As filed with the Securities and Exchange Commission on June 17, 2002
Registration No. 333 - 61200
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
ESSEX CORPORATION
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF VIRGINIA 54-0846569
(State or other jurisdiction of (I.R.S.
incorporation or organization) Employer Identification Number)
9150 Guilford Road
Columbia, Maryland 21046
(301) 953-8800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Leonard E. Moodispaw WITH COPY TO:
President and Chief Executive D. Scott Freed, Esquire
Officer
Essex Corporation Whiteford, Taylor & Preston L.L.P.
9150 Guilford Road Seven Saint Paul Street
Columbia, Maryland 21046 Baltimore, Maryland 21202
(301) 939-7000 (410) 347-8700
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, 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, please check the following box. / /
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
PROSPECTUS SUBJECT TO COMPLETION: June 17, 2002
ESSEX CORPORATION
785,000 Shares of Common Stock
We have prepared this prospectus to allow some of our stockholders and
optionholders to sell up to 785,000 shares of our Common Stock.
Our Common Stock trades on the OTC Bulletin Board under the symbol
"ESEX." On June 14, 2002, the last reported sale price of our Common
Stock was $4.95 per share.
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON STOCK, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June , 2002.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGE. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC 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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms at 450 Fifth Street,
N.W., Washington, D.C., and in New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-732-0330 for further information on the public reference
rooms.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under the Securities Exchange Act of 1934:
o Our Annual Report on Form 10-KSB for the fiscal year ended December 30, 2001.
o Our Quarterly Report on Form 10-QSB for the three months ended March 31, 2002.
o The description of our Common Stock in our Form 8-A as it may be amended from
time to time.
We are delivering with this prospectus a copy of the Form 10-KSB and
Form 10-QSB referred to above. To obtain a copy of other filings at no cost, you
may write or telephone us at the following address:
Corporate Secretary
ESSEX CORPORATION
9150 Guilford Road
Columbia, Maryland 21046
(301) 939-7000
Neither we nor the selling stockholders have authorized anyone else to
provide you with different information. Neither we nor the selling stockholders
are making an offer of these securities in any state where the state does not
permit an offer. You should not assume that the information in this prospectus
is accurate as of any date other than the date on the front of this prospectus
or on any prospectus supplement that accompanies this prospectus.
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FORWARD-LOOKING STATEMENTS
Some of the statements contained, or incorporated by reference, in this
prospectus discuss future expectations, contain projections of results of
operations or financial condition or state other "forward-looking" information.
Those statements are subject to known and unknown risks, uncertainties and other
factors that could cause the actual results to differ materially from those
contemplated by the statements. The "forward-looking" information is based on
various factors and was derived using numerous assumptions. In some cases, you
can identify these so-called "forward-looking statements" by words like "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of those words and other
comparable words. You should be aware that those statements only reflect our
predictions. Actual events or results may differ substantially. Important
factors that could cause our actual results to be materially different from the
forward-looking statements are disclosed under the heading "Risk Factors" and
throughout this prospectus.
3
ESSEX CORPORATION
REFERENCES TO "WE," "US," "OUR" AND "ESSEX" REFER TO ESSEX CORPORATION.
Essex is an optical and digital signal processing firm that is
developing technologies, components, devices and systems that enable
next-generation products in fast-growing areas of the telecommunications and
microelectronics industries: fiber-optic transmission, wireless
telecommunications, high-speed optoelectronics processors and advanced
semiconductor chips. Our products and services incorporate advances achieved
through more than two decades of pioneering work in developing high-throughput
optoelectronics processors and receivers for image, signal and data processing,
and advanced communications applications for U.S. intelligence organizations.
Essex's optoelectronics-engineering team has applied its optical and
digital signal processing experience to critical challenges in the
telecommunications and advanced digital signal processing fields. As a result,
Essex is developing three product lines that it believes have the potential to
provide dramatic improvements in the speed, cost effectiveness and quality of
service for next-generation systems in fiber-optic data transmission, wireless
telecommunications and image processing.
Essex currently does not have sufficient resources to bring its
telecommunications and optoelectronics processing devices to market.
Accordingly, Essex will likely have to partner with or enter into licensing
arrangements with major industry participants in order to successfully introduce
its technology and products. In addition, several optical telecommunications and
fiber optic companies, both established and emerging, are currently developing
products that may compete in the specialty areas that Essex's technology is
designed to address. These companies are all larger and more established than
Essex, have existing customer bases and significantly greater access to capital
resources than Essex. See "RISK FACTORS."
Our products under development include:
o An all-optical, all-passive technique, HYPERFINE WDM FIBER OPTIC
COMMUNICATIONS TECHNOLOGY, which has shown in laboratory tests and
prototype demonstrations to significantly increase the number of channels
and their combined bandwidth used for DWDM. The core HYPERFINE WDM
technology provides:
- All passive optical components;
- Simple and small packaging;
- Excellent channel isolation;
- High density--50 MHz to 100 GHz spacing;
- Superior response and flat filter shapes;
- Passband shapes that can be tailored for each application;
- Low insertion loss;
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- Low temperature sensitivity;
- Fixed or tunable designs; and
- Standard manufacturing processes.
o An optically enhanced digital signal processing technology, OPTICAL
PROCESSOR ENHANCED RECEIVER ARCHITECTURE (OPERATM), has demonstrated in
laboratory modeling a dramatic increase in the quality of service and
carrying capacity for CDMA wireless telecommunications systems. We believe
the OPERA(TM)technology has the potential to revolutionize current and
future 2.5G and 3G CDMA systems, when deployed, by eliminating the
"near-far" interference problem and allowing significantly more channels
(users) per base station. Essex is in continuing discussions with wireless
industry representatives regarding development of initial prototypes.
Further development and testing of OPERA(TM)has been temporarily delayed
until funding is identified and obtained to finance such activity.
o A high-speed optoelectronic processor, IMAGE SYNTHESIS (IMSYNTM), enabling
extraordinarily fast processing of data for complex visual image systems
including radar imaging, magnetic resonance imaging (MRI), microscopy and
ultrawideband signal processing. The second generation ImSyn(TM)
optoelectronic processor can accelerate computing speed for processing of
large volumes of data by factors of up to one hundred times over comparable
digital-only processing. Partial development of the second generation of
ImSyn(TM)is taking place under a government contract for the development of
advanced synthetic aperture radar techniques. We are currently seeking
additional funding to further the development and testing of second
generation ImSyn(TM)processors in 2002.
