PROSPECTUS Filed Pursuant to Rule 424(b)(1)
File Number 333-108068
CONCORD COMMUNICATIONS, INC.
340,996 SHARES OF
COMMON STOCK
This prospectus is offering 340,996 shares of our common stock for sale
by certain selling stockholders. The selling stockholders acquired their stock
in connection with our acquisition of netViz Corporation ("netViz") completed on
July 17, 2003. netViz was acquired through a wholly owned subsidiary of Concord
and subsequently merged into a limited liability company also wholly owned by
Concord. The surviving entity, netViz LLC, is now a wholly owned subsidiary of
Concord.
We are receiving no proceeds from the sale of the shares offered for
sale hereunder.
Concord's common stock is traded on the Nasdaq National Market under
the symbol "CCRD." The last reported sale price of the common stock on the
Nasdaq National Market on September 12, 2003 was $15.32 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED 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 September 15, 2003.
The information in this preliminary 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.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED HEREIN OR SPECIFICALLY
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS.
THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES
OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF THE COMMON STOCK.
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TABLE OF CONTENTS
PAGE
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Summary of the Offering and the Company............................. 2
Factors that Could Affect Future Results............................ 2
Use of Proceeds..................................................... 14
Selling Stockholders................................................ 14
Plan of Distribution................................................ 15
Legal Matters....................................................... 17
Experts............................................................. 17
Where You Can Find More Information................................. 17
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SUMMARY OF THE OFFERING AND THE COMPANY
This prospectus is offering 340,996 shares of our common stock for sale
by certain selling stockholders. The selling stockholders acquired their stock
in connection with our acquisition of netViz Corporation ("netViz") completed on
July 17, 2003. netViz was acquired through a wholly owned subsidiary of Concord
and subsequently merged into a limited liability company also wholly-owned by
Concord. The surviving entity, netViz LLC, is now a wholly owned subsidiary of
Concord.
We are receiving no proceeds from the sale of the shares offered for
sale hereunder. We have agreed to pay the expenses, including certain accounting
and legal expenses, associated with registering these shares of the selling
stockholders. We may suspend the use of this prospectus during periods of time
if there then exists material, non-public information relating to Concord that,
in our reasonable opinion, would not be appropriate for disclosure.
Concord develops, markets and supports solutions that optimize
application performance and availability across networks and systems. With the
recent acquisition of netViz, Concord has expanded its product line to include a
solution that enables users to visualize business processes and allows them to
map relationships within the supporting technology infrastructure through
data-driven icons. The eventual integration of netViz's technology with
Concord's flagship product, the eHealth Suite, will provide users with a new,
more automated means of application service optimization.
On July 14, 2003, we entered into an Agreement and Plan of
Reorganization providing for the merger of Sunburst Acquisition Corporation, a
wholly owned subsidiary of Concord, with and into netViz. The merger was
effected on July 17, 2003. At the effective time of the merger, the issued and
outstanding shares of the common stock, $0.001 par value per share, of netViz
were cancelled and automatically converted into cash consideration and an
aggregate of 340,996 shares of our common stock.
Our principal executive offices are located at 600 Nickerson Road,
Marlborough, Massachusetts, 01752 and our telephone number is (508) 460-4646. As
used in this prospectus, "we," "us," "our", "the Company" and "Concord" refer to
Concord Communications, Inc., a Massachusetts corporation, and its wholly owned
subsidiaries.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and
related notes thereto included in our annual reports and other information on
file with the SEC. The statement of operations data for each of the three years
ended December 31, 2002 and the balance sheet data as of December 31, 2002 and
2001, have been derived from audited financial statements incorporated by
reference in this Registration Statement. The statement of operations data for
each of the two years ended December 31, 1999 and the balance sheet data as of
December 31, 2000, 1999 and 1998, have been derived from financial statements
not incorporated by reference in this Registration Statement. The Company
adopted Statement of Financial Accounting Standards ("FAS") No. 145.
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" as of January 1, 2003. The adoption of FAS
No. 145 retroactively changes guidance related to the reporting of gains and
losses from extinguishment of debt as extraordinary items. The effect of FAS
No. 145 on the Company's statement of operations data for the five years ended
December 31, 2002 is for amounts previously recorded as "Extraordinary loss on
early extinguishment of debt" to instead be recorded as a component of "Other
income, net". The Company has reclassified extraordinary loss of $216, net of
tax benefit of $72, for the year ended December 31, 2000. There were no
extraordinary items in the years ended December 31, 2002, 2001, 1999 and 1998.
