aidman, Piser & Company, P.A., Speedcom's
independent auditors, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of P-Com, Inc. as of December 31,
2001 and 2002, and for the three years ended December 31, 2002, have been
incorporated by reference into this prospectus and in the registration statement
to which this prospectus relates in reliance upon the report (which includes an
explanatory paragraph relating to the our ability to continue as a going concern
as described in Note 1 to the financial statements), of PricewaterhouseCoopers,
LLP, independent accountants, given upon the authority of said firm as experts
in accounting and auditing.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" certain information we
have filed with it, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus. We incorporate by reference
into this prospectus and refer you to the documents listed below:
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 2003, filed with the SEC on March 30, 2004;
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2004, June 30, 2004 and September 30, 2004, filed with the SEC on
May 17, 2004, August 16, 2004 and November 12, 2004, respectively;
and
o Our Current Reports on Form 8-K, filed with the SEC on February 2,
2004, February 5, 2004, March 2, 2004, April 22, 2004, April 30,
2004, June 15, 2004, June 29, 2004, July 12, 2004, July 19, 2004,
July 23, 2004, August 2, 2004, September 23, 2004, October 4, 2004,
October 14, 2004 and November 1, 2004.
o All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 since the end of the fiscal year
covered by the annual report referred to above.
o The financial statements of Speedcom Wireless Corporation for its
year ended December 31, 2002 and its nine-months ended September 30,
2003; and, certain pro-forma financial information related to our
purchase of Speedcom Wireless Corporation, as filed with the SEC on
Form 8-K dated December 24, 2003 and Form S-1 dated December 19,
2003.
You may request, orally or in writing, a copy of these filings. We will
provide the requested copies of these filings to you at no cost. Please direct
your requests to:
-31-
P-Com, Inc.
3175 S. Winchester Boulevard
Campbell, CA 95008
Telephone: (408) 866-3666
Attention: Daniel W. Rumsey
This prospectus is accompanied by a copy of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 and a copy of our Quarterly Report
on Form 10-Q for the quarter ended September 30, 2004. You should read these
reports to obtain additional information about our business, financial condition
and results of operations.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). Copies of these reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at:
Judiciary Plaza
Room 1024
450 Fifth Street, N.W.
Washington, D.C. 20549
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Room of the SEC at the address set forth above or by
calling the SEC at l-800-SEC-0330. The SEC maintains a website that contains
reports, proxy statements and other information about issuers, including us,
that file electronically with the SEC. The address of the SEC's website is
http://www.sec.gov.
Information on any website of ours or the website of any of our
subsidiaries is not part of this prospectus and you should not consider
information contained on any such websites as part of this prospectus, unless
that information is also contained in this prospectus. You should rely only on
the information incorporated by reference or provided in this prospectus or any
prospectus supplement. We have not authorized anyone else to provide you with
different information. 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 page of those documents.
-32-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All costs and expenses incurred in connection with the sale and
distribution of the common stock being registered for sale will be paid by the
Registrant. The following is an itemized statement of these costs and expenses.
All amounts shown are estimates except for the Securities and Exchange
Commission registration fee.
SEC Registration Fee $ 704.14
Printing and Engraving Expenses *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Miscellaneous *
----------
Total $ *
==========
-------------------------
* To be completed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law allows a corporation
to include in its certificate of incorporation a provision that eliminates the
personal liability of the directors of that corporation to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except where the director breached the duty of loyalty, failed to act
in good faith, engaged in intentional misconduct or knowingly violated a law,
authorized the payment of a dividend or approved a stock repurchase in violation
of Delaware corporate law or obtained an improper personal benefit. The
Registrant's certificate of incorporation contains a provision that eliminates
the personal liability of its directors in accordance with Section 102 of the
Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. Article
VII of the Registrant's bylaws provides for mandatory indemnification of its
directors and permissible indemnification of its officers, employees and other
agents to the maximum extent permitted under the Delaware General Corporation
Law. The Registrant has entered into indemnification agreements with its
officers and directors, which are intended to provide the Registrant's officers
and directors with indemnification to the maximum extent permitted under the
Delaware General Corporation Law.
ITEM 16. EXHIBITS.
See Index of Exhibits on page II-4.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
-1-
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act,
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Campbell, State of California, on this 28th day
of January, 2004.
P-COM, INC.
