1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 2001.
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
----------------------
AETHER SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-2186634
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
----------------------
11460 CRONRIDGE DRIVE
OWINGS MILLS, MARYLAND 21117
(410) 654-6400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------------
DAVID S. OROS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
11460 CRONRIDGE DRIVE
OWINGS MILLS, MARYLAND 21117
(410) 654-6400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------------
with a copy to:
MARK A. DEWIRE, ESQ.
ROGER J. PATTERSON, ESQ.
WILMER, CUTLER & PICKERING
2445 M STREET, N.W.
WASHINGTON, D.C. 20037
(202) 663-6000
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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. [ ]
----------------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT AGGREGATE AGGREGATE
TITLE OF CLASS OF TO BE PRICE PER OFFERING
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE
---------------------------------------------------------------------------------------------------------------------
Common Stock............................................ 2,944,960(2) $25.79 $75,950,519
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
AMOUNT OF
TITLE OF CLASS OF REGISTRATION
SECURITIES TO BE REGISTERED FEE
-------------------------------------------------------------------------------------------------
Common Stock............................................ $18,988
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933. The price per share is
based on the average for the high and low prices of a share of Aether common
stock quoted on the Nasdaq National Market on February 21, 2001.
(2) All of the shares of common stock offered hereby are being sold for the
accounts of selling stockholders named herein. See "Selling Stockholders"
herein.
----------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
The information in this prospectus is not complete and may be changed. We
may not sell these securities 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.
PRELIMINARY PROSPECTUS DATED FEBRUARY 23, 2001
PROSPECTUS
----------
2,944,960 SHARES
[AETHER LOGO]
COMMON STOCK
----------------------
This prospectus relates to 2,944,960 shares of common stock, $.01 par
value per share, of Aether Systems, Inc., which may be offered from time to time
by the selling stockholders named herein or their pledgees, donees, transferees
or other successors in interest in transactions on the Nasdaq National Market,
in negotiated transactions or otherwise, at fixed prices prevailing at the time
of sale, at negotiated prices, or without consideration, or by any other legally
available means. We are registering the sale of the common stock pursuant to the
terms of a registration rights agreement with the selling stockholders. The
registration of the common stock does not necessarily mean that any of the
shares will be offered or sold by the selling stockholders.
The selling stockholders or their pledgees, donees, transferees or other
successors in interest will receive all of the net proceeds from the sale of the
common stock and will pay all underwriting discounts and selling commissions, if
any, applicable to any such sale. We will not receive any of the proceeds from
the sale of the shares by the selling stockholders. We are paying the costs of
preparing and filing the registration statement of which this prospectus is a
part.
The shares are quoted on the Nasdaq National Market under the symbol
"AETH." On February 22, 2001, the last sale price of the shares as reported on
the Nasdaq National Market was $24.38 per share.
The common stock may be sold by selling stockholders or their pledgees,
donees, transferees or other successors in interest from time to time directly
to purchasers or through agents, underwriters and dealers. See "Plan of
Distribution" and "Selling Stockholders." The selling stockholders and any
dealers, agents or underwriters who participate in the distribution of the
common stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 and any commission received by them and any profit on the
resale of the common stock purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
The date of this prospectus is , 2001.
3
TABLE OF CONTENTS
PAGE
----
About Aether Systems........................................ 4
Risk Factors................................................ 6
Forward-Looking Statements.................................. 16
Use of Proceeds............................................. 16
Selling Stockholders........................................ 17
Plan of Distribution........................................ 18
Legal Matters............................................... 19
Experts..................................................... 19
Where You Can Find More Information......................... 19
3
4
ABOUT AETHER SYSTEMS
Aether provides wireless data services, systems and software enabling
people to use handheld devices for mobile data communications and real-time
transactions. We design, develop, sell and support complete wireless systems for
corporations seeking to make data available to mobile workers or consumers. Our
full mobile and wireless solution, including our wireless data engineering and
development expertise, our wireless integration software and mobile data
management software products, our customer service center and our network
operations centers, positions us to take advantage of the growing demand for
wireless data services.
We seek to develop and deliver wireless data services across a variety of
industries and market segments in the United States and internationally. Our
strategy initially focused on developing services for the financial services
sector, whose participants we believe were among the earliest adopters of
wireless data services. We currently offer and are developing wireless trading
and financial services for several major financial institutions. We also
currently offer and are developing financial news and information services
through major content providers. We have moved and continue to move into other
industries and market segments, including software products, logistics, field
sales, healthcare, wireless commerce, mobile government and messaging.
Our strategy. Our strategy is to be the dominant provider in the United
States and internationally of wireless data services and systems to corporations
by using our engineering expertise, our software platforms, our customer service
center, our network operations centers and our other resources. We believe our
capabilities and experience have established us as an early market leader in
wireless data services, and a key element of our strategy is to move quickly
into new opportunities to extend our leadership position. Our strategy also
includes the following other key elements:
- target a variety of industries and market segments for development of
wireless data communications and services in the United States and
internationally;
- offer a wide range of software products to address every aspect of
wireless integration and mobile data management for mobile workers and
consumers;
- expand our customer base and strengthen the Aether brand through enhanced
sales and marketing efforts;
- maintain and strengthen our strategic relationships with suppliers and
network carriers;
- seek to maximize our recurring revenue; and
- apply the expertise we gain through engineering services and research and
development activities to emerging business opportunities.
Other information. We are a Delaware corporation. In October 1999, we
completed our initial public offering of 6,900,000 shares of our common stock at
an initial offering price of $16.00 per share, which resulted in net proceeds of
approximately $101.1 million. In March 2000, we completed the offering of an
additional 5,411,949 shares of our common stock at a price of $205.00 per share
and issued $310.5 million of 6% convertible subordinated notes due 2005, which
together resulted in net proceeds of approximately $1.4 billion. All references
to "we," "us," "our" or "Aether" in this prospectus mean Aether Systems, Inc.
and its subsidiaries or predecessors.
Our principal executive offices are located at 11460 Cronridge Drive,
Owings Mills, Maryland 21117, and our telephone number is (410) 654-6400. We
maintain a Web site at www.aethersystems.com. Information contained in our Web
site does not constitute a part of this prospectus.
4
5
RECENT DEVELOPMENTS
In February 2001, we announced our financial results for the three months
and the year ended December 31, 2000. At that time, we reported revenue of $25.8
for the three-month period ended December 31, 2000, including subscriber revenue
of $13.1 million, engineering services revenue of $3.9 million and software and
related services revenue of $8.8 million. We reported a net loss for the three
month period ended December 31, 2000 of ($3.37) per share compared with a net
loss of ($0.94) per share in the same period last year.
In December 2000, we acquired RTS Wireless, Inc., a leading developer of
software systems connecting the Internet to a broad array of wireless devices,
for $26.0 million in cash and 1,259,981 shares of our common stock. In addition,
we agreed to convert existing options held by RTS employees into options to
acquire our common stock.