(in thousands, except per share data) Fiscal Year Ended December 31,
2002 2001 2000 1999 1998
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Consolidated Statements of Operations Data:
Revenues ................................... 93,844 87,978 91,484 68,820 41,969
Gross profit ............................... 76,874 70,162 78,383 60,318 37,085
Operating (loss) income .................... (147) (13,868) (1,277) 7,517 2,599
Other income net ........................... 2,916 3,161 2,778 2,964 2,515
Net income (loss) .......................... 2,201 (11,154) 1,126 6,195 6,100
Net income (loss) available to common
shareholders ............................. $ 2,201 $(11,154) $ 1,126 6,070 5,980
Net income (loss) per common and potential common share:
Basic .................................... $ 0.13 $ (0.67) $ 0.07 $ 0.42 $ 0.44
Diluted .................................. $ 0.12 $ (0.67) $ 0.07 $ 0.36 $ 0.37
Weighted average common and potential common shares outstanding:
Basic .................................... 17,057 16,683 16,144 14,395 13,570
Diluted .................................. 17,627 16,683 16,746 16,722 16,200
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Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable
securities ............................... $ 73,670 $ 68,344 $ 63,251 $63,569 $56,619
Working capital ............................ 56,975 48,965 54,131 55,213 47,913
Total assets ............................... 105,930 102,480 102,276 89,787 67,981
Long-term debt, net of current portion ..... -- -- -- 2,064 242
Redeemable convertible preferred stock ..... -- -- -- 11,723 11,598
Total stockholders' equity ................. $ 68,936 $ 63,507 $ 70,746 $52,476 $41,213
FACTORS THAT COULD AFFECT FUTURE RESULTS
Any investment in our common stock involves a high degree of risk. If any of the
following risks actually occur, our business, results of operations and
financial condition would likely suffer.
This document contains forward-looking statements. Any statements
contained in this document that do not describe historical facts are
forward-looking statements. Concord makes such forward-looking statements under
the provisions of the "safe harbor" section of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements contained herein are based on
current expectations, but are subject to a number of risks and uncertainties.
Concord's actual
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future results may differ significantly from those stated in any forward-looking
statements. Factors that may cause such differences include, but are not limited
to, the factors discussed below.
OUR FUTURE OPERATING RESULTS ARE UNCERTAIN.
Prior to 2001, we marketed and sold our products primarily in the
performance management market. In 2001, our product functionality was expanded
to include both fault and performance management features to penetrate the fault
management market. While sales of our fault and application products were
approximately 20% of our license revenues for the fiscal quarter ended June 30,
2003, we still have a limited operating history in this expanded market upon
which we can evaluate our business. The integrated fault and performance market
is highly competitive and rapidly evolving. Additionally, many of our
competitors in this new market have a longer operating history and greater
resources. Our limited operating history and an uncertain economic climate due
to worldwide economic conditions make the prediction of future results of
operations difficult or impossible. Our prospects must be considered in light of
the risks, costs, and difficulties frequently encountered by emerging companies
operating in the highly competitive software industry.
FAILURE TO SUCCESSFULLY INTEGRATE ACQUIRED COMPANIES MAY ADVERSELY IMPACT OUR
BUSINESS.
In July 2003, we completed the acquisition of netViz Corporation, a
developer of software that enables customers to visualize business processes and
allows them to map relationships within the supporting technology infrastructure
through data-driven icons. The acquisition of netViz Corporation provides us the
opportunity to integrate the netViz products with our existing products and to
manage the continued marketing and selling of the netViz products as a distinct
product set. Additionally, we must integrate the netViz personnel, manage
operations with a workforce located in multiple locations, and retain netViz
customers. Our efforts to integrate netViz may not be successful. This would
adversely impact our business. This acquisition may adversely impact our
business through:
- failure to successfully integrate the acquired products;
- failure to successfully integrate personnel and management structures;
- failure to retain key customers;
- loss of key employees;
- failure to effectively control costs associated with the integration;
- failure to meet expected timelines for product development and
commercialization; and
- exposure to liabilities of the acquired company that were not known or
accurately evaluated by us prior to consummating the acquisition.
Even if the acquisition is successfully integrated, we may not fully
realize all of the expected benefits of the acquisition, including the expected
financial results or the expected benefits to our product line.
WE CANNOT ENSURE THAT OUR REVENUES WILL GROW OR THAT WE WILL CONTINUE TO BE
PROFITABLE.
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We have expended considerable resources to the research and development
of new technologies and new or improved product features that have enabled us to
penetrate new markets both in the United States and internationally. This
investment in product development allowed the company to achieve revenue growth
and profitability for the fiscal quarter ended June 30, 2003. Despite our
results in the second fiscal quarter of 2003, we cannot ensure that we can
generate revenue growth on a quarterly or annual basis, or that we can achieve
or sustain any revenue growth in the future.