5
RISK FACTORS
You should carefully consider the following risk factors before
deciding to invest in our Common Stock. You should also consider the other
information in this prospectus and the additional information in our other
reports on file with the SEC and in the other documents incorporated by
reference in this prospectus. See "Where You Can Find More Information" on page
2.
RISKS RELATED TO OUR FINANCIAL RESULTS
WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO INCUR NET LOSSES FOR
THE FORESEEABLE FUTURE, AND MAY NEVER ACHIEVE OR SUSTAIN PROFITABILITY.
We incurred a net loss for our fiscal years ended December 30, 2001 and
December 31, 2000 and for the fiscal quarter ended March 31, 2002. The Company
also incurred net losses in fiscal 1998 and 1997. In 1999, we reported a small
net income. As of fiscal year end 2001and March 31, 2002, we had accumulated
deficits of $12.2 million and $13.1 million, respectively. Our revenues have
declined from $3.3 million in fiscal 2000 to $2.6 million in fiscal 2001,
primarily as a result of our focus on commercial optoelectronics
telecommunications products that have not yet generated revenue. Our revenues
for the quarter ended March 31, 2002 were $763,000 compared to revenues of
$413,000 in the same period in 2001. We expect to incur net losses for the
foreseeable future. To date, we have primarily funded our operations from the
sale of equity securities. We also expect to incur significant product
development and administrative expenses, and, as a result, we will need to
significantly increase revenues to achieve profitability. Even if we achieve
profitability, given the competition in, and the evolving nature of, the optical
and wireless telecommunications markets, we may not be able to sustain or
increase profitability on a quarterly or annual basis. As a result, we will need
to generate significantly higher revenues while containing costs and operating
expenses if we are to become and remain profitable.
IF OUR ACTUAL CAPITAL REQUIREMENTS VARY SIGNIFICANTLY FROM OUR EXPECTATIONS, WE
MAY REQUIRE ADDITIONAL FINANCING SOONER THAN ANTICIPATED.
Since September 2000 we have received approximately $5.4 million from
private investors to pursue commercial applications of our optical and wireless
communications technologies and resulting products. We have commitments for an
additional $500,000 of investment on an as needed basis from these private
investors. Additional funds are critical to our ability to continue to develop
our commercial technologies and products because we currently experience and
expect to continue to experience negative cash flows. The funds available and
committed are projected to last through 2002. Our actual capital requirements
depend upon several factors that are difficult to predict, including the timing
of market acceptance of our commercial products under development, our ability
to establish and expand our customer base for our commercial products and
services, the level of expenditures for sales and marketing and general and
administrative functions, the level of revenues from our U.S. Government
contracts, the cost of offering additional services and other factors. If our
capital requirements vary materially from those currently planned, we may
require additional financing
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sooner than anticipated. There can be no assurance that such funding will be
available or could be obtained in sufficient amounts or on terms acceptable to
us, if at all, or on terms that would not include substantial dilution to our
stockholders. Without timely financing, we would have to curtail or eliminate
development and immediately reduce expenditures.
RISKS RELATED TO OUR BUSINESS
THE EARLY STAGE OF DEVELOPMENT OF OUR OPTICAL AND WIRELESS TELECOMMUNICATIONS
PRODUCTS MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS.
We have traditionally derived our revenues from providing engineering
and signal processing services to the U.S. Government. While we continue to
provide these services, over the past two years we have increasingly emphasized
our work on developing new optoelectronics telecommunications products,
including HYPERFINE WDM fiber optic communications technology and OPERA(TM).
Because our development efforts on these products are ongoing and we have not
begun commercial sales of these products, our revenue and profit potential is
unproven and our limited history in the commercial telecommunications field
makes it difficult to evaluate our business and prospects. Further, due to our
shift in focus, we have difficulty accurately forecasting our revenue, and we
have limited historical financial data upon which to base operating expense
budgets. You should consider our business and prospects in light of the
heightened risks and unexpected expenses and problems we may face as a company
in an early stage of commercial development in a rapidly-evolving industry.
WE CURRENTLY RELY ON SALES TO U.S. GOVERNMENT ENTITIES, AND THE LOSS OF SUCH
CONTRACTS WOULD HAVE A MATERIAL ADVERSE IMPACT ON OUR OPERATING RESULTS.
During fiscal 2001, contracts with the U.S. Government, primarily the
military services and other departments and agencies of the Department of
Defense (DoD), accounted for approximately $1.9 million, or 73% of our revenues.
In fiscal 2000, U.S. Government programs accounted for $2.4 million, or 73%, of
our revenues. During the first quarter of fiscal 2002 U.S. Government programs
accounted for $763,000, or 100%, of our revenues. The reduction in revenues from
commercial customers in 2000 and 2001 has increased dependence upon such
government program revenues. Our business with the agencies of the Department of
Defense (DoD) is focused increasingly on our proprietary optoelectronics
technology and products. Until we are able to generate revenues from sales of
our commercial optoelectronics telecommunication products, our results of
operations will continue to depend on contracts with the DoD and other U.S.
Government departments and agencies. The loss of any significant contract or a
significant reduction in or cancellation of these contracts would adversely
affect our revenues and impair our ability to continue the development of our
proprietary products.
The loss or significant reduction in government funding of a large
program in which we participate could also materially adversely affect our
future revenues, earnings and cash flows and thus our ability to meet our
financial obligations. U.S. Government contracts are conditioned upon the
continuing approval by Congress of the amount of necessary spending. Congress
usually appropriates funds for a given program each fiscal year even though
contract periods of performance may exceed one year. Consequently, at the
beginning of a major
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program, the contract is usually partially funded, and additional monies are
normally committed to the contract only if appropriations are made by Congress
for future fiscal years.
GOVERNMENT CONTRACTS CONTAIN UNFAVORABLE TERMINATION PROVISIONS AND ARE SUBJECT
TO AUDIT AND MODIFICATION.