In December 2000, we acquired Motient Corporation's transportation business
unit for $45.0 million in cash, of which $10.0 million was placed in escrow to
cover indemnities by the sellers. The terms of the acquisition agreement provide
for potential future payments of up to $22.5 million based on revenue and other
incentive targets for the acquired business in 2001.
5
6
RISK FACTORS
Investing in our common stock involves risks. You should carefully
consider the following risks together with the other information contained in
this prospectus and all the information incorporated by reference before
deciding to buy our common stock.
WE HAVE HISTORICALLY INCURRED LOSSES AND THESE LOSSES MAY INCREASE IN THE
FUTURE.
We reported net losses of $2.7 million, $4.7 million, $30.7 million and
$230.4 million for the years ended December 31, 1997, 1998 and 1999 and for the
nine months ended September 30, 2000, respectively. Information regarding our
operating results for subsequent periods is or will be included in our periodic
reports incorporated herein by reference. Our amortization of intangible assets
and option and warrant expense has grown significantly as a result of recent
acquisitions. In addition, we expect to continue to incur significant sales and
marketing, systems development and administrative expenses. Therefore, we will
need to generate significant revenue to become profitable and sustain
profitability on a quarterly or annual basis. We expect to continue to incur
significant losses for the foreseeable future. As a result, we may not be able
to achieve profitability on a quarterly or annual basis.
OUR FUTURE RESULTS ARE UNCERTAIN BECAUSE OUR HISTORICAL REVENUE WAS DERIVED FROM
SERVICES OTHER THAN THOSE WE EXPECT TO BE THE FOCUS OF OUR BUSINESS IN THE
FUTURE.
We only have a limited history selling our current services on which you
can evaluate our business, financial condition and operating results. Although
we commenced operations in January 1996, until March 1997 all of our revenue
came from engineering services and not from monthly service subscriptions or
software licensing which we now provide and which will be our focus in the
future. We have not had any AIM license sales other than sales to Inciscent,
Inc. and Data Critical Corporation totaling $1.25 million, for which the revenue
will be recognized over the terms of the agreements. In addition, our monthly
service subscriptions have come primarily from subscriptions to our financial
data, wireless internet and messaging and online trading services, and our
strategy includes development of services in other industries. Because of this
change in focus and our recent acquisitions, you should not rely on our past
performance to evaluate our future performance.
THERE IS NO ESTABLISHED MARKET FOR OUR SERVICES AND WE MAY NOT BE ABLE TO SELL
ENOUGH OF OUR SERVICES TO BECOME PROFITABLE.
The markets for wireless data and transaction services are still emerging
and continued growth in demand for and acceptance of these services remains
uncertain. Current barriers to market acceptance of these services include cost,
reliability, functionality and ease of use. We cannot be certain that these
barriers will be overcome. We are currently developing services for some of our
business customers pursuant to preliminary agreements with these parties and
expect to develop services for other entities as well. We cannot assure you that
these parties will enter into contracts for our services or that products
developed for our other customers will result in revenue. Our competitors may
develop alternative wireless data communications systems that gain broader
market acceptance than our systems. If the market for our services does not
grow, or grows more slowly than we currently anticipate, we may not be able to
attract customers for our services and our revenues would be adversely affected.
OUR RECENT ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES MAY NOT DELIVER THE
VALUE WE PAID OR WILL PAY FOR THEM AND MAY RESULT IN EXCESSIVE EXPENSES IF WE DO
NOT SUCCESSFULLY INTEGRATE THEM, OR IF THE COSTS AND MANAGEMENT RESOURCES WE
EXPEND IN CONNECTION WITH THE INTEGRATIONS EXCEED OUR EXPECTATIONS.
We expect that our recent acquisitions, investments and strategic alliances
and any acquisitions, investments or strategic alliances we may pursue in the
future will have a continuing, significant impact on
6
7
our business, financial condition and operating results. The value of the
companies that we acquire or invest in may be less than the amount we paid if
there is:
- a decline of their position in the respective markets they serve; or
- a decline in general of the markets they serve.
Our financial results may be adversely affected if:
- we fail to assimilate the acquired assets with our pre-existing business;
- we lose key employees of these companies or of Aether as a result of the
acquisitions;
- our management's attention is diverted by other business concerns; or
- we assume unanticipated liabilities related to the acquired assets.
In addition, the companies we have acquired or invested in or may acquire
or invest in are subject to each of the business risks we describe in this
section, and if they incur any of these risks the businesses may not be as
valuable as the amount we paid. Further, we cannot guarantee that we will
realize the benefits or strategic objectives we are seeking to obtain by
acquiring or investing in these companies. In addition, we cannot assure you
that our various pending acquisitions, investments and strategic alliances will
be completed on the terms we describe, or at all.
WE MAY NOT ACHIEVE PROFITABILITY IF WE ARE UNABLE TO MAINTAIN, IMPROVE AND
DEVELOP THE WIRELESS DATA SERVICES WE OFFER.
We believe that our future business prospects depend in part on our ability
to maintain and improve our current services and to develop new ones on a timely
basis. Our services will have to achieve market acceptance, maintain
technological competitiveness and meet an expanding range of customer
requirements. As a result of the complexities inherent in our service offerings,
major new wireless data services and service enhancements require long
development and testing periods. We may experience difficulties that could delay
or prevent the successful development, introduction or marketing of new services
and service enhancements. Additionally, our new services and service
enhancements may not achieve market acceptance. If we cannot effectively develop
and improve services we may not be able to recover our fixed costs or otherwise
become profitable.
IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE, OUR SERVICES MAY BECOME OBSOLETE AND WE MAY LOSE SALES.
The wireless and data communications industries are characterized by
rapidly changing technologies, industry standards, customer needs and
competition, as well as by frequent new product and service introductions. Our
services are integrated with wireless handheld devices and the computer systems
of our corporate customers. Our services must also be compatible with the data
networks of wireless carriers. We must respond to technological changes
affecting both our customers and suppliers. We may not be successful in
developing and marketing, on a timely and cost-effective basis, new services
that respond to technological changes, evolving industry standards or changing
customer requirements. Our ability to grow and achieve profitability will
depend, in part, on our ability to accomplish all of the following in a timely
and cost-effective manner:
- effectively use and integrate new wireless and data technologies;
- continue to develop our technical expertise;
- enhance our wireless data, engineering and system design services;
- develop applications for new wireless networks; and
- influence and respond to emerging industry standards and other changes.
7
8
WE DEPEND UPON WIRELESS NETWORKS OWNED AND CONTROLLED BY OTHERS. IF WE DO NOT
HAVE CONTINUED ACCESS TO SUFFICIENT CAPACITY ON RELIABLE NETWORKS, WE MAY BE
UNABLE TO DELIVER SERVICES AND OUR SALES COULD DECREASE.