By: /s/ Samuel Smookler
------------------------------------
Samuel Smookler
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each of Samuel Smookler and Daniel
W. Rumsey, the undersigned's true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for the undersigned and in his
name, place and stead, in any and all capacities (including the undersigned's
capacity as a director and/or officer of P-Com, Inc.), to sign any or all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said attorneys-in-fact full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute, acting alone, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Name Title Date
--------------------------------------------------------------------------------------------------
/s/ Samuel Smookler Chief Executive Officer (Principal January 28, 2005
-------------------------- Executive Officer) and Director
Samuel Smookler
/s/ Daniel W. Rumsey Acting Chief Financial Officer, Vice January 28, 2005
-------------------------- President and General Counsel (Principal
Daniel W. Rumsey Financial Officer and Principal Accounting
Officer)
/s/ George Roberts Chairman of the Board January 28, 2005
-------------------------
George P. Roberts
/s/ Frederick Fromm Director January 28, 2005
-------------------------
Frederick Fromm
/s/ Brian T. Josling Director January 28, 2005
-------------------------
Brian T. Josling
/s/ R. Craig Roos Director January 28, 2005
-------------------------
R. Craig Roos
-3-
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
3.1(1) Restated Certificate of Incorporation, as amended and restated
through October 12, 2004
3.1A(4) Amended and Restated Certificate of Designation of the Series A
Junior Participating Preferred Stock
3.1B(10) Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock
3.1C(11) Certificate of Designation, Preferences and Rights of Series C
Convertible Preferred Stock
3.1D(13) Certificate of Designation, Preferences and Rights of Series D
Convertible Preferred Stock
3.2(12) Bylaws, as amended and restated through December 3, 2003
4.1(13) Form of Common Stock Certificate
4.2(14) Amended and Restated Rights Agreement, dated January 24, 2001,
between Registrant and BankBoston, N.A
5.1 Opinion of Sheppard, Mullin, Richter & Hampton, LLP
10.1*(15) 1995 Stock Option/Stock Issuance Plan (as amended and restated
through July 17, 2002)
10.2* Amendment to 1995 Stock Option/Stock Issuance Plan, effective as
of December 3, 2003
10.3*(16) Employee Stock Purchase Plan, as amended
10.18(17) Form of Indemnification Agreement by and between the Company and
each of its officers and directors and a list of signatories.
10.62(19) Warrant to Purchase Stock, dated January 14, 2000, issued to
Greyrock Capital.
10.63(18) Registration Rights Agreement, dated January 14, 2000, by and
between P-Com, Inc. and Greyrock Capital.
10.64(18) Antidilution Agreement, dated January 14, 2000, by and between
P-Com, Inc. and Greyrock Capital.
10.65(18) Warrant to Purchase Stock, dated January 14, 2000, issued to
Silicon Valley Bank. 10.66(18) Registration Rights Agreements,
dated January 14, 2000, by and between P-Com, Inc. and Silicon
Valley Bank.
10.67(18) Antidilution Agreement, dated January 14, 2000, by and between
P-Com, Inc. and Silicon Valley Bank.
10.90*(25) Employment and Continuity of Benefits Agreement by and between
George Roberts and P-Com, Inc., dated May 31, 2001.
10.92(27) Common Stock PIPES Agreement, dated June 26, 2002, by and among
P-Com, Inc and the investors signatory thereto.
10.98#(28) Engagement Letter Agreement by and between P-Com, Inc. and Cagan
McAfee Capital Partners dated December 10, 2001 and Addendum
dated June 13, 2002.
10.99(28) Warrant Issuance Agreement by and between P-Com, Inc. and Cagan
McAfee Capital Partners dated December 1, 2001.
10.100(28) Accounts Receivable Purchase Agreement by and between P-Com, Inc.
and Silicon Valley Bank dated June 26, 2002.
10.101#(28) OEM Agreement by and between P-Com, Inc. and Shanghai Datang
Mobile Communications dated July 1, 2002.
10.107(30) Loan and Security Agreement between P-Com, Inc. and Silicon
Valley Bank dated September 20, 2002
10.108(30) Loan and Security Agreement (Exim Program) between P-Com, Inc.
and Silicon Valley Bank dated September 20, 2002.
10.109(30) Secured Promissory Notes issued to Silicon Valley Bank dated
September 20, 2002. 10.110(30) Warrant to Purchase Stock
Agreement between P-Com, Inc. and Silicon Valley Bank dated
September 20, 2002.
10.111(30) Amendment to OEM Agreement between P-Com, Inc. and Shanghai
Datang Mobile Communication effective July 1, 2002.
10.113(31) Addendum II to Engagement Letter, dated December 10, 2001,
between P-Com, Inc. and Cagan McAfee Capital Partners, effective
as of January 9, 2003.
10.117(10) Securities Purchase Agreement, dated May 28, 2003, by and among
P-Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd.
-4-
10.118(10) Registration Rights Agreement, dated May 28, 2003, by and among
P-Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd.
10.119(10) Security Agreement, dated May 28, 2003, by P-Com, Inc. and North
Sound Legacy Institutional Fund LLC, as collateral agent for
North Sound Legacy Fund LLC, North Sound Legacy Institutional
Fund LLC and North Sound Legacy International Ltd.