Companies engaged in supplying defense-related equipment and services
to U.S. Government agencies are subject to certain business risks peculiar to
the defense industry. These risks include the ability of the U.S. Government to
unilaterally:
o suspend us from receiving new contracts pending resolution of
alleged violations of procurement laws or regulations;
o terminate existing contracts;
o reduce the value of existing contracts;
o audit our contract-related costs and fees, including allocated
indirect costs; and
o control and potentially prohibit the export of our products.
All of our U.S. Government contracts can be terminated by the U.S.
Government either for its convenience or if we default by failing to perform
under the contract. Termination for convenience provisions provide only for our
recovery of costs incurred or committed, settlement expenses and profit on the
work completed prior to termination. Termination for default provisions provide
for the contractor to be liable for excess costs incurred by the U.S. Government
in procuring undelivered items from another source.
OUR FIXED PRICE CONTRACTS MAY COMMIT US TO UNFAVORABLE TERMS.
We provide some of our products and services through fixed price
contracts. Fixed price contracts provided 22%, 45% and 73% of our revenues for
fiscal 2000, fiscal 2001and the first quarter of fiscal 2002, respectively. In a
fixed price contract, the price is not subject to adjustment based on costs
incurred to perform the required work under the contract. Therefore, we fully
absorb cost overruns on fixed price contracts and this reduces our profit margin
on the contract. Those cost overruns may result in a loss. A further risk
associated with fixed price contracts is the difficulty of estimating sales and
costs that are related to performance in accordance with contract specifications
and the possibility of obsolescence in connection with long-term procurements.
Failure to anticipate technical problems, estimate costs accurately or control
costs during performance of a fixed price contract may reduce our profit or
cause a loss on the contract.
WE MAY NOT SUCCESSFULLY IMPLEMENT OUR PLAN TO EXPAND INTO COMMERCIAL MARKETS.
Our revenues currently come from business with the DoD and other U.S.
Government agencies. In addition to continuing to pursue these market areas, we
will focus our technical capabilities and expertise on related commercial
markets, including HYPERFINE WDM, OPERA(TM) and ImSyn(TM). These products are
still under various stages of development. As such, these products are subject
to certain risks and may require us to:
8
o develop marketing, sales and customer support capabilities;
o obtain customer and/or regulatory certification;
o respond to rapid technological advances; and
o obtain customer acceptance of these products and product
performance.
Our efforts to enter commercial markets will require significant
resources, including additional working capital and capital expenditures, as
well as the use of management's time. Our efforts to sell our commercial
telecommunications products, particularly our optical networking and broadband
wireless communications products, also may depend to a significant degree on the
efforts of independent distributors or communication service providers. We can
give no assurance that these distributors or service providers will be able to
market our products or their services successfully or that we will be able to
realize a return on our investments in them. If we are not successful in
addressing these risks or in developing these commercial business opportunities
we may not be able to reach profitability or remain in business.
OUR SUCCESS LARGELY DEPENDS ON OUR ABILITY TO RETAIN KEY PERSONNEL.
Our success has always depended in large part on our ability to attract
and retain highly-skilled technical, managerial, sales and marketing personnel,
particularly those skilled and experienced in optoelectronics and optical
communications equipment. We have entered into agreements with our employees
that limit the employee's ability to work for a competitor following termination
of employment. We expect our competitors will respect these agreements and not
interfere with them. We can make no assurances of that, or that we will be able
to retain all of our key contributors or attract new personnel to add to or
replace them. The loss of key personnel would prevent us from completing current
development and restrict new development.
IF BROADBAND WIRELESS TECHNOLOGY OR OUR IMPLEMENTATION OF THIS TECHNOLOGY IS NOT
BROADLY ACCEPTED, WE WILL NOT BE ABLE TO EXPAND OUR BUSINESS.
The future success of OPERA(TM) and other wireless products we are
currently developing depends on high-speed wireless communications products
gaining market acceptance as a means to provide improved voice and data
communications services. Because these markets are relatively new, it is
difficult to predict which market segments will develop or expand. We have
recently invested and expect to continue to invest significant time and
resources in the development of new products for this market. In the event that
service providers adopt technologies other than the high-speed access and other
wireless technologies or delay in their deployment of high-speed wireless
communication products, we will not be able to generate significant revenues
from our wireless products and our results of operations and financial condition
could be materially and adversely affected.
IF WE ARE UNABLE TO DEVELOP AND SUCCESSFULLY INTRODUCE NEW AND ENHANCED PRODUCTS
THAT MEET THE NEEDS OF OUR CUSTOMERS IN A TIMELY MANNER, OUR REVENUES AND
RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.
Our future success depends on our ability to anticipate our customers'
needs and develop products that address those needs. Technological change in the
optical networking industry is
9
occurring at a rapid pace. As a result, we expect there to be frequent new
product introductions, changes in customer requirements and evolving industry
standards. We may not be able to develop new products or enhancements to our
existing products in a timely manner, or at all. This would cause potential
customers to seek other solutions, which would reduce our revenues and adversely
affect our results of operations and financial condition.
We are currently developing many potential optical networking products
through our research and development efforts. Although we have several products
in development, we may not bring all of these potential products into commercial
production due to:
o changes in customer demand;
o technological developments that make our products less competitive; o evolving
industry standards; or o allocation of our limited resources to other products
or technologies.
If we incur significant expenses developing products that we do not
produce commercially, or if we select the wrong products or technologies to
bring into commercial production, our revenues and results of operations could
be adversely affected and we may not recover significant research and
development expenses.
OUR SUCCESS IS DEPENDENT ON OUR OPTOELECTRONICS TELECOMMUNICATIONS PRODUCTS
BEING DEVELOPED. FAILURE OF OUR PRODUCTS TO OPERATE AS EXPECTED COULD DELAY OR
PREVENT THEIR DEPLOYMENT AND SALE AND COULD SERIOUSLY IMPAIR OUR BUSINESS AND
PROSPECTS.
Our future growth and success largely depends on the commercial success
of our optical and wireless telecommunications products being developed. We have
not begun commercial sales of our products and have produced devices only to
specifications required in order to conduct laboratory tests and field trials.
Some of our devices have been deployed in field trials, others have been tested
in our laboratories and still others are in earlier stages of development. If
our products fail to operate as expected, this could delay or prevent their
deployment and sale and could seriously impair our business and prospects. If
our customers do not successfully test and deploy our products and technologies,
we may not be able to reach profitability or remain in business.