Our ability to grow and achieve profitability partly depends on our ability
to buy sufficient capacity on the networks of wireless carriers such as Verizon
Wireless, Research In Motion and AT&T Wireless Services and on the reliability
and security of their systems. All of our services are delivered using airtime
purchased from third parties. We depend on these companies to provide
uninterrupted and "bug free" service and would not be able to satisfy our
customers' needs if they failed to provide the required capacity or needed level
of service. In addition, our expenses would increase and our profitability could
be materially adversely affected if wireless carriers were to increase the
prices of their services. Our existing agreements with the wireless carriers
generally have one-year terms. Some of these wireless carriers are, or could
become, our competitors and if they compete with us they may refuse to provide
us with their services.
OUR FAILURE TO DEVELOP RECOGNITION FOR THE AETHER BRAND COULD PREVENT US FROM
ACHIEVING A PROFITABLE LEVEL OF SALES.
Our expenses related to sales and marketing activities were $840,000 and
$2.1 million for the years ended December 31, 1998 and 1999, respectively, and
$32.3 million for the nine months ended September 30, 2000. We intend to
increase the market presence of our brand over time, which will require us to
continue our increased spending on sales and marketing. We have applied for, but
have not received, federal trademark registrations for the names "Aether,"
"Aether Systems" and "AIM," among others, and we may not be able to use these
names effectively or at all if we fail to obtain such registrations due to
conflicting marks or otherwise. As a result of our recent acquisitions, we
expect to market our acquired products and services under their existing brands.
We may lose existing customers or fail to attract new customers if these brands
are not well received by our customers, if our marketing efforts are not
productive, if we are otherwise unsuccessful in increasing our brand awareness
or if our competition has greater brand recognition.
WE DEPEND ON THIRD PARTIES FOR THE MARKETING AND SALES OF SOME OF OUR SERVICES.
IF THE MARKETING EFFORTS OF THESE THIRD PARTIES ARE NOT EFFECTIVE, WE MAY NOT
ACHIEVE A PROFITABLE LEVEL OF SALES.
We rely substantially on the efforts of others to market and sell some of
our wireless data communications services, in particular the online trading
services we have developed for Charles Schwab and Morgan Stanley Dean Witter
Online and are developing for Merrill Lynch, National Discount Brokers, Bear
Stearns and other financial institutions. We also expect to rely on the
marketing efforts of our strategic relationship partners for products under
development in our other market segments such as healthcare and wireless
commerce. We cannot control whether or how these third parties who sell and
market our services will perform their obligations to market our services. If
these third parties fail to market our services or their efforts fail to result
in new customers, we may be unable to attract new customers and our revenue
could be adversely affected.
WE MAY FAIL TO SUPPORT OUR ANTICIPATED GROWTH IN OPERATIONS, WHICH COULD REDUCE
DEMAND FOR OUR SERVICES AND MATERIALLY ADVERSELY AFFECT OUR REVENUE.
Our business strategy is based on the assumption that the number of
subscribers to our services, the amount of information they want to receive and
the number of services we offer will all increase. We must continue to develop
and expand our systems and operations to accommodate this growth. The expansion
and adaptation of our customer service and network operations centers require
substantial financial, operational and management resources. We may be unable to
expand our operations for one or more of the following reasons:
- we may not be able to locate or hire at reasonable compensation rates
qualified engineers and other employees necessary to expand our capacity;
8
9
- we may not be able to obtain the hardware necessary to expand our
capacity;
- we may not be able to expand our billing and other related support
systems; and
- we may not be able to obtain sufficient additional capacity from wireless
carriers.
Due to the limited deployment of our services to date, the ability of our
systems and operations to connect and manage a substantially larger number of
customers while maintaining superior performance is unknown. Any failure on our
part to develop and maintain our wireless data services as we experience rapid
growth could significantly reduce demand for our services and materially
adversely affect our revenue.
WE DEPEND ON RECRUITING AND RETAINING KEY MANAGEMENT AND TECHNICAL PERSONNEL
WITH WIRELESS DATA AND SOFTWARE EXPERIENCE AND WE MAY NOT BE ABLE TO DEVELOP NEW
PRODUCTS OR SUPPORT EXISTING PRODUCTS IF WE CANNOT HIRE OR RETAIN QUALIFIED
EMPLOYEES.
Because of the technical nature of our products and the dynamic market in
which we compete, our performance depends on attracting and retaining key
employees. Competition for qualified personnel in the wireless data and software
industries is intense and finding qualified personnel with experience in both
industries is even more difficult. We believe there are only a limited number of
individuals with the requisite skills in the field of wireless data
communication, and it is becoming increasingly difficult to hire and retain
these persons. Competitors and others have in the past attempted, and may in the
future attempt, to recruit our employees. Each of our engineers has entered into
a non-competition agreement with us for a period of ten months after they leave
Aether. These agreements will not prevent our engineers from leaving or working
for competitors relatively soon after they leave us.
We currently maintain a key person life insurance policy for David S. Oros,
our chairman and chief executive officer. We do not maintain insurance policies
for any of our other executive officers.
WE MAY NOT HAVE ADEQUATELY PROTECTED OUR INTELLECTUAL PROPERTY RIGHTS, WHICH
COULD ALLOW COMPETITORS TO DEVELOP SIMILAR PRODUCTS USING SIMILAR TECHNOLOGY AND
THUS REDUCE OUR SALES AND REVENUE.
We have attempted to protect our technology, including the technology we
have obtained or will obtain in our acquisitions, through patent, trademark and
copyright protection, as well as through trade secret laws and non-competition
and non-disclosure agreements with key employees. Patents may infringe on valid
patents held by third parties, or patents held by third parties may limit the
scope of any patents we receive. In particular, the patent we acquired in our
acquisition of Riverbed covers a technology that is similar to other patented
technologies. In addition, we have no international patent protection in this
technology. If we are not adequately protected, other companies with sufficient
engineering expertise could develop competing products based on our intellectual
property and reduce our sales and thus our revenue.
WE MAY BE SUED BY THIRD PARTIES FOR INFRINGEMENT OF THEIR INTELLECTUAL PROPERTY
RIGHTS AND INCUR COSTS OF DEFENSE AND POSSIBLY ROYALTIES OR LOSE THE RIGHT TO
USE TECHNOLOGY IMPORTANT TO PROVIDING OUR SERVICES.
The telecommunications and software industries are characterized by the
existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of participants in our market increases, the possibility
of an intellectual property claim against us could increase. We have received
two claims that we have infringed patents developed by other parties. Although
we believe these claims are without merit, these and any other intellectual
property claims, with or without merit, could be time-consuming and expensive to
litigate or settle, could require us to enter into costly royalty arrangements,
could divert management attention from administering our business and could
hinder us from conducting our business.