In an effort to retain profitability, we continue to work to reduce
operating expenses while maintaining funding for product development. However,
competition in the marketplace may require us to increase our operating expenses
in the future in order to:
- fund higher levels of research and development;
- increase our sales and marketing efforts;
- develop new distribution channels;
- broaden our customer support capabilities;
- expand our administrative resources in anticipation of future growth; and
- respond to unforeseeable economic or business circumstances.
To the extent that increases in our expenses precede or are not
followed by increased revenues, our profitability will be at risk.
In addition, in view of the rapidly evolving nature of our business and
markets, the uncertain economic and geopolitical landscape, and our limited
operating history in our current market, we believe that one should not rely on
period-to-period comparisons of our financial results as an indication of our
future performance.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.
We are likely to experience significant fluctuations in our quarterly
operating results caused by many factors, including, but not limited to:
- changes in the demand for our products by customers or groups of
customers;
- the timing, composition, and size of orders from our customers, including
the tendency for significant bookings to occur in the final two weeks of
each fiscal quarter;
- our customers' spending patterns and budgetary resources for our products;
- geopolitical conditions in the world;
- the success of our new customer generation activities;
- introductions or enhancements of products, or delays in the introductions
or enhancements of products, by us or our competitors;
- changes in our pricing policies or those of our competitors;
- changes in the distribution channels through which our products are sold;
- our success in anticipating and effectively adapting to developing markets
and rapidly changing technologies;
- our success in attracting, retaining, and motivating qualified personnel;
- the publication of opinions about us and our products, or our competitors
and their products, by industry analysts or others;
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- changes in general economic conditions; and
- changes in accounting rules, such as recording expenses for employee stock
option grants.
Though our service revenues have been increasing as a percentage of
total revenues, we do not have a significant ongoing revenue stream that may
mitigate quarterly fluctuations in operating results, as do other software
companies with a longer history of operations. Increases in our revenues will
also depend on our successful implementation of our distribution strategy as we
attempt to expand our channels of distribution. There also may be other factors,
such as seasonality and the timing of receipt and delivery of orders within a
fiscal quarter, that significantly affect our quarterly results, which are often
difficult to predict.
A significant portion of our product sales occurs in the final two
weeks of each fiscal quarter. Any delay in the shipment of products near the end
of the quarter may result in decreased revenues for the quarter. Additionally,
intense competition and budgetary constraints placed upon our customers
typically increase during the final two weeks of a fiscal quarter and may
adversely affect our revenues for that quarter.
Due to all of the foregoing factors, we believe that our quarterly
operating results are likely to vary significantly in the future. Therefore, in
some future quarter our results of operations may fall below the expectations of
securities analysts and investors. In such event, the trading price of our
common stock will likely suffer.
OUR SUCCESS IS DEPENDENT UPON SALES TO TELECOMMUNICATION CARRIERS, SERVICE
PROVIDERS, AND ENTERPRISE CUSTOMERS.
We derive and likely will continue to derive a significant portion of
our revenues from the sales of our products to telecommunication carriers,
service providers, and enterprise customers. These markets worldwide have
suffered from a turbulent economy during 2002 and the first half of fiscal 2003.
We have been negatively affected by the general weakness in capital spending
within these markets. The volume of sales of our products and services to
telecommunication carriers, service providers, and enterprise customers may
increase slower than we expect or may decrease.
THE MARKET FOR APPLICATION PERFORMANCE MANAGEMENT SOFTWARE IS EMERGING.
The market for our application performance management software is in an
early stage of development. Management of the end user's experience through
optimizing the performance of computer applications is critical to our
customers' business profitability and is the core of the information technology
infrastructure management. Targeting this market is central to the development
and marketing of our products, but this market is emerging and highly
competitive, and it is difficult to assess:
- the size of the application performance management market;
- the appropriate features and prices for products to address this market;
- the optimal distribution strategy; and
- the market that will develop and the impact of large competitors within
the market.
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This market is very competitive and we are in direct competition with
larger companies with substantially greater resources. These larger companies
are able to devote considerable resources to the development of competitive
products and the creation and maintenance of direct and indirect sales channels.
The rapidly evolving application performance market and the continued presence
of larger companies in this market may impact our ability to retain or increase
our market share.
THE MARKET FOR APPLICATION AVAILABILITY AND PERFORMANCE MANAGEMENT SOFTWARE IS
EMERGING.
The market for our application availability and performance solution is
still in an early stage of development. Although the rapid expansion and
increasing complexity of computer applications, systems, and networks in recent
years have increased the demand for fault and performance management software
products, the awareness of, and the demand for, an integrated fault and
performance solution is a recent development; therefore, it is difficult to
assess:
- the size of this market;
- the appropriate features and prices for products to address this market;
- the optimal distribution strategy; and
- the market that will develop and the impact of large competitors within
the market.