THE MARKET WE INTEND TO SERVE IS HIGHLY COMPETITIVE AND WE MAY NOT BE ABLE TO
ACHIEVE OR MAINTAIN PROFITABILITY.
Competition in the network communications equipment market is intense.
This market has historically been dominated by large companies, such as Alcatel,
Ciena, Cisco Systems, JDS Uniphase, Lucent Technologies, NEC and Nortel
Networks. Some of these companies, as well as emerging companies, are currently
developing products that may compete in the specialty areas that Essex's
technology is designed to address. We may face competition from other large
communications companies who may enter our proposed markets. Many of our
competitors have longer operating histories, greater name recognition, larger
customer bases and greater financial, technical and sales and marketing
resources than we do and may be able to undertake more extensive marketing
efforts and adopt more aggressive pricing policies than we can. Moreover, our
competitors may foresee the course of market developments more accurately than
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we do and could develop new technologies that compete with our products or
render our products obsolete. Due to the rapidly evolving markets in which we
compete, additional competitors with significant market presence and financial
resources may enter our markets, further intensifying competition.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY EFFECTIVELY, WE MAY BE
UNABLE TO PREVENT THIRD PARTIES FROM USING OUR TECHNOLOGIES, WHICH WOULD IMPAIR
OUR COMPETITIVE ADVANTAGE.
We rely on a combination of patent, copyright, trademark and trade
secret laws and restrictions on disclosure to protect our intellectual property
rights. We also enter into confidentiality or license agreements with our
employees and consultants and control access to and distribution of our
software, documentation and other proprietary information. The Company believes
that its patents and patent applications provide it with a competitive
advantage. Accordingly, in the event the Company's products and technologies
under development gain market acceptance, patent protection would be important
to the Company's business. However, obtaining patent and other intellectual
property protection may not adequately protect our rights or permit us to gain
or keep any competitive advantage. For instance, unauthorized parties may
attempt to copy, reverse engineer or otherwise obtain and use our patented
products or technology without our permission, thus eroding or eliminating the
competitive advantage we hope to gain though the exclusive rights provided by
patent protection. Moreover, our existing patents and patents we have applied
for (if granted) may not protect us against competitors that independently
develop proprietary technologies that are substantially equivalent or superior
to our technologies, or design around our patents. In addition, the competitive
advantage provided by patenting our technology may erode if we do not upgrade,
enhance and improve our technology on an ongoing basis to meet competitive
challenges.
Monitoring unauthorized use of our technology is difficult, and we
cannot be certain that the steps we have taken will prevent unauthorized use of
our technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States. A complete description
of Essex's patents and patent applications is contained in Essex's Annual Report
on Form 10-KSB for fiscal 2001. The Form 10-KSB is incorporated in this
prospectus by reference and we are delivering a copy of the report together with
this prospectus.
THERE IS A RISK THAT OUR PATENT APPLICATIONS WILL NOT BE GRANTED.
Although we have filed several applications for U.S. patents relating
to our HyperFine WDM(TM) and OPERA(TM) technologies, there is a risk that some
or all of our pending applications will not issue as patents. Although we
believe our patent applications are valid, the failure of our pending
applications to issue as patents would eliminate the competitive advantage we
hope to gain by obtaining patent protection and thus likely would have a
material adverse effect upon our business and results of operations.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY DISPUTES, WHICH COULD SUBJECT US
TO SIGNIFICANT LIABILITY, DIVERT THE TIME AND ATTENTION OF OUR MANAGEMENT AND
PREVENT US FROM SELLING OUR PRODUCTS.
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We or our customers may become a party to litigation in the future to
protect our intellectual property or to respond to allegations that we infringe
others' intellectual property. Any parties asserting that our products infringe
upon their proprietary rights would force us to defend ourselves and possibly
our customers against the alleged infringement. If we are unsuccessful in any
intellectual property litigation, we could be subject to significant liability
for damages and loss of our proprietary rights. Intellectual property
litigation, regardless of its success, would likely be time consuming and
expensive to resolve and would divert management time and attention. In
addition, we could be forced to do one or more of the following:
o stop selling, incorporating or using our products that include
the challenged intellectual property;
o obtain from the owner of the infringed intellectual property
right a license to sell or use the relevant technology, which
license may not be available on reasonable terms, or at all; or
o redesign those products that use the technology.
If we are forced to take any of these actions, our business would be
seriously harmed.
IF NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY ARE NOT AVAILABLE TO US OR ARE
VERY EXPENSIVE, OUR BUSINESS WOULD BE SERIOUSLY HARMED.
From time to time we may be required to license technology from third
parties to sell or develop our products and product enhancements. These
third-party licenses may not be available to us on commercially reasonable
terms, if at all. Our inability to maintain or obtain any third-party license
required to sell or develop our products and product enhancements could require
us to obtain substitute technology of lower quality or performance standards or
at greater cost. If we were required to use technology with lower performance
standards or quality, customers may stop buying our products and this would
cause our revenues to decline. Similarly, if our costs rise significantly,
customers may choose less expensive alternative products, which would cause our
revenues to decline.
RISKS RELATED TO THE OPTICAL NETWORKING INDUSTRY
THE OPTICAL NETWORKING INDUSTRY IS DEVELOPING, UNPREDICTABLE AND CHARACTERIZED
BY RAPID TECHNOLOGICAL CHANGES AND EVOLVING STANDARDS. IF THIS INDUSTRY DOES NOT
DEVELOP AND EXPAND AS WE ANTICIPATE, DEMAND FOR OUR PRODUCTS MAY FAIL TO GROW OR
MAY DECLINE, WHICH WOULD ADVERSELY AFFECT OUR REVENUES.
The optical networking industry is developing and characterized by
rapid technological change, frequent new product introductions, changes in
customer requirements and continuously evolving industry standards. As a result,
it is difficult to predict its potential size and future growth rate. In
addition, evolving customer requirements and industry standards are uncertain.