9
10
WE MAY BE SUBJECT TO LIABILITY FOR TRANSMITTING INFORMATION, AND OUR INSURANCE
COVERAGE MAY BE INADEQUATE TO PROTECT US FROM THIS LIABILITY.
We may be subject to claims relating to information transmitted over
systems we develop or operate. These claims could take the form of lawsuits for
defamation, negligence, copyright or trademark infringement or other actions
based on the nature and content of the materials. Although we carry general
liability insurance, our insurance may not cover potential claims of this type
or may not be adequate to cover all costs incurred in defense of potential
claims or to indemnify us for all liability that may be imposed.
DISRUPTION OF OUR SERVICES DUE TO ACCIDENTAL OR INTENTIONAL SECURITY BREACHES
MAY HARM OUR REPUTATION, POTENTIALLY CAUSING A LOSS OF SALES AND AN INCREASE IN
OUR EXPENSES.
A significant barrier to the growth of wireless data services or
transactions on the Internet or by other electronic means has been the need for
secure transmission of confidential information. Our systems could be disrupted
by unauthorized access, computer viruses and other accidental or intentional
actions. We may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by such breaches. If a third
party were able to misappropriate our users' personal or proprietary information
or credit card information, we could be subject to claims, litigation or other
potential liabilities that could materially adversely impact our revenue and may
result in the loss of customers.
ANY TYPE OF SYSTEMS FAILURE COULD REDUCE SALES, INCREASE COSTS OR RESULT IN
CLAIMS OF LIABILITY.
Our existing wireless data services are dependent on real-time, continuous
feeds from Reuters Selectfeed Plus and others. The ability of our subscribers to
make securities trades, receive sales leads and receive critical business
information requires timely and uninterrupted connections with our wireless
network carriers. Any disruption from our satellite feeds or backup landline
feeds could result in delays in our subscribers' ability to receive information
or execute trades. We cannot assure you that our systems will operate
appropriately if we experience a hardware or software failure or if there is an
earthquake, fire or other natural disaster, a power or telecommunications
failure, intentional disruptions of service by third parties, an act of God or
an act of war. A failure in our systems could cause delays in transmitting data,
and as a result we may lose customers or face litigation that could involve
material costs and distract management from operating our business.
OUR ABILITY TO SELL NEW AND EXISTING SERVICES AT A PROFIT COULD BE IMPAIRED BY
COMPETITORS.
Intense competition could develop in the market for services we offer. We
developed our software using standard industry development tools. Many of our
agreements with wireless carriers, wireless handheld device manufacturers and
data providers are non-exclusive. Our competitors could develop and use the same
products and services in competition with us. With time and capital, it would be
possible for competitors to replicate our services. Our competitors could
include wireless network carriers such as Verizon Wireless and AT&T Wireless
Services, software developers such as Microsoft Corporation, 724 Solutions Inc.
and Phone.com and systems integrators such as International Business Machines
Corporation. Many of our competitors have significantly greater resources than
we do. Furthermore, competitors may develop a different approach to marketing
the services we provide in which subscribers may not be required to pay for the
information provided by our services. Competition could reduce our market share
or force us to lower prices to unprofitable levels.
WE MAY LOSE THE OPPORTUNITY TO PURSUE DESIRABLE PROJECTS TO INCISCENT, OMNISKY,
SILA AND MINDSURF AND OTHER COMPANIES IN WHICH WE HOLD EQUITY INTERESTS, BECAUSE
SOME OF OUR DIRECTORS AND EXECUTIVE OFFICERS SERVE ON THE BOARDS OF DIRECTORS OF
THESE COMPANIES.
David S. Oros, our chairman and chief executive officer, and some of our
other directors have been appointed to the boards of directors of companies in
which we hold an equity interest, including OmniSky, Sila and MindSurf. Some of
our executive officers have been appointed to the board of directors of
10
11
companies in which we hold an equity interest, including Inciscent and MindSurf.
These other companies may develop products that compete with our own products.
Mr. Oros and the other directors and executive officers may learn of business
opportunities that are appropriate for the boards on which they serve and Mr.
Oros and these other individuals may not be required to make those opportunities
available to us. If OmniSky, Sila, Inciscent, MindSurf or any other joint
ventures we may enter into pursue opportunities that we would have an interest
in pursuing, our business may fail to grow or our existing business may suffer.
Mr. Oros and these other directors and executive officers may also have other
conflicts of interest with Aether because of their positions with OmniSky, Sila,
Inciscent and MindSurf and OmniSky's, Sila's, Inciscent's and MindSurf's
contractual relationships with Aether.
AN INTERRUPTION IN THE SUPPLY OF PRODUCTS AND SERVICES THAT WE OBTAIN FROM THIRD
PARTIES COULD CAUSE A DECLINE IN SALES OF OUR SERVICES, AND PRODUCTS WE PURCHASE
TO AVOID SHORTAGES MAY BECOME OBSOLETE BEFORE WE CAN USE THEM.
In designing, developing and supporting our wireless data services, we rely
on wireless carriers, wireless handheld device manufacturers, content providers
and software providers. These suppliers may experience difficulty in supplying
us products or services sufficient to meet our needs or they may terminate or
fail to renew contracts for supplying us these products or services on terms we
find acceptable. Any significant interruption in the supply of any of these
products or services could cause a decline in sales of our services unless and
until we are able to replace the functionality provided by these products and
services. Specifically, Novatel Wireless and Sierra Wireless Inc. are our only
suppliers of wireless modems, which are an integral hardware component of our
services. Research In Motion is our primary provider of pager devices. It can be
difficult to obtain these wireless modems and their parts. Although we have
purchased a large supply of these modems, they may become obsolete before we are
able to use them. We also depend on third parties to deliver and support
reliable products, enhance their current products, develop new products on a
timely and cost-effective basis and respond to emerging industry standards and
other technological changes. In addition, we rely on the ability of our content
providers -- Reuters, the New York Stock Exchange, Inc., the Chicago Board of
Trade, the Nasdaq Stock Market, Inc. and the Options Price Reporting
Authority -- to continue to provide us with uninterrupted access to the news and
financial information we provide to our customers. The failure of third parties
to meet these criteria, or their refusal or failure to deliver the information
for whatever reason, could materially harm our business.
OUR SALES CYCLE IS LONG, AND OUR STOCK PRICE COULD DECLINE IF SALES ARE DELAYED
OR CANCELLED.
Quarterly fluctuations in our operating performance are exacerbated by the
length of time between our first contact with a business customer and the first
revenue from sales of services to that customer or end users. Because our
services represent a significant investment for our business customers, we spend
a substantial amount of time educating them regarding the use and benefits of
our services and they, in turn, spend a substantial amount of time performing
internal reviews and obtaining capital expenditure approvals before purchasing
our services. As much as a year may elapse between the time we approach a
business customer and the time we begin to deliver services to a customer or end
user. Any delay in sales of our services could cause our quarterly operating
results to vary significantly from projected results, which could cause our
stock price to decline. In addition, we may spend a significant amount of time
and money on a potential customer that ultimately does not purchase our
services.