The development of this market and our growth will depend significantly
upon the desire and success of telecommunication carriers, managed services
providers, and enterprises to integrate availability and performance management
into their applications, systems, and networks. Moreover, this market is very
competitive and we are in direct competition with larger companies with
substantially greater resources. These larger companies are able to devote
considerable resources to the development of competitive products and the
creation and maintenance of direct and indirect sales channels. The presence of
these larger companies in this market may impact our ability to retain or
increase our market share.
THE MARKET FOR OUR PRODUCTS IS INTENSELY COMPETITIVE AND RAPIDLY EVOLVING.
The market for our products is intensely competitive and rapidly
evolving. Our current and future competitors include:
- application performance software vendors;
- fault management software vendors;
- IT visualization software vendors;
- report toolset niche vendors;
- enterprise management software, framework and platform providers;
- software vendors providing service assurance for the wireless market;
- large, well established management framework companies that have developed
network or application management platforms;
- developers of network element management solutions;
- probe vendors;
- telecommunications vendors;
- system agent vendors; and
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- vendors that provide, as a service, some of the functionality of our
products.
We expect competition to persist, increase, and intensify in the future
which will likely result in price competition within our relevant market. If we
do not provide products that achieve success in our market in the short term, we
could suffer an insurmountable loss in market share and brand name acceptance.
We cannot ensure that we will compete effectively with current and future
competitors.
MARKET ACCEPTANCE OF OUR EHEALTH(R) PRODUCT FAMILY IS CRITICAL TO OUR SUCCESS.
We currently derive substantial product revenues from our eHealth(R)
Suite product family, and we expect that revenues from these products will
continue to account for substantially all of our product revenues in the
foreseeable future. Broad market acceptance of these products is critical to our
future success. We cannot ensure that market acceptance of our eHealth(R) Suite
of products will increase or even remain at current levels. Factors that may
affect the market acceptance of our integrated solution include:
- the availability and price of competing integrated solutions, products and
technologies;
- the demand for integrated, as opposed to stand-alone, solutions; and
- the success of our sales efforts and those of our marketing partners.
Moreover, if demand for integrated fault and performance management
software products increases, we anticipate that our competitors will introduce
additional competitive products and new competitors could enter our market and
offer alternative products resulting in decreased market acceptance of our
products.
WE MAY NEED FUTURE CAPITAL FUNDING.
We plan to continue to expend substantial funds on the continued
development, marketing, and sale of the eHealth(R) product family. While we have
approximately $80.4 million in short term investments (cash, cash equivalents
and marketable securities), excluding restricted cash totaling $539,000 as of
June 30, 2003, we cannot ensure that our existing capital resources and any
funds that may be generated from future operations together will be sufficient
to finance our future operations or that other sources of funding will be
available on terms acceptable to us, if at all. In addition, future sales of
substantial amounts of our securities in the public market could adversely
affect prevailing market prices and could impair our future ability to raise
capital through the sale of our securities.
WE MUST INTRODUCE PRODUCT ENHANCEMENTS AND NEW PRODUCTS ON A TIMELY BASIS.
Because of rapid technological change in the software industry,
potential changes in the architecture of the IT infrastructure, changes in the
fault and performance management software market, and changes in industry
standards, the market acceptance of versions of our eHealth(R) Suite is
difficult to estimate. We cannot ensure that:
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- we will successfully develop and market enhancements to our eHealth(R)
Suite or successfully develop new products that respond to technological
changes, evolving industry standards, or customer requirements;
- we will not experience difficulties that could delay or prevent the
successful development, introduction, and sale of enhancements or new
products; or
- enhancements or new products will adequately address the requirements of
the marketplace and achieve market acceptance.
THE NEED FOR OUR PRODUCTS MAY DECREASE IF MANUFACTURERS INCORPORATE OUR PRODUCT
FEATURES INTO THEIR PRODUCT OFFERINGS.
Our products manage the performance of computer applications, systems,
and networks. Presently, manufacturers of both hardware and software have not
implemented these management functions into their products in any significant
manner. These products typically include, but are not limited to, operating
systems, workstations, network devices, and software. If manufacturers begin to
incorporate these management functions into their products it may decrease the
value of our products and have a substantial impact on our business.
CURRENT GEOPOLITICAL INSTABILITY AND THE CONTINUING THREAT OF DOMESTIC AND
INTERNATIONAL TERRORIST ATTACKS MAY ADVERSELY IMPACT OUR REVENUES.
International tensions, exacerbated by the war in Iraq contribute to an
uncertain political and economic climate, both in the United States and
globally, which may affect our ability to generate revenue on a predictable
basis. In addition, the continuing threat of terrorist attacks internationally
has contributed to international tension and uncertainty, which has exacerbated
the weakening of the worldwide economy. As we sell products both in the United
States and internationally, the threat of future terrorist attacks may adversely
affect our business.