Our success depends in part on the widespread adoption of next generation
optical networks. Communications service providers that have invested
substantial resources in their existing optical networks or other systems may be
reluctant or slow to develop and deploy next-
12
generation optical networks. Our success in generating revenues in this emerging
market will depend on our ability to:
o establish, maintain and enhance our relationships with optical
networking customers;
o convince our customers of the benefits of next-generation optical
networks; and
o predict accurately, and develop our products to meet, evolving
customer requirements and industry standards.
If we fail to address changing market conditions, sales of our products
may fail to grow or may decline, which would adversely affect our revenues.
THE OPTICAL NETWORKING EQUIPMENT INDUSTRY IS EXPERIENCING DECLINING AVERAGE
SELLING PRICES, WHICH COULD ADVERSELY AFFECT OUR REVENUES AND GROSS MARGINS.
The optical networking equipment industry is experiencing declining
average selling prices as a result of increasing competition and greater unit
volumes as communications service providers continue to deploy fiber optic
networks. We anticipate that average selling prices will continue to decrease in
the future in response to product introductions by competitors, price pressures
from significant customers and greater manufacturing efficiencies. These average
selling price declines may contribute to a decline in our gross margins, which
could adversely affect our results of operations.
THE MARKET FOR OUR HYPERFINE PRODUCTS UNDER DEVELOPMENT IS NEW AND UNCERTAIN AND
OUR BUSINESS WILL SUFFER IF IT DOES NOT DEVELOP AS WE EXPECT.
Most service providers have made substantial investments in their
current network infrastructure, and they may elect to remain with current
network architectures or to adopt new architectures in limited stages or over
extended periods of time. A decision by a customer to purchase some of our
all-optical products under development will involve a significant capital
investment. We will need to convince these service providers of the benefits of
all-optical network products for future network upgrades or expansions. We
cannot be certain that a viable market for our products will develop or be
sustainable. If this market does not develop, or develops more slowly than we
expect, our business, financial condition and results of operations would be
seriously harmed.
IF THE INTERNET AND COMMERCIAL DATA NETWORKS DO NOT CONTINUE TO EXPAND AND
NEXT-GENERATION OPTICAL NETWORKS ARE NOT DEPLOYED AS RAPIDLY AS WE ANTICIPATE,
WE MAY BE UNABLE TO SELL OUR PRODUCTS UNDER DEVELOPMENT.
Our future success depends on the continued growth of the Internet and
commercial data networks for commerce and communications, the continuing
increase in the amount of data transmitted over communications networks and the
increasing adoption of, and improvements to, optical networks to meet the
increased demand for bandwidth. If data networks, including the Internet, do not
continue to expand as a widespread communications medium and commercial
marketplace, the need for significantly increased bandwidth across networks and
the market for optical networking products may not continue to develop. Future
demand for the products we
13
are developing is uncertain and will depend to a great degree on the continued
growth and upgrading of optical networks. If this growth does not continue, we
may be unable to reach profitability or remain in business.
BECAUSE OPTICAL PRODUCTS ARE COMPLEX AND ARE DEPLOYED IN COMPLEX ENVIRONMENTS,
THE PRODUCTS WE ARE DEVELOPING MAY HAVE DEFECTS THAT WE DISCOVER ONLY AFTER FULL
DEPLOYMENT, WHICH COULD SERIOUSLY HARM OUR BUSINESS.
Optical products are complex and are designed to be deployed in large
quantities across complex networks. Because of the nature of the products, they
can only be fully tested when completely deployed in large networks with high
amounts of traffic. Customers may discover errors or defects in the hardware or
the software, or products we develop may not operate as expected, after they
have been fully deployed. If we are unable to fix defects or other problems that
may be identified in full deployment, we would experience:
o loss of, or delay in, revenue and loss of market share;
o loss of existing customers;
o failure to attract new customers or achieve market acceptance;
o diversion of development resources;
o increased service and warranty costs;
o legal actions by our customers; and
o increased insurance costs.
The occurrence of any of these problems would seriously harm our
business, financial condition and results of operations. Defects, integration
issues or other performance problems could result in financial or other damages
to our customers or could negatively affect market acceptance for the products
we develop. Our customers could also seek damages for losses from us, which, if
they were successful, would seriously harm our business, financial condition and
results of operations. A product liability claim brought against us, even if
unsuccessful, would likely be time consuming and costly and would put a strain
on our management and resources.
RISKS RELATED TO THIS OFFERING
WE ARE CONTROLLED BY A LIMITED NUMBER OF STOCKHOLDERS THAT WILL BE ABLE TO EXERT
SIGNIFICANT INFLUENCE OVER MATTERS REQUIRING STOCKHOLDER APPROVAL.
We are controlled by two private investment firms, GEF Optical
Investment Company, LLC and Networking Ventures, L.L.C. and their affiliates. We
refer to these firms as the "Investors." Together the Investors own preferred
stock having voting rights equivalent to 51% of the voting power of all shares
of voting stock on all stockholder matters through mid-September 2002, at which
time such preferred stock will be converted to 2 million shares of Common Stock.
In addition, the Investors and their affiliates have directly acquired or
contracted to acquire 929,234 shares of Common Stock from the Company, including
660,000 shares of Common Stock covered by this Prospectus. Accordingly, the
Investors will control us and have the power to elect all of our directors,
appoint new management and approve certain actions requiring the approval of the
holders of shares of our Common Stock. This concentration
14
of ownership may also delay or prevent a change in control of Essex or reduce
the price investors might be willing to pay for our Common Stock. The interests
of the Investors may conflict with the interests of other holders of our Common
Stock.
THERE IS CURRENTLY ONLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND OUR
COMMON STOCK IS SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS.
Our Common Stock is listed on the OTC Bulletin Board. Prior to this
offering there only has been a limited public market for our Common Stock.
Unless and until our Common Stock is admitted for quotation on the Nasdaq Stock
Market or listed on a national securities exchange it is unlikely that any
active trading market will develop or, if any such market develops, that it will
be sustained. Even if our Common Stock is admitted for quotation or listing on
Nasdaq or a national securities exchange, an active trading market may not
develop unless the number of shares in the hands of the public is substantially
increased. In addition, in the event our operating results fall below the
expectations of public market analysts and investors, the market price of our
Common Stock would likely be materially adversely affected.