OUR SALES OF FINANCIAL DATA AND TRADING SERVICES COULD DECREASE IF THERE IS A
DECLINE IN SECURITIES TRADING.
We earn a substantial portion of our revenue (we earned 52.2% for the nine
months ended September 30, 2000, or 41.1% on a pro forma basis giving effect to
the acquisitions of LocusOne, Riverbed, NetSearch, Cerulean, Sunpro, Sinope and
IFX and the related formation of Sila) from services that provide financial
information and wireless trading capability. If there is a prolonged decline in
the
11
12
overall level of securities trading, or online trading in particular, our
operating results may decline. A decline in securities trading may result from:
- loss of confidence in the reliability or security of online trading
systems;
- government regulation of the securities industry or online trading; or
- a downturn or volatility in the stock market.
OUR SOFTWARE MAY CONTAIN DEFECTS OR ERRORS, AND OUR SALES COULD GO DOWN IF THIS
INJURES OUR REPUTATION OR DELAYS SHIPMENTS OF OUR SOFTWARE.
The AIM package of wireless messaging and software development tools we
develop, the ScoutWare family of software products we develop, Sila's
proprietary software and Aether Logistics' e-mobile software are complex and
must meet the stringent technical requirements of our customers. We must develop
our services quickly to keep pace with the rapidly changing software and
telecommunications markets. Software as complex as ours is likely to contain
undetected errors or defects, especially when first introduced or when new
versions are released. Our software may not be free from errors or defects after
delivery to customers has begun, which could result in the rejection of our
software or services, damage to our reputation, lost revenue, diverted
development resources and increased service and warranty costs.
THE STOCKHOLDER AGREEMENT AMONG OUR MAJOR STOCKHOLDERS HAS THE EFFECT OF
ALLOWING THEM TO NOMINATE SEVEN OF OUR TWELVE DIRECTORS, WHICH LIMITS THE
ABILITY OF NEW INVESTORS TO INFLUENCE CONTROL OF AETHER.
NexGen Technologies, L.L.C., Telcom-ATI Investors, L.L.C., Reuters
MarketClip Holdings Sarl, a subsidiary of Reuters Group Plc., and 3Com
Corporation -- who together hold 32.7% of the shares of our common
stock -- entered into a stockholder agreement that governs voting for our
directors. The agreement provides that each party will vote all of its shares
for one director nominated by NexGen, two directors nominated by Telcom-ATI
Investors, two directors nominated jointly by NexGen and Telcom-ATI Investors
and one director nominated by each of Reuters and 3Com. As a result, seven
directors of our board are nominated by these major stockholders. As we
currently have authorized only 12 directors, the voting rights of our
stockholders other than these major stockholders effectively will be
meaningfully exercised only in connection with the election of five of our
directors. In addition to its effect on the voting rights of our new investors,
the stockholder agreement could have the effect of delaying or preventing a
change in control.
WE MAY NEED ADDITIONAL CAPITAL AND WE MAY NOT BE ABLE TO OBTAIN IT, WHICH COULD
PREVENT US FROM CARRYING OUT OUR BUSINESS STRATEGY.
We currently anticipate that our available cash resources will be
sufficient to fund our operating needs for at least the next 12 months,
including the expansion of our sales and marketing program and any acquisitions
we may pursue in that period. Thereafter, we expect to require additional
financing in an amount that we cannot determine at this time. We do not have any
bank credit facility or other working capital credit line under which we may
borrow funds for working capital or other general corporate purposes. If our
plans or assumptions change or are inaccurate, we may be required to seek
capital sooner than anticipated. We may need to raise funds through public or
private debt or equity financings.
If funds are raised through the issuance of equity securities, the
percentage ownership of our then-current stockholders may be reduced and the
holders of new equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. If additional funds are
raised through a bank credit facility or the issuance of debt securities, the
holder of this indebtedness would have rights senior to the rights of the
holders of our common stock and the terms of this indebtedness could impose
restrictions on our operations. If we need to raise additional funds, we may not
be able to do so on terms favorable to us, or at all. If we cannot raise
adequate funds on acceptable terms, we may not be able to continue to fund our
operations.
12
13
WE MAY NOT BE ABLE TO RECOVER THE FULL VALUE OF GOODWILL RECORDED ON SOME OF OUR
ACQUISITIONS.
Consideration for some of our acquisitions was partially or fully funded
through the issuance of shares of our common stock at a time when our stock
price was at historically high prices. In recent months, stock prices in our and
similar industries have fallen in response to a variety of factors, including a
general downturn in the economy. If the current declines in our stock price are
determined to be other than temporary, we may not be able to recover the full
value of the goodwill recorded on some of our acquisitions.
NEW LAWS AND REGULATIONS THAT IMPACT OUR INDUSTRY COULD INCREASE OUR COSTS OR
REDUCE OUR OPPORTUNITIES TO EARN REVENUE.
We are not currently subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another regulatory agency. In
addition, the wireless carriers who supply us airtime and certain of our
hardware suppliers are subject to regulation by the FCC and regulations that
affect them could increase our costs or reduce our ability to continue selling
and supporting our services.
OUR STOCK PRICE, LIKE THAT OF MANY TECHNOLOGY COMPANIES, HAS BEEN, AND MAY
CONTINUE TO BE, VOLATILE.
The market price of our common stock has been highly volatile and is likely
to continue to be highly volatile. The trading price of our common stock
increased significantly from our initial offering price of $16.00 per share on
October 20, 1999 and has fluctuated from a high of $305 1/16 to a low of $24 3/8
in the one year prior to the date of this prospectus. We are involved in a
highly visible, rapidly changing industry and stock prices in our and similar
industries have risen and fallen in response to a variety of factors, including:
- announcements of new wireless data communications technologies and new
providers of wireless data communications;
- acquisitions of or strategic alliances among providers of wireless data
communications;
- changes in recommendations by securities analysts regarding the results
or prospects of providers of wireless data communications; and
- changes in investor perceptions of the acceptance or profitability of
wireless data communications.
WE MAY HAVE TO TAKE ACTIONS THAT ARE DISRUPTIVE TO OUR BUSINESS STRATEGY TO
AVOID REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940.