10.120(11) Form of Securities Purchase Agreement, dated October 3, 2003, by
and among P-Com, Inc. and certain investors signatory thereto.
10.121(11) Form of Registration Rights Agreement, dated October 3, 2003, by
and among P-Com, Inc. and certain investors signatory thereto.
10.122(11) Form of Series C-1 Warrant 10.123(11) Form of Series C-2 Warrant
10.124 Form of Registration Rights Agreement, dated October 3, 2003, by
and among P-Com, Inc., P Investors LLC, Woodmont Investments Ltd.
and Newberg Family Trust.
10.125 Form of Joinder Agreement, dated December 16, 2003, by and among
P-Com, Inc. and certain investors signatory thereto.
10.126 Closing Memorandum, dated December 10, 2003, by and between
P-Com, Inc. and SPEEDCOM Wireless Corporation.
10.127 Debt Conversion Agreement, dated December 10, 2003, by and among
P-Com, Inc., SPEEDCOM Wireless Corporation, North Sound Legacy
Fund LLC, North Sound Legacy Institutional Fund LLC and North
Sound Legacy International Ltd.
10.128 Form of Promissory Note, dated December 16, 2003, issued by P-Com
to each of North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd.
10.129 Note Repurchase Agreement, dated December 15, 2003, by and among
P-Com, Inc., North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd.
10.130 Form of Registration Rights Agreement, dated December 15, 2003,
by and among P-Com, Inc., North Sound Legacy Fund LLC, North
Sound Legacy Institutional Fund LLC and North Sound Legacy
International Ltd.
10.131*(30) 2004 Equity Incentive Plan
16.1(29) Letter from PricewaterhouseCoopers LLP to the Securities and
Exchange Commission, dated August 14, 2003, regarding the change
in the independent auditor of P-Com, Inc.
21.1(28) Subsidiaries of the Registrant
23.1 Consent of Aidman, Piser & Co., P.A.
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Sheppard, Mullin, Richter & Hampton LLP (included in
Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
-------------------------------------
* Compensatory benefit arrangement.
# Confidential treatment has been granted as to certain portions of these
exhibits.
(1) Incorporated by reference to the exhibits filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 2004.
(4) Incorporated by reference to Exhibit 3.2C of the Registrant's Form 8-A/A
filed with the Securities and Exchange Commission on December 22, 1998.
(10) Incorporated by reference to the exhibits filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
2003.
(11) Incorporated by reference to the exhibits filed as part of the
Registrant's Current Report on Form 8-K, filed with the Securities and
Exchange Commission on October 7, 2003.
(13) Incorporated by reference to the exhibits filed as part of the
Registrant's Registration Statement on Form S-1 (File No. 33-88492),
declared effective with the Securities and Exchange Commission on March 2,
1995.
(14) Incorporated by reference to Exhibit 4.10 to the Registrant's Form 8-A/A,
filed with the Securities and Exchange Commission on May 7, 2001.
(15) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-55604), filed with the Securities and
Exchange Commission on February 14, 2001.
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(16) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-63762), filed with the Securities and
Exchange Commission on June 25, 2001.
(17) Incorporated by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 33-88492)
declared effective with the Securities and Exchange Commission on March 2,
1995.
(18) Incorporated by reference to the exhibits filed as part of the
Registrant's Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 25, 2000.
(19) Incorporated by reference to the exhibits filed as part of the
Registrant's Registration Statement on Form S-3/A (File No. 333-70937),
filed with the Securities and Exchange Commission on May 4, 2000.
(20) Incorporated by reference to Exhibit 10.79 to the Registrant's
Registration Statement on Form S-3/A (File No. 333-70937), filed with the
Securities and Exchange Commission on August 24, 2000.
(21) Incorporated by reference to the exhibits filed as part of the
Registrant's Current Report on Form 8-K, filed with the Securities and
Exchange Commission on August 11, 2000.
(22) Incorporated by reference to Exhibit 10.85 to the Registrant's Quarterly
Report on Form 10-Q/A for the quarter ended September 30, 2000.
(23) Incorporated by reference to the exhibits filed as part of the
Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 2000.
(24) Incorporated by reference to Exhibit 10.90 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001.
(25) Incorporated by reference to Exhibit 10.92 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
June 26, 2002.
(26) Incorporated by reference to the exhibits filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter June 30, 2002.
(27) Incorporated by reference to the exhibits filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 2002.
(28) Incorporated by reference to the exhibits filed as part of the
Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 2003.
(29) Incorporated by reference to Exhibit 16.1 to the Registrant's Current
Report on Form 8-K, filed with the Securities and Exchange Commission on
August 14, 2003.
(30) Incorporated by reference to Exhibit 99.1 to the Registrant's Registration
Statement on Form S-8 (File No. 333-120455) filed with the Securities and
Exchange Commission on November 12, 2004.
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