The trading price of our Common Stock is likely to be volatile and
sporadic. The stock market in general, and the market for technology companies
in particular, has experienced extreme volatility. This volatility has often
been unrelated to the operating performance of particular companies. Volatility
in the market price of our Common Stock may prevent investors from being able to
sell their Common Stock at or above the price such investors paid for their
shares or at any price at all.
SALES BY THE SELLING STOCKHOLDERS OR OTHERS OF A SIGNIFICANT NUMBER OF SHARES OF
COMMON STOCK COULD HAVE A MATERIAL ADVERSE EFFECT ON PREVAILING MARKET PRICES.
We cannot predict what effect, if any, that future sales of shares, or
the availability of shares for future sale, will have on the market price of our
Common Stock prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock by the selling stockholders, or the perception that such
sales may occur, could have a material adverse effect on prevailing market
prices.
As of March 31, 2002 we had outstanding approximately 5.3 million
shares of our Common Stock, 814,000 of which were issued and sold by us in
private transactions in reliance upon exemptions from registration under the
Securities Act. Other than the shares of Common Stock covered by this
prospectus, shares may be sold only pursuant to an effective registration
statement filed by Essex or an applicable exemption, including the exemption
contained in Rule 144 promulgated under the Securities Act. In general, under
Rule 144 as currently in effect, a shareholder, including an affiliate of Essex,
may sell shares of Common Stock after at least one year has elapsed since such
shares were acquired from us or an affiliate of ours. The number of shares of
Common Stock which may be sold within any three- month period is limited to the
greater of one percent of the then outstanding number of shares of Common Stock
or the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144. Certain other requirements of Rule 144
15
concerning availability of public information, manner of sale and notice of sale
must also be satisfied. In addition, a shareholder who is not our affiliate (and
who has not been our affiliate for 90 days prior to the sale) and who has
beneficially owned shares acquired from us or our affiliate for over two years
may resell the shares without compliance with the foregoing requirements under
Rule 144.
In addition to the shares covered by this prospectus, the Investors
have been granted rights to have up to 4,000,000 shares of Common Stock issuable
upon conversion of preferred stock and underlying warrants registered under the
Securities Act upon demand. Sales of substantial amounts of Common Stock under
Rule 144 or pursuant to the Investor's registration rights, or the perception
that such sales may occur, could have a material adverse effect on prevailing
market prices.
In March 2002, the Investors committed to purchase a total of 230,766
shares of Common Stock at a purchase price of $6.50 per share. In the event that
Essex completes a round of financing with institutional investors prior to
December 31, 2002 at a price of less that $6.50 per share, the price paid by the
Investors will be adjusted downward to equal the price paid by such
institutional investors, but in no event will go below $3.00 per share. This
adjustment provision could result in the issuance of up to 269,234 additional
shares to the Investors for no additional consideration, resulting in dilution
to other stockholders.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK
PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against companies after periods of volatility in the market price of their
securities. Securities litigation could result in substantial costs and divert
management's attention and resources from our business. Due to the potential
volatility of our stock price, we may be the target of securities litigation in
the future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Common Stock by
the selling stockholders. We may receive a small amount of proceeds if and when
an optionholder exercises the option that it holds and we will use those
proceeds for general corporate purposes.
SELLING STOCKHOLDERS
This prospectus relates to the offering by the stockholders and
optionholder named in the prospectus for resale of up to 785,000 shares of
Common Stock. Throughout this prospectus, we may refer to these stockholders and
optionholder and their pledgees, donees, transferees or other successors in
interest who receive shares in non-sale transactions, as the "selling
stockholders." If they sell all of these shares in this offering, the selling
stockholders will beneficially own the shares of our Common Stock as shown
below.
The following table sets forth the following information with respect
to each selling stockholder as of March 31, 2002: (i) name and nature of any
position or other relationship with us within the past three years; (ii) the
number and percentage of total outstanding shares of our Common Stock each
selling stockholder beneficially owns before this offering; (iii) the number
16
of shares of Common Stock the selling stockholder is offering; and (iv) the
number and percentage of total outstanding shares of our Common Stock that the
selling stockholder will own after the selling stockholder sells all of the
shares in this offering.
Percentage of
Percentage of Outstanding
Amount and Outstanding Amount and Shares of
Nature of Shares of Nature of Common Stock
Beneficial Common Stock Shares of Beneficial Beneficially
Name and Address Ownership Beneficially Common Ownership Owned After
of Beneficial Owner Before the Owned Before Stock After the the Offering
Offering the Offering Offered Offering
--------------------- ----------------- ----------------- ----------- --------------- ---------------
H. Jeffrey Leonard (1) 2,848,162 39.1 660,000 2,188,162 30.0
Caroline S. Pisano (2) 2,822,662 38.7 660,000 2,162,662 29.7
John G. Hannon (3) 2,893,811 39.7 660,000 2,233,811 30.6
James P. Gregory (4) 2,816,662 38.6 660,000 2,156,662 29.6
Marie S. Minton (5) 2,816,662 38.6 660,000 2,156,662 29.6
GEF Optical Investment
Company, LLC (6)(8) 2,816,662 38.6 660,000 2,156,662 29.6
Networking
Ventures, L.L.C. (7)(8) 2,816,662 38.6 660,000 2,156,662 29.6
Nottingham Investment
Company (9) 125,000 1.7 125,000 0 0.0
Global Environment
Capital Co., LLC
("GECC") (8)(10) 2,816,662 38.6 660,000 2,156,662 29.6
Global Environment
Strategic Technology
Partners, LLC
("GESTP")(8)(11) 2,816,662 38.6 660,000 2,156,662 29.6
---------------------------------
(1) H. Jeffrey Leonard is Chairman of the Board of Essex and a director of the
managing member of GEF. Of the shares shown as beneficially owned, 31,500
are owned directly by Mr. Leonard and 2,816,662 may be deemed to be
beneficially owned by Mr. Leonard as described in footnotes (6) and (8)
below. Mr. Leonard's address is c/o GEF, 1225 Eye Street, N.W., Suite 900,
Washington, DC 20005.
(2) Caroline S. Pisano is a Director of Essex and a managing member of
Networking Ventures. Of the shares shown as beneficially owned, 6,000 are
owned directly by Ms. Pisano and 2,816,662 shares may be deemed to be
beneficially owned by Ms. Pisano as described in footnotes (7) and (8)
below. Ms. Pisano's address is c/o Networking Ventures, 9150 Guilford Road,
Columbia, MD 21046.