As part of our business strategy we own minority and majority equity
interests in a number of ventures. While we believe we are not currently an
investment company, our ownership of these securities could potentially subject
us to registration under the Investment Company Act of 1940, which, absent an
applicable exclusion or exemption, requires registration for companies that are
engaged primarily in the business of investing, reinvesting, owning, holding or
trading in securities. If we were required to register as an investment company,
we would not be able to continue operating our business in accordance with our
business plan. Accordingly, we intend to take all necessary steps to avoid being
deemed an investment company. These necessary steps might disrupt our business
strategy of forming joint ventures with strategic partners and making equity
investments in companies with whom we have a strategic relationship to develop
new technology or extend the reach of existing products and services. A company
may be deemed to be an investment company if it owns investment securities with
a value exceeding 40% of its total assets excluding cash items and government
securities as defined in the Investment Company Act, subject to certain
exclusions and exemptions. Any acquisition or disposition of assets, or
fluctuations in the value of our assets may require us to take steps to avoid
registration under the Investment Company Act. These steps could include buying,
refraining from buying, selling or refraining from selling securities in
circumstances where we would not take these actions except to avoid registration
under the Investment Company Act. For example, we may have to retain majority or
controlling interests in our joint ventures
13
14
after their initial public offerings, which would require us to expend
significant amounts of capital that we might otherwise use to expand our
products and services in other market segments. Moreover, we may incur tax
liabilities if we are required to sell assets. We may also be unable to purchase
additional investment securities that may be important to our business strategy.
We have applied to the SEC for an exemptive order declaring that we are not an
investment company and are not required to register under the Investment Company
Act. We may not ultimately be successful in receiving such an order.
WE CONDUCT OPERATIONS IN A NUMBER OF COUNTRIES THROUGH SILA AND OTHER
SUBSIDIARIES AND ARE SUBJECT TO RISKS OF INTERNATIONAL OPERATIONS.
We currently operate outside the United States through Sila and other
subsidiaries, which have operations throughout Europe and Asia. We expect that
Sila's management will independently perform the day-to-day operations of our
joint venture and will not be within our day-to-day control. Any failure by Sila
to successfully implement or maintain services could result in negative
publicity and have an unfavorable impact on our ability to expand our products
and services to Europe and Asia. We face various risks in expanding outside the
United States, including:
- difficulty and cost of monitoring our international operations;
- cultural differences in the conduct of business;
- unexpected changes in regulatory requirements, including U.S. export
restrictions on encryption technologies; and
- recessionary or inflationary environments in foreign economies,
particularly in Asian countries and in the financial services sector.
We cannot assure you that our international operations will contribute
positively to our business, financial condition or result of operations. Our
failure to manage international growth could result in higher operating costs
than anticipated or could delay or preclude altogether our ability to generate
revenues in international markets. In addition, our expanding operations outside
the United States are, in some instances, conducted in currencies other than the
U.S. dollar and fluctuations in the value of foreign currencies relative to the
U.S. dollar could cause currency exchange losses. We cannot predict the effect
of exchange rate fluctuations on our future operating results.
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF
AETHER AND COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
Provisions of our certificate of incorporation and bylaws and provisions of
Delaware law could delay, defer or prevent an acquisition or change of control
of Aether or otherwise adversely affect the price of our common stock. For
example, our bylaws limit the ability of stockholders to call a special meeting.
Moreover, our certificate of incorporation permits our board to issue shares of
preferred stock without stockholder approval, which means that the board could
issue shares with special voting rights or other provisions that could deter a
takeover. In addition to delaying or preventing an acquisition, the issuance of
a substantial number of preferred shares could adversely affect the price of our
common stock.
SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY DEPRESS OUR
SHARE PRICE.
As of February 8, 2001, we had outstanding 40,428,105 shares of common
stock. Sales of a substantial number of our shares of common stock in the public
market -- or the expectation of such sales -- could cause the market price of
our common stock to drop. All the shares sold pursuant to this prospectus will
be, and the shares sold in our initial public offering, our offering in March
2000, our September, 2000 offering and the October 2000 shelf registration are,
freely tradable. We have agreed to register the resale of 17,921,884 shares upon
demand beginning on October 26, 2000 and 462,412 shares beginning on April 30,
2001. After February 24, 2001, 13,521,129 shares (including some of the shares
subject to registration rights) will be eligible for sale, subject to a
limitation on the number of shares that can be sold in any three-month period.
An additional 4,575,754 shares subject to registration rights will become
eligible for sale without registration at various times after March 6, 2001 and
an additional
14
15
462,412 shares will become eligible for sale without registration on September
14, 2001, in each case subject to a limitation on the number of shares that can
be sold in any three-month period.
We filed a registration statement to register all shares of common stock
that were issued to our employees under our equity incentive plan and intend to
file future registration statements. Shares issued upon exercise of stock
options will be eligible for resale in the public market without restriction. As
of February 9, 2001, options and warrants to purchase 4,761,156 shares of our
common stock were issued and outstanding and covered by the registration
statement. In addition, warrants to purchase 893,665 additional shares were
issued and outstanding on that date.
DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH FLOW.
As a result of the $310.5 million of 6% convertible subordinated notes due
2005 currently outstanding, we have a substantial amount of indebtedness,
primarily consisting of the notes. As a result of this indebtedness, we are
obligated to make principal and interest payments. There is a possibility that
we may be unable to generate cash sufficient to pay the principal of, interest
on and other amounts due in respect of our indebtedness when due. We may also
obtain additional long-term debt and working capital lines of credit to meet
future financing needs. We cannot assure you that additional financing
arrangements will be available on commercially reasonable terms or at all.
15
16
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. We have based these forward-looking statements on our current expectations
and projections about future events. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"could," "pending," "potential," "continue," "expects," "anticipates,"
"intends," "plans," "believes," "predicts," "estimates" and similar expressions,
although not all forward-looking statements are identified by these words. These
forward-looking statements are subject to a number of risks, uncertainties and
assumptions about Aether and our industry, including those we describe in the
"Risk Factors" section of this prospectus. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus might not occur. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
USE OF PROCEEDS
This prospectus relates to shares of our common stock being offered and
sold for the accounts of the selling stockholders named in this prospectus. We
will not receive any proceeds from the shares sold pursuant to this prospectus.
16
17
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of February 16, 2001, as adjusted to
reflect the sale of 2,944,960 shares of common stock pursuant to this
prospectus, as to each stockholder selling shares of our common stock pursuant
to this prospectus. In addition to the selling stockholders identified below,
this prospectus includes an additional 462,412 shares that we expect will be
added if certain stockholders who have the right to be included in the
prospectus exercise those rights. Any persons who exercise their rights will be
identified as selling stockholders prior to the effective date of this
prospectus.
Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of common stock. For
the purposes of calculating percent ownership as of February 16, 2001,
40,438,599 shares were issued and outstanding.
The persons selling shares pursuant to this prospectus may include
pledgees, donees, transferees or other successors in interest of the persons
identified below as selling stockholders.
