Prospectus Summary
This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before buying shares in the offering. You should read the entire prospectus carefully.
Efficient Networks, Inc.
Efficient Networks is a leading worldwide independent supplier of high-speed digital subscriber line customer premises equipment for the broadband access market. Our digital subscriber line, or DSL, solutions enable telecommunications and other network service providers to provide high-speed, cost-effective broadband access services over the existing copper wire telephone infrastructure. We believe there is significant demand for high-speed broadband access, especially among business users and consumers who have found current solutions to be inadequate or too expensive. We therefore focus on developing and producing single- and multiple-user DSL customer premises equipment for small- to medium-size businesses, branch offices of large corporations and consumers. Our DSL products enable applications such as high- speed Internet access, electronic commerce, remote access, telecommuting and extensions of corporate networks to branch offices.
Business-critical Internet-based applications, such as electronic commerce, supply chain management, Web hosting and remote access for telecommuters, generate enormous data traffic over the existing communications infrastructure. The growth in Internet use, increased competition resulting from domestic and international deregulation, and pressure from alternative means of providing high-bandwidth access services have led both traditional and new operators of the existing copper networks to deploy DSL. DSL technology enables these network service providers to exploit the existing copper infrastructure to provide broadband access at a low cost to most businesses and homes currently connected by telephone lines.
In order to offer cost-effective DSL services to end users, network service providers are actively seeking DSL customer premises equipment solutions that offer seamless end-to-end interoperability within their networks and which provide for simple and low-cost installation and maintenance. Our SpeedStream family of products consists of routing and bridging, external universal serial bus and internal DSL customer premises equipment. Our products satisfy the requirements of network service providers, as they:
. Enable DSL Deployments. We enable network service providers to rapidly deploy DSL services, thereby allowing them to quickly capture market share in today's intensely competitive broadband services market.
. Ensure End-To-End Interoperability. We leverage our core technology expertise and relationships with network equipment vendors, such as ADC Telecommunications, Advanced Fibre Communications, Alcatel, Diamond Lane Communications, DSC Communications, Ericsson, Lucent Technologies, Newbridge Networks, Nokia, Nortel Networks and Siemens, and network service providers to ensure interoperability from the end user's personal computer through the service provider's network.
. Provide for Efficient and Cost-Effective Installation. Our ProfileBuilder software tool allows a network service provider to pre-configure the customer premises equipment to the parameters of a particular network, reducing the costs associated with having installers perform these activities during each end-user installation.
. Provide for Cost-Effective Maintenance. Our Advanced Status software allows a network service provider to easily monitor, diagnose and often remotely fix the customer's problems quickly, which can substantially reduce the network service provider's customer support costs.
Our objective is to be the leading worldwide provider of high-performance DSL broadband access customer premises equipment for businesses, remote offices, telecommuters and consumers. To achieve this goal, we intend to capitalize on our early market acceptance by network service providers and to leverage our relationships with network equipment vendors. In addition, we will continue developing enhancements to our current DSL products as well as create new bundled voice and data access DSL products. Finally, we plan to extend our distribution channels to meet the growing demand for broadband access solutions and increase our brand awareness.
We sell our products to network equipment vendors and DSL network service providers. As of March 31, 1999, our products have been deployed by Ameritech, BellSouth, Covad Communications, Hong Kong Telecom, Singapore Telecom and six other network service providers, and purchased by eight network equipment vendors. An additional 39 network service providers have begun to test our customer premises equipment solutions.
We were incorporated in Delaware in 1993. Our principal executive offices are located at 4201 Spring Valley Road, Suite 1200, Dallas, Texas 75244-3666 and our telephone number is (972) 991-3884. Our Website is located at http://www.efficient.com. Information contained on our Website does not constitute part of this prospectus.
The Offering
Common stock offered.............. shares Common stock to be outstanding after this offering.............. shares Use of proceeds................... For general corporate purposes, principally working capital, additional sales and marketing efforts, and potential acquisitions. Proposed Nasdaq National Market symbol........................... EFNT The above table is based on shares outstanding as of March 31, 1999. However, this table also includes 3,082,191 shares that will be issued prior to the closing of this offering upon exercise of presently outstanding warrants for redeemable convertible preferred stock. These warrants will terminate if not exercised prior to the closing of this offering. See "Capitalization" and "Certain Transactions." This table excludes:
. 6,470,575 shares subject to options outstanding as of March 31, 1999 under our stock option plans;
. 3,700,000 shares reserved for future issuance under our stock option and employee stock purchase plans; and . 167,746 shares issuable upon exercise of certain outstanding warrants.
You should be aware that our fiscal year ends on June 30; thus, a reference to "fiscal 1998," for example, is to the fiscal year ended June 30, 1998. In addition, except as otherwise indicated, information in this prospectus is based on the following assumptions:
. that certain investors will convert an aggregate of $9.0 million owed to them by Efficient into an aggregate of 3,082,191 shares of redeemable convertible preferred stock through the exercise of outstanding warrants;
. that each outstanding share of redeemable convertible preferred stock will convert into one share of common stock immediately prior to the closing of this offering;
. that the underwriters' over-allotment option will not be exercised; and . that we will file our amended and restated certificate of incorporation.
Summary Consolidated Financial Information (in thousands, except per share data)
Nine Months Ended
Fiscal Year Ended June 30, March 31,
1996 1997 1998 1998 1999
Statement of Operations Data: Net revenues................ $ 3,687 $ 4,122 $ 3,370 $ 2,703 $ 7,139 Cost of revenues............ 2,209 2,386 2,160 1,553 6,699 Gross profit................ 1,478 1,736 1,210 1,150 440 Loss from operations........ (5,823) (6,174) (8,070) (5,158) (11,016) Net loss.................... $ (5,646) $ (6,049) $ (7,940) $ (5,077) $(12,996) Net loss per share: Basic and diluted......... $ (1.99) $ (2.00) $ (2.44) $ (1.59) $ (3.48) Weighted average shares... 2,838 3,027 3,254 3,193 3,807 Pro forma net loss per share: Basic and diluted......... $ (0.35) $ (0.64) Weighted average shares... 22,886 27,077 March 31, 1999 Pro Forma Actual Pro Forma As Adjusted
Balance Sheet Data: Cash and cash equivalents................... $ 4,596 $6,596 $ Working capital............................. 9,473 9,473 Total assets................................ 17,234 19,234 Long-term debt, net of discount............. 4,253 -- Redeemable convertible preferred stock...... 40,408 -- Total stockholders' equity (deficit)........ (33,036) 13,625
See Note 2 of Notes to Consolidated Financial Statements for an explanation of the determination of the number of shares used in computing per share data.
The pro forma numbers reflect:
. the conversion of $9.0 million in long-term debt into an aggregate of 3,082,191 shares of redeemable convertible preferred stock through the exercise of certain warrants; and . the conversion into common stock of all redeemable convertible preferred stock immediately prior to the closing of this offering.
The pro forma as adjusted numbers give effect to our receipt of the estimated net proceeds from the sale of the shares of common stock offered hereby at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. See "Use of Proceeds" and "Capitalization."