OUR COMMON STOCK PRICE COULD EXPERIENCE SIGNIFICANT VOLATILITY.
The market price of our common stock may be highly volatile and could
be subject to wide fluctuations in response to:
- variations in results of operations;
- announcements of technological innovations or new products by us or our
competitors;
- changes in financial estimates by securities analysts;
- announcements of results of operations by other companies;
- announcements by government or other agencies regarding the economic
health of the United States and the rest of the world;
- announcements relating to financial improprieties by public companies; or
- other events or factors.
In addition, the financial markets have experienced significant price
and volume fluctuations that have particularly affected the market prices of
equity securities of many high technology companies and that often have been
unrelated to the operating performance of such companies or have resulted from
the failure of the operating results of such companies to meet market
expectations in a particular quarter. Broad market fluctuations or any failure
of our
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operating results in a particular quarter to meet market expectations may
adversely affect the market price of our common stock leading to an increased
risk of securities class action litigation. Such litigation could result in
substantial costs and a diversion of our attention and resources.
OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE. OUR SUCCESS DEPENDS UPON
MAINTENANCE OF STANDARD PROTOCOLS.
The software industry is characterized by:
- rapid technological change;
- frequent introductions of new products;
- changes in customer demands; and
- evolving industry standards.
The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products and integrated
solutions obsolete and unmarketable. While we actively work to develop products
that operate with standard protocols, any change in industry standards or the
emergence of new network technologies could affect the compatibility of our
products, which in turn could affect the demand for, or the pricing of, our
products and solutions.
WE RELY ON STRATEGIC PARTNERS AND OTHER EVOLVING DISTRIBUTION CHANNELS.
Our distribution strategy is to develop multiple distribution channels,
including sales through:
- strategic marketing partners;
- value added resellers;
- system integrators;
- telecommunication carriers;
- original equipment manufacturers; and
- independent software vendors and international distributors.
We have developed a number of these relationships and intend to
continue to develop new "channel partner" relationships. We have focused on
identifying and developing our key distribution partners worldwide to maximize
the success of our indirect sales. As part of this process, we have decreased
the total number of distributors selling our products, but increased the quality
and focus of our most valuable distributors through improved training and
development programs. Our success will depend in large part on our development
of these more focused distribution relationships and on the performance and
success of these third parties, particularly telecommunication carriers and
other network service providers. We sell our products in the United States
through both direct sales to customers and indirect sales to customers through
our channel partners. Outside the United States, we sell our products primarily
through indirect sales via our channel partners. Our international channel
partners are located in Europe, the Middle East, Africa, Asia, and North and
South America and are subject to local laws, regulations, and customs that may
make it difficult to accurately assess the potential
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revenues that can be generated from a certain market. Our success depends upon
our ability to attract and retain valuable channel partners and to accurately
assess the size and vitality of the markets in which our products are sold.
While we have implemented policies and procedures to achieve this, we cannot
predict the extent to which we are able to attract and retain financially
stable, motivated channel partners. Additionally, our channel partners may not
be successful in marketing and selling our products. We may:
- fail to attract important and effective channel partners;
- fail to penetrate our targeted market segments through the use of channel
partners; or
- lose any of our channel partners, as a result of competitive products
offered by other companies, products developed internally by these channel
partners, their financial insolvency or otherwise.
WE MAY FAIL TO MANAGE SUCCESSFULLY THE GROWTH OF OUR BUSINESS.
We have experienced employee turnover in our sales and operations
personnel; our products have become increasingly complex; and our product
distribution channels are being developed and expanded. The rapid evolution of
our markets and the increasing complexity of our products has placed, and is
likely to continue to place, significant strains on our administrative,
operational, and financial resources and increase demands on our internal
systems, procedures, and controls that may impact our ability to grow our
business.
OUR SUCCESS DEPENDS ON OUR RETENTION OF KEY PERSONNEL.
Our performance depends substantially on the performance of our key
technical, senior management, and sales and marketing personnel. We may lose the
services of any of such persons. Our success depends on our continuing ability
to identify, hire, train, motivate, and retain highly qualified management,
technical, and sales and marketing personnel. Despite current weak economic
conditions, we experience intense competition for such personnel and are
constantly exploring new avenues for attracting and retaining key personnel.
However, we cannot ensure that we will successfully attract, assimilate, or
retain highly qualified technical, managerial or sales and marketing personnel
in the future.
OUR FAILURE TO CONTINUE TO EXPAND INTO INTERNATIONAL MARKETS COULD HARM OUR
BUSINESS.