OWNERSHIP OF SHARES OF OWNERSHIP OF
SHARES BEFORE THE COMMON SHARES AFTER THE
OFFERING(1) STOCK OFFERING(2)
----------------- COVERED BY THIS ----------------
SELLING STOCKHOLDERS NUMBER PERCENT PROSPECTUS NUMBER PERCENT
-------------------- ------- ------- --------------- ------ -------
Mayfield X, L.P.(3)............................ 649,891 2.1% 649,891 0 *
Mayfield Associates Fund V, L.P.(3)............ 22,409 * 22,409 0 *
Mayfield Principals Fund, L.C.C.(3)............ 74,700 * 74,700 0 *
Columbia Riverbed Partners, LLC................ 559,279 1.4% 559,279 0 *
Columbia Capital Equity Partners II (QP),
L.P. ........................................ 514,309 1.3% 514,309 0 *
FBR Technology Venture Partners, L.P. ......... 661,960 1.6% 661,960 0 *
---------------
* Less than 1%.
(1) Includes shares of common stock which are being held in escrow until March
6, 2001 in connection with the Riverbed acquisition but which are
beneficially owned by such stockholder.
(2) Assuming all of the shares covered by this prospectus are sold.
(3) We previously registered the resale of 249,995 shares held by Mayfield X
L.P., Mayfield Associates Fund V, L.P. and Mayfield Principals Fund, L.L.C.
on Form S-1 (Registration No. 333-45656). Since that time, we converted that
registration statement to a Form S-3 in connection with the registration of
shares held by other stockholders, and listed the partners and members of
Mayfield as the selling stockholders (Registration No. 333-48898).
17
18
PLAN OF DISTRIBUTION
We have been advised that the selling stockholders (and their pledgees,
donees, transferees and other successors in interest) may offer shares of common
stock from time to time depending on market conditions and other factors, in one
or more transactions on the Nasdaq National Market, or any other national
securities exchanges or over-the-counter markets on which the shares may be
traded, or in negotiated transactions, at market prices prevailing at the time
of sale, at prices related to those market prices, at negotiated prices or at
fixed prices.
Sales of shares of common stock by the selling stockholders may involve (i)
block transactions in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (ii) purchases by a broker-dealer as
principal and resale by such broker-dealer for its own account pursuant to this
prospectus, (iii) ordinary brokerage transactions and transactions in which a
broker solicits purchasers or (iv) privately negotiated transactions. To the
extent required, this prospectus may be amended and supplemented from time to
time to describe a specific plan of distribution. In connection with the
distribution of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the common stock in the course of hedging the position they assume with the
selling stockholders. The selling stockholders may also sell the common stock
short and redeliver the shares to close out such short positions.
The selling stockholders may also enter into option transactions (including
call or put option transactions) or other transactions with broker-dealers which
require delivery to such broker-dealer of shares offered hereby, which shares
such broker-dealer may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction, if necessary). The selling stockholders may
also pledge shares to a broker-dealer and, upon a default, such broker-dealer
may effect sales of the pledged shares pursuant to this prospectus (as
supplemented or amended to reflect such transaction, if necessary). The selling
stockholders may also sell the common stock through one or more underwriters on
a firm commitment or best-efforts basis (with a supplement or amendment to this
prospectus, if necessary). In addition, any shares that qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus.
Brokers and dealers may receive compensation in the form of concessions or
commissions from the selling stockholders and/or purchasers of shares for whom
they may act as agent and/or to whom they may sell as principal (which
compensation may be in excess of customary commissions). The selling
stockholders and any broker or dealer that participates in the distribution of
shares may be deemed to be underwriters and any commissions received by them and
any profit on the resale of shares positioned by a broker or dealer may be
deemed to be underwriting discounts and commissions under the Securities Act. We
have agreed to indemnify the selling stockholders, the officers, directors,
partners, agents and employees of the selling stockholders, any underwriter (as
defined in the Securities Act) for such selling stockholder, and each person, if
any, who controls such selling stockholder or underwriter within the meaning of
the Securities Act or the Exchange Act against certain liabilities, including
liabilities arising under the Securities Act or the Exchange Act. The selling
stockholders may agree to indemnify any agent or broker-dealer that participates
in transactions involving sales of the shares of common stock against certain
liabilities, including liabilities arising under the Securities Act.
We have advised the selling stockholders that Regulation M under the
Exchange Act may apply to sales of shares and to the activities of the selling
stockholders or broker-dealers in connection therewith. We will bear all costs,
expenses and fees in connection with the registration of the shares of common
stock covered by this prospectus. The selling stockholders will bear any
brokerage commissions and similar selling expenses, if any, attributable to the
sale of the shares.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
18
19
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Aether by Wilmer, Cutler & Pickering, Washington, D.C.
EXPERTS
The consolidated financial statements and schedule of Aether Systems, Inc.
as of December 31, 1998 and 1999, and for each of the years in the three-year
period ended December 31, 1999 have been incorporated by reference in this
prospectus and elsewhere in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The financial statements of Mobeo, Inc. as of December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998 have been
incorporated by reference in this prospectus and elsewhere in the registration
statement in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of LocusOne Communications, Inc. as of December
31, 1998 and 1999, and for each of the years then ended have been incorporated
by reference in this prospectus and elsewhere in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of Riverbed Technologies, Inc. as of December 31,
1998 and 1999, and for the period from October 21, 1998 (date of inception) to
December 31, 1998 and for the year ended December 31, 1999, have been
incorporated by reference in this prospectus and elsewhere in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act and we file reports, proxy and information statements and other information
with the SEC. You may read and copy all or any portion of the reports, proxy and
information statements or other information we file at the SEC's principal
office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, 13th Floor, New York, New York 10048 after payment of fees
prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on operation of the public reference rooms. The SEC also maintains a
Web site which provides online access to reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC at the address http://www.sec.gov.
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits to the Registration Statement. For
further information with respect to Aether and our common stock offered hereby,
reference is made to the Registration Statement and the exhibits filed as a part
of the Registration Statement. Statements contained in this prospectus
concerning the contents of any contract or any other document are not
necessarily complete; reference is made in each instance to the copy of such
contract or any other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement, including exhibits thereto, may be
inspected without charge at the locations described above, or obtained upon
payment of fees prescribed by the SEC.
19
20
The Securities and Exchange Commission also allows Aether to "incorporate
by reference" information into this prospectus. This means that Aether can
disclose important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered to be part of this prospectus, except
for any information that is superseded by information that is included directly
in this document, or any future filings with the Securities and Exchange
Commission made under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934.
This prospectus incorporates by reference the documents listed below:
- Aether's Annual Report on Form 10-K for the fiscal year ended December
31, 1999.
- Aether's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000.
- Aether's Current Reports on Form 8-K dated February 3, 2000, March 6,
2000, April 6, 2000 and September 14, 2000, including any amendments.
- The Description of Capital Stock contained in Aether's Registration
Statement on Form S-1 (Registration No. 333-45656) dated September 27,
2000, including any amendments or reports filed for the purpose of
updating such description.