(3) John G. Hannon is a Director of Essex and a managing member of Networking
Ventures. Of the shares shown as beneficially owned, 225 are owned directly
by Mr. Hannon, 76,924 are owned by the Hannon Family LLC for which Mr.
Hannon exercises voting and dispositive control, and 2,816,662 shares may
be deemed to be beneficially owned by Mr. Hannon as described in footnotes
(7) and (8) below. Mr. Hannon's address is c/o Networking Ventures, 9150
Guilford Road, Columbia, MD 21046.
(4) James P. Gregory is a director of the managing member of GEF. Mr. Gregory
may be deemed to be the beneficial owner of these shares by virtue of the
arrangements described in footnotes (6) and (8) below. Mr. Gregory's
address is c/o GEF, 1225 Eye Street, N.W., Suite 900, Washington, DC 20005.
17
(5) Marie S. Minton is a Director of Essex and a director of the managing
member of GEF. Ms. Minton may be deemed to be the beneficial owner of these
shares by virtue of the arrangements described in footnotes (6) and (8)
below. Ms. Minton's address is c/o GEF, 1225 Eye Street, N.W., Suite 900,
Washington, DC 20005.
(6) Consists of 1,000,000 shares of Common Stock issuable upon conversion of
250,000 shares of Preferred Stock and 330,000 shares directly owned by GEF.
Also consists of (i) 1,000,000 shares of Common Stock issuable on
conversion of 250,000 shares of Preferred Stock to Networking Ventures,
(ii) 330,000 shares directly owned by Networking Ventures, (iii) 118,200
shares of Common Stock directly owned by GECC and (iv) 38,462 shares of
Common Stock directly owned by GESTP, by virtue of the voting arrangements
described in footnote (8) below. GEF is a Delaware limited liability
company with its principal executive offices located at 1225 Eye Street,
N.W., Suite 900, Washington, DC 20005.
(7) Consists of 1,000,000 shares of Common Stock issuable upon conversion of
250,000 shares of Preferred Stock and 330,000 shares directly owned by
Networking Ventures. Also consists of (i) 1,000,000 shares of Common Stock
issuable on conversion of 250,000 shares of Preferred Stock to GEF, (ii)
330,000 shares directly owned by GEF, (iii) 118,200 shares of Common Stock
directly owned by GECC and (iv) 38,462 shares of Common Stock directly
owned by GESTP, by virtue of the voting arrangements described in footnote
(8) below. Networking Ventures is a Maryland limited liability company with
its principal executive offices located at 9150 Guilford Road, Columbia, MD
20146.
(8) Based on a Schedule 13D/A filed with the SEC on November 1, 2001, each of
GEF, GECC, Mr. Leonard, Ms. Minton, Mr. Gregory, Networking Ventures, Mr.
Hannon and Ms. Pisano may be deemed the beneficial owner of 2,000,000
shares of Common Stock issuable upon conversion of 500,000 shares of
Preferred Stock and 816,662 shares of Common Stock directly held for the
account of GEF, Networking Ventures, GECC and GESTP by virtue of the
provisions of a Shareholders Voting Agreement between GEF and Networking
Ventures providing for certain voting arrangements with respect to such
shares. A copy of the Shareholders Voting Agreement is included as Exhibit
3 to the Schedule 13D/A.
(9) Total shares beneficially owned prior to the Offering. As of March 31,
2002, Nottinham Investment Company beneficially owned 121,000 shares
consisting of options exercisable for 115,000 shares of Common Stock and
6,000 shares of Common Stock directly held. Nottingham Investment Company
is a Maryland corporation with its principal executive offices located at
100 West Pennsylvania Avenue, Towson, Maryland 21204.
(10) Consists of 1,000,000 shares of Common Stock issuable upon conversion of
250,000 shares of Preferred Stock and 330,000 shares of Common Stock
directly owned by GEF. Also consists of (i) 1,000,000 shares of Common
Stock issuable on conversion of 250,000 shares of Preferred Stock to
Networking Ventures, (ii) 330,000 shares of Common Stock directly owned by
Networking Ventures, (iii) 118,200 shares of Common Stock directly owned by
GECC and (iv) 38,462 shares of Common Stock directly owned by GESTP, by
virtue of the voting arrangements described in footnote (8) above. GECC is
a Delaware limited liability company with its principal executive offices
located at 1225 Eye Street, N.W., Suite 900, Washington, DC 20005.
(11) Consists of 1,000,000 shares of Common Stock issuable upon conversion of
250,000 shares of Preferred Stock and 330,000 shares of Common Stock
directly owned by GEF. Also consists of (i) 1,000,000 shares of Common
Stock issuable on conversion of 250,000 shares of Preferred Stock to
Networking Ventures, (ii) 330,000 shares of Common Stock directly owned by
Networking Ventures, (iii) 118,200 shares of Common Stock directly owned by
GECC and (iv) 38,462 shares of Common Stock directly owned by GESTP, by
virtue of the voting arrangements described in footnote (8) above. GESTP is
a Delaware limited liability company with its principal executive offices
located at 1225 Eye Street, N.W., Suite 900, Washington, DC 20005.
18
PLAN OF DISTRIBUTION
The Common Stock being offered by the selling stockholders may be sold
in transactions on the OTC Bulletin Board, on another market on which the Common
Stock may be trading, or in privately-negotiated transactions. The sale price to
the public may be the market price prevailing at the time of sale, a price
related to the prevailing market price or any other price the selling
stockholders may determine. The Common Stock may also be sold under SEC Rule 144
and not under this prospectus. The selling stockholders have the discretion not
to accept any purchase offer or make any sale of Common Stock if they deem the
purchase price to be unsatisfactory at any particular time, or for any reason.