We intend to continue to expand our operations outside of the United
States and enter additional international markets, primarily through the
establishment of channel partner arrangements. As mentioned above, we have
concentrated recently on developing more focused relationships with fewer key
distributors. We expect to commit additional time and development resources to
customizing our products and services for selected international markets and to
developing international sales and support channels. We cannot ensure that such
efforts will be successful.
We face certain difficulties and risks inherent in doing business
internationally, including, but not limited to:
- costs of customizing products and services for international markets;
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- dependence on independent resellers;
- multiple and conflicting regulations;
- exchange controls;
- longer payment cycles;
- unexpected changes in regulatory requirements;
- import and export restrictions and tariffs;
- difficulties in staffing and managing international operations;
- greater difficulty or delay in accounts receivable collections;
- potentially adverse tax consequences;
- compliance with a variety of laws outside the United States;
- the impact of possible recessionary environments in economies outside the
United States;
- political and economic instability; and
- exposure to foreign currency fluctuations.
Our successful expansion into certain countries will require additional
modification of our products, particularly national language support. Presently,
the majority of our current export sales are denominated in United States
dollars. To the extent that international sales continue to be denominated in
United States dollars, an increase in the value of the United States dollar
relative to other currencies could make our products and services more expensive
and, therefore, potentially less competitive in international markets. In
certain European Union countries, however, we have introduced pricing in Euros.
While we do maintain a foreign currency hedging program on accounts receivable,
to the extent that future international sales are denominated in foreign
currency, our operating results will be subject to risks associated with foreign
currency fluctuation. Additionally, as we increase our international sales,
seasonal fluctuations in revenue generation resulting from lower sales that
typically occur during the summer months in Europe and other parts of the world
may affect our total revenues.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS MAY HARM OUR COMPETITIVE
POSITION.
Our success depends significantly upon our proprietary technology. We
rely on a combination of patent, copyright, trademark and trade secret laws,
non-disclosure agreements, and other contractual provisions to establish,
maintain, and protect our proprietary rights. These means afford only limited
protection.
We have nine issued and twelve pending U.S. patents, and various
foreign counterparts as of June 30, 2003. We cannot ensure that patents will
issue from our pending applications or from any future applications or that, if
issued, any claims allowed will be sufficiently broad to protect our technology.
In addition, we cannot ensure that any patents that have been or may be issued
will not be challenged, invalidated or circumvented, or that any rights granted
by those patents would protect our proprietary rights. Failure of any patents to
protect our technology may make it easier for our competitors to offer
equivalent or superior technology.
We have sought also to protect our intellectual property through the
use of copyright, trademark, and trade secret laws. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our products or services, or to obtain and use information that we regard as
proprietary. Third parties may also independently develop similar technology
without breach of our proprietary rights.
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In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States. In
addition, many of our products are licensed under end user license agreements
(also known as shrinkwrap licenses) that are not signed by licensees. The law
governing the enforceability of shrinkwrap license agreements is not settled in
most jurisdictions. There can be no guarantee that we would achieve success in
enforcing one or more shrinkwrap license agreements if we sought to do so in a
court of law.
WE LICENSE CERTAIN TECHNOLOGIES FROM THIRD PARTIES.
We license from third parties, generally on a non-exclusive basis,
certain technologies used in our products. The termination of any such licenses,
or the failure of the third-party licensors to adequately maintain or update
their products, could result in delay in our shipment of certain of our products
while we seek to implement technology offered by alternative sources, and any
required replacement licenses could prove costly. While it may be necessary or
desirable in the future to obtain other licenses relating to one or more of our
products or relating to current or future technologies, we cannot ensure that we
will be successful in doing so on commercially reasonable terms or at all.
We have started shipping Oracle(R) software as the database on which
the eHealth(R) Suite runs. While we believe the switch to Oracle will make our
products even more robust and we are comfortable with the choice of Oracle as a
database vendor, there is no guarantee that our customers will readily accept
this change. As with any vendor, there also is no guarantee that Oracle will be
able to continue to deliver to us an acceptable database solution, nor that the
product Oracle delivers will continue to interface effectively in conjunction
with our eHealth Suite of products.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS WOULD HARM OUR BUSINESS.
Although we do not believe that we are infringing upon the intellectual
property rights of others, claims of infringement are becoming increasingly
common as the software industry develops legal protections for software
products. Litigation may be necessary to protect our proprietary technology, and
third parties may assert infringement claims against us with respect to their
proprietary rights. Any claims or litigation can be time-consuming and expensive
regardless of their merit. Infringement claims against us can cause product
release delays, require us to redesign our products, or require us to enter into
royalty or license agreements which may not be available on terms acceptable to
us or at all.
WE MAY NOT HAVE SUFFICIENT PROTECTION AGAINST PRODUCT LIABILITY CLAIMS.