- In addition, all documents subsequently filed by Aether pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering shall be deemed to be incorporated by
reference herein from their respective dates of filing.
You may request a copy of any filings incorporated by reference in this
prospectus from Aether by contacting:
Kevin Connelly
VP Finance and Accounting
Aether Systems, Inc.
11460 Cronridge Drive
Owings Mills, Maryland 21117
Telephone: (410) 654-6400
You should rely only on the information incorporated by reference or
provided in this prospectus. Aether has not authorized anyone else to provide
you with different or additional information. You should not assume that the
information in this prospectus is accurate as of any date other than the date
set forth on the front cover.
20
21
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2,944,960 SHARES
[AETHER LOGO]
COMMON STOCK
----------------------
PROSPECTUS
----------------------
, 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by Aether Systems, Inc. ("Aether" or "Aether
Systems") in connection with the distribution of the securities being registered
are as follows:
TOTAL
AMOUNT(1)
---------
Securities and Exchange Commission Registration Fee......... $18,988
Accounting Fees and Expenses................................ 10,000
Legal Fees and Expenses..................................... 25,000
Printing and Engraving Expenses............................. 10,000
Miscellaneous Fees and Expenses............................. 1,012
-------
Total............................................. $65,000
=======
---------------
(1) All amounts are estimates except the SEC filing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporate law of the State of Delaware,
Aether Systems has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Aether Systems'
bylaws (Exhibit 3.2 hereto) also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
Aether's certificate of incorporation (Exhibits 3.1 and 3.3 hereto)
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to Aether and its stockholders.
These provisions do not eliminate the directors' duty of care and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to Aether, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
Aether has entered into agreements with its directors and certain of its
executive officers that require Aether to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of Aether or any of its affiliated enterprises, provided such person
acted in good father and in a manner such person reasonably believed to be in or
not opposed to the best interests of Aether and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The indemnification agreements also set forth certain procedures that will apply
in the event of a claim for indemnification thereunder.
Aether has a policy of directors' and officers' liability insurance that
insures Aether's directors and officers against the cost of defense, settlement
or payment of a judgment under certain circumstances.
II-1
23
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of Aether and its
officers and directors for certain liabilities arising under the Securities Act
or otherwise.
ITEM 16. EXHIBITS
The exhibit index is incorporated by reference.
ITEM 17. UNDERTAKINGS
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, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this 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 this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the 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 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in this 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement 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.
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 foregoing provisions, 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 Act and is,
therefore, unenforceable. In
II-2
24
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, 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 Act and
will be governed by the final adjudication of such issue.
II-3
25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Owings Mills, State of
Maryland on the 22nd day of February, 2001.
Aether Systems, Inc.
By: /s/ DAVID S. OROS
----------------------------------
David S. Oros
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS, that each person whose signature appears below
constitutes and appoints David S. Oros and David C. Reymann, and each of them,
as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and sign any registration statement
for the same offering covered by the Registration Statement that is to be
effective upon filing pursuant to Rule 462 promulgated under the Securities Act
of 1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DAVID S. OROS Chairman and Chief Executive February 22, 2001
------------------------------------------------ Officer
David S. Oros
/s/ DAVID C. REYMANN Chief Financial Officer (Principal February 22, 2001
------------------------------------------------ Financial and Accounting Officer)
David C. Reymann
/s/ J. CARTER BEESE, JR. Director February 22, 2001
------------------------------------------------
J. Carter Beese, Jr.
/s/ FRANK A. BONSAL, JR. Director February 22, 2001
------------------------------------------------
Frank A. Bonsal, Jr.
/s/ MARK D. EIN Director February 22, 2001
------------------------------------------------
Mark D. Ein
Director February , 2001
------------------------------------------------
Rahul C. Prakash
Director February , 2001
------------------------------------------------
Janice M. Roberts
/s/ DR. RAJENDRA SINGH Director February 22, 2001
------------------------------------------------
Dr. Rajendra Singh
II-4
26
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GEORGE P. STAMAS Director February 22, 2001
------------------------------------------------
George P. Stamas
Director February , 2001
------------------------------------------------
Robin T. Vasan
Director February , 2001
------------------------------------------------
Devin Wenig
/s/ THOMAS E. WHEELER Director February 22, 2001
------------------------------------------------
Thomas E. Wheeler
II-5
27
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT AND DESCRIPTION
------- ------------------------
*2.1 -- Agreement of Merger, dated as of October 18, 1999,
between Aether Systems LLC, and Aether Systems, Inc.
*2.2 -- Stock Purchase Agreement by and among Aether Technologies
International, L.L.C., Mobeo, Inc. and Peter Kibler,
Winston Barrett and Edward Spear dated as of August 19,
1999.
**2.3 -- Stock Purchase Agreement by and among Aether Systems,
Inc., LocusOne Communications, Inc. and the stockholders
named therein dated as of January 25, 2000
+2.4 -- Agreement and Plan of Merger dated as of February 9, 2000
by and among Aether Systems, Inc., RT Acquisition, Inc.
and Riverbed Technologies, Inc.
++2.5 -- LLC Interest Purchase Agreement made effective as of
April 18, 2000 by and among Aether Systems, Inc., Net
Search LLC and the members of Net Search, LLC and
Augustine N. Esposito
++2.6 -- Share Purchase Agreement relating to IFX Group Limited
***2.7 -- Agreement and Plan of Merger by and among Aether Systems,
Inc. and Cerulean Technology, Inc.
*4.1 -- Specimen Certificate for Aether Systems Common Stock
+4.2 -- Form of Indenture for Convertible Debt
+++5.1 -- Opinion of Wilmer, Cutler & Pickering as to the legality
of the shares of Common Stock being registered
21.1 -- Subsidiaries of Aether Systems
23.1 -- Consent of KPMG LLP for Aether Systems, Inc.
23.2 -- Consent of PricewaterhouseCoopers LLP
+++23.3 -- Consent of Wilmer, Cutler & Pickering, included in
Exhibit 5.1
23.6 -- Consent of KPMG LLP for LocusOne Communications, Inc.
23.7 -- Consent of KPMG LLP for Riverbed Technologies, Inc.
---------------
* Incorporated by reference to the Registration Statement
(File No. 333-85697) on Form S-1 filed with the Commission
on October 20, 1999, as amended.
** Incorporated by reference to the Form 8-K filed with the
Commission on February 15, 2000.
*** Incorporated by reference to the Registration Statement
(File No. 333-44566) on Form S-1 filed with the Commission
on September 7, 2000, as amended.
+ Incorporated by reference to the Registration Statement
(File No. 333-30852) or Form S-1 filed with the Commission
on February 22, 2000, as amended.
++ Incorporated by reference to the Form 10-Q filed with the
Commission on August 14, 2000.
+++ To be filed by amendment.