The selling stockholders may also sell the Common Stock directly to
broker-dealers acting as principals and/or to broker-dealers acting as agents
for themselves or their customers. Brokers acting as agents for the selling
stockholders will receive usual and customary commissions for brokerage
transactions, and broker-dealers acting as principals will do so for their own
account at negotiated prices and at their own risk. It is possible that the
selling stockholders will sell shares of Common Stock to broker-dealers or other
purchasers at a price per share which may be below the then market price. In
addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales of Common Stock in the course of
hedging the positions they assume with a selling stockholder. The selling
stockholders also may sell shares short and deliver the shares to close out
their positions, and may loan or pledge their shares to a broker-dealer who may
have the right to sell the loaned or pledged shares on default or otherwise. The
selling stockholders and any brokers, dealers or agents, upon effecting the sale
of any of the Common Stock offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
The selling stockholders and any other persons participating in the
sale or distribution of the Common Stock will be subject to applicable
provisions of the Exchange Act and its rules and regulations, which may limit
the timing of purchases and sales of any of the Common Stock by the selling
stockholders or other distribution participants. Furthermore, under Regulation
M, persons engaged in a distribution of securities are prohibited from
simultaneously engaging in market making and other activities with respect to
such securities for a specified period of time before the commencement of
distributions subject to specified exceptions or exemptions. This may affect the
marketability of the Common Stock.
We have agreed to indemnify the selling stockholders against some
important liabilities, including liabilities under the Securities Act, or to
contribute to any payments these selling stockholders may be required to make in
respect of these liabilities. We are paying the costs of this registration for
the selling stockholders.
19
LEGAL MATTERS
The legal issuance and fully paid and non-assessable status of our
Common Stock offered by this prospectus was passed upon for us by our legal
counsel, Whiteford, Taylor & Preston L.L.P., Baltimore, Maryland. Counsel's
opinion is included as exhibit 5.1 to the registration statement of which this
prospectus is a part.
EXPERTS
The financial statements incorporated in this prospectus by reference
to our Annual Report on Form 10-KSB for the year ended December 30, 2001 have
been so incorporated in reliance on the report of Stegman & Company, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
20
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More
Information........................................................... 2
Forward Looking Statements............................................. 3
Essex.................................................................. 4
Risk Factors........................................................... 6
Use of Proceeds....................................................... 17
Selling Stockholders.................................................. 17
Plan of Distribution.................................................. 19
Legal Matters......................................................... 20
Experts............................................................... 20
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ESSEX CORPORATION
Common Stock
------------------------
PROSPECTUS
------------------------
June ...., 2002
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with
the issuance and distribution of the securities being registered. Except for the
SEC registration fee, all amounts are estimates.
SEC registration fee........................................ $ 854
Accounting fees and expenses................................ 4,000
Legal fees and expenses..................................... 12,500
Blue Sky fees and expenses (including counsel fees)......... 2,500
Printing expenses........................................... 500
Transfer agent's and registrar's fees and expenses.......... 500
Miscellaneous expenses...................................... 200
Total....................................................... $ 21,054
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Virginia Stock Corporation Act ("Act") permits indemnification of
directors and officers of a corporation under certain conditions and subject to
certain limitations. Articles (h) and (i) of Essex's Articles of Incorporation
contain provisions for the indemnification of directors and officers of Essex
within the limitations permitted by the Act. In addition, Essex has entered into
indemnity agreements with all of its directors and officers which provide the
maximum indemnification allowed by the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
4.1 Specimen Stock Certificate*
5.1 Opinion of Whiteford, Taylor & Preston L.L.P.*
23.1 Consent of Independent Accountants
23.3 Consent of Whiteford, Taylor & Preston L.L.P. (included in Exhibit 5.1)*
24 Power of Attorney*
99.1 Securities Purchase Agreement dated March 15, 2001*
II-1
99.2 Amendment No. 2 to Registration Rights Agreement dated March 15, 2001*
99.3 Securities Purchase Agreement dated December 4, 2000*
99.4 Amendment No. 1 to Registration Rights Agreement dated December 4, 2000*
99.5 Amendment to Securities Purchase Agreement, dated as of March 1, 2002,
between Essex Corporation and the Hannon Family LLC*
99.6 Amendment to Securities Purchase Agreement, dated as of March 1, 2002,
between Essex Corporation and Global Environment Strategic Technology
Partners, L.P.*
-----------------------
* Previously filed
(b) Financial Statement Schedules.
None.
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 of 1933.
(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 to
the registration statement) which, individually or when
viewed together, 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% 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 the
information in the registration statement. Provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-
II-2
effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Securities and Exchange Act of
1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each of these post-effective amendments shall be
deemed to be a new registration statement relating to the securities
being offered, and the offering of those securities at that time shall
be deemed to be their initial bona fide offering.
(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) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities being offered, and the offering of those securities
at that time shall be deemed to be their initial bona fide offering.
(c) Insofar as directors, officers and controlling persons of the
Registrant are permitted to seek indemnification for liabilities arising under
the Securities Act, under the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
this indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a director, officer or
controlling person asserts a claim for indemnification against these types of
liabilities in connection with the securities being registered, 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, 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 indemnification by it under these
circumstances is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of the issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Columbia, State of Maryland, on June 17, 2002.
ESSEX CORPORATION
By: /S/ LEONARD E. MOODISPAW
--------------------------------------
Leonard E. Moodispaw
President and Chief Executive Officer
II-4
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/S/ H. JEFFREY LEONARD* Chairman of the Board June 17, 2002
--------------------------
H. Jeffrey Leonard
/S/ LEONARD E. MOODISPAW President, Chief Executive Officer, June 17, 2002
-------------------------- and Directors (principal executive
Leonard E. Moodispaw officer)
/S/ JOSEPH R. KURRY, JR. Chief Financial Officer June 17, 2002
-------------------------- (principal financial and accounting
Joseph R. Kurry, Jr. officer)
Director June 17, 2002
--------------------------
John G. Hannon
/S/ ROBERT W. HICKS* Director June 17, 2002
--------------------------
Robert W. Hicks
/S/ RAY M. KEELER* Director June 17, 2002
--------------------------
Ray M. Keeler
Director June 17, 2002
--------------------------
Frank E. Manning
/S/ MARIE S. MINTON* Director June 17, 2002
--------------------------
Marie S. Minton
/S/ CAROLINE S. PISANO* Director June 17, 2002
--------------------------
Caroline S. Pisano
/S/ TERRY M. TURPIN* Director June 17, 2002
--------------------------
Terry M. Turpin
* pursuant to a power of attorney dated May 17, 2001 filed with Form S-3 (No.
333-61200)
II-5