Because our products are used by our customers to identify and predict
current and future application, system, and network problems and to avoid
failures of the network to support critical business functions, design defects,
software errors, misuse of our products, incorrect data from network elements,
or other potential problems, within or out of our control, may arise from the
use of our products and could result in financial or other damages to our
customers. Our license agreements with our customers typically contain
provisions designed to limit our exposure to potential claims as well as any
liabilities arising from such claims. As a matter of practice, our
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license agreements limit our liability in regards to product liability claims,
and in many agreements, our maximum liability for product liability claims is
limited to the equivalent of the cost of the products licensed under that
agreement. However, any litigation or similar procedure related to a product
liability claim may require considerable resources to be expended that could
adversely affect our business and financial condition and decrease future
revenues.
THE CONVICTION OF ARTHUR ANDERSEN LLP MAY LIMIT POTENTIAL RECOVERIES RELATED TO
THEIR PRIOR SERVICE AS OUR INDEPENDENT AUDITORS.
Arthur Andersen LLP served as our independent auditors until June 10,
2002. On June 15, 2002, Arthur Andersen LLP was found guilty on federal
obstruction of justice charges arising from the government's investigation of
Enron Corporation. Following this indictment, Arthur Andersen LLP informed the
SEC that it would cease its operations. On June 10, 2002, we dismissed Arthur
Andersen LLP and on June 11, 2002, we retained PricewaterhouseCoopers LLP as our
independent auditors. Securities and Exchange Commission ("SEC") rules require
us to present historical audited financial statements in various SEC filings,
such as registration statements, along with consents from Arthur Andersen LLP to
include its audit report in those filings. In light of the cessation of Arthur
Andersen LLP's SEC practice, we will not be able to obtain the consent of Arthur
Andersen LLP for the inclusion of its audit report in our relevant current and
future filings. The SEC has provided regulatory relief designed to allow
companies that file reports with the SEC to dispense with the requirement to
file a consent of Arthur Andersen LLP in certain circumstances, but purchasers
of securities sold under our registration statements, which were not filed with
the consent of Arthur Andersen LLP for the inclusion of its audit report will
not be able to file suit against Arthur Andersen LLP pursuant to Section
11(a)(4) of the Securities Act and therefore their right of recovery under that
section may be limited as a result of the lack of our ability to obtain the
consent of Arthur Andersen LLP.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS.
The Company's management, including the Chief Executive Officer and the
Chief Financial Officer, does not expect that our disclosure controls or our
internal controls will prevent all errors and intentional misrepresentations. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or intentional conduct may occur and not be
detected.
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USE OF PROCEEDS
Concord will not receive any of the proceeds from the sale of any of
the shares being offered and sold by the selling stockholders pursuant to this
prospectus. See "Selling Stockholders" and "Plan of Distribution". The principal
purpose of this offering is to effect an orderly disposition of the shares of
common stock of Concord being offered and sold from time to time by the selling
stockholders.
SELLING STOCKHOLDERS
The following table sets forth, the following:
(i) the name of each selling stockholder;
(ii) the number of shares of common stock and the percentage of
outstanding common stock beneficially owned by each selling
stockholder before this offering;
(iii) the number of shares that each selling stockholder may offer
and sell pursuant to this prospectus; and
(iv) the number of shares of common stock and the percentage of
outstanding common stock beneficially owned by each selling
stockholder after this offering.
The shares registered pursuant to this prospectus may be offered from
time to time by any of the selling stockholders named below or by those
individuals and entities to which they may transfer or distribute the shares.
See "Plan of Distribution."
Each of the selling stockholders has sole voting and investment power
with respect to the shares they beneficially own. In addition, none of the
selling stockholders has had any material relationship with Concord or any of
its predecessors or affiliates within the past three years. This information was
compiled solely from representations received from each of the selling
stockholders.
Since each selling stockholder may sell all, some or none of their
shares registered under this prospectus, no estimate can be made of the
aggregate number of percentage of shares of Common Stock that each Selling
Stockholder will beneficially own upon completion of this offering. Thus, we
have assumed that the selling stockholders will sell all of the shares of common
stock registered for them under this prospectus.
In calculating the percentage of shares beneficially owned by each
selling stockholder after completion of the offering, we have based our
calculations on the fact that as July 31, 2003, a total of 17,803,381 shares of
common stock were outstanding.
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NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED AFTER
TO OFFERING (A) THE OFFERING (A)
-------------------------- ------------------------
NUMBER OF SHARES
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
---- ------ ---------- ------- ------ ----------
Vo Ngoc Tran(B) 276,207 1.55% 276,207 -- *
Vo Ngoc Tran(B) (held in 51,150 * 51,150 -- *
escrow)
TCGen, Inc. 13,639 * 13,639 -- *
------- -------
TOTAL 340,996 1.92% 340,996 *
======= ==== =======
---------------------------------------------------
(A) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission"). Beneficial ownership
includes options to purchase common stock exercisable as of July 31, 2003
and options to purchase common stock that will become exercisable within 60
days of July 31, 2003 ("presently exercisable stock options"). Presently
exercisable stock options are deemed outstanding for purposes of computing
the percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage of any other person.
(B) Former Chief Executive Officer and Director of netViz. Currently an
employee of Concord. Excludes 25,000 shares of common stock issuable upon
the exercising of options that are not presently exercisable and will not
become exercisable within 60 days of July 31, 2003.
* Less than one percent.
PLAN OF DISTRIBUTION
The shares of common stock of Concord offered under this prospectus may
be sold from time to time by or for the account of any of the selling
stockholders or by those individuals and entities to whom they pledge, donate,
distribute or transfer their shares or other successors in interest.
The selling stockholders received the shares of common stock offered
under this prospectus from Concord in connection with our acquisition of netViz
Corporation completed on July 17, 2003.
Concord will not receive any of the proceeds from the sale of these
shares by the selling stockholders. Concord is paying the expenses of
registering these shares for offer and sale by the selling stockholders. Such
expenses include, but are not limited to, legal fees, accounting fees, various
filing fees and other expenses incident to registering these shares. Concord is
not paying any brokerage commissions incurred by the selling stockholder.
Concord has agreed to indemnify the selling stockholders against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
and the Securities Exchange Act of 1934, as amended, arising in connection with
this prospectus.
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The distribution of the shares of common stock of Concord offered under
this prospectus by the selling stockholders is not subject to any underwriting
agreement. The shares may be sold under this prospectus directly to purchasers
by the selling stockholders in negotiated transactions; by or through brokers or
dealers in ordinary brokerage transactions or transactions in which the broker
solicits purchasers; in block trades in which the broker or dealer will attempt
to sell the shares as agent but may position and resell a portion of the block
as principal; in transactions in which a broker or dealer purchases as principal
for resale for its own account; or through underwriters or agents. The shares of
common stock of Concord offered under this prospectus may be sold at a fixed
offering price, which may be changed, at the prevailing market price at the time
of sale, at prices related to such prevailing market price or at negotiated
prices. Any brokers, dealers, underwriters or agents may arrange for others to
participate in any such transaction and may receive compensation in the form of
discounts, commissions or concessions from the selling stockholders and/or the
purchasers of the shares. Each selling stockholder will be responsible for
payment of any and all commissions to brokers.
The selling stockholders have agreed with Concord that neither of them
may sell any of their respective shares registered under this prospectus for a
period of 180 days following the effective date of the registration statement of
which this prospectus forms a part.
Each selling stockholder may also loan or pledge the shares registered
under this prospectus to a broker-dealer and the broker-dealer may sell the
shares so loaned or upon a default the broker-dealer may effect sales of the
pledged shares using this prospectus.
If and when any of the shares covered by this prospectus qualifies for
sale under Rule 144 under the Securities Act, they may be sold under Rule 144
rather than under this prospectus.
Any selling stockholder and any broker-dealer, agent or underwriter
that participates with the selling stockholder in the distribution of the shares
of common stock of Concord offered under this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The selling stockholders are not restricted as to the price or prices
at which they may sell the shares of common stock of Concord offered under this
prospectus. Sales of such shares at less than the market price may depress the
market price of Concord's common stock. Moreover, the selling stockholders are
not restricted as to the number of shares that may be sold at any one time, and
it is possible that a significant number of shares could be sold at the same
time which may also depress the market price of Concord's common stock.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares of Concord common stock offered
under this prospectus may not simultaneously engage in market making activities
with respect to the shares for a period of time prior to the commencement of
such distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations under
the Exchange Act, including, but not limited to, Rule 10b-5 and Regulation M,
which provisions may limit the timing of purchases and sales of the shares by
the selling stockholder.
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There is no assurance that any selling stockholder will sell any or all
of the shares described in this prospectus and may transfer, devise or gift such
securities by other means not described in this prospectus and, upon the
transfer, the donee would have the same rights of sale as the selling
stockholder under this prospectus.
Expenses of preparing and filing the registration statement and all
post-effective amendments will be borne by Concord.
Concord is permitted to suspend the use of this prospectus in
connection with sales of the shares of common stock of Concord offered under
this prospectus during periods of time if there then exists material, non-public
information relating to Concord which, in the reasonable opinion of Concord,
would not be appropriate for disclosure at that time.
Concord will use all commercially reasonable efforts to cause this
prospectus to remain effective until July 17, 2005.
LEGAL MATTERS
The validity of the shares of common stock of Concord offered hereby
will be passed upon by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 2002 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Arthur Andersen LLP served as our independent auditors until June 10, 2002. On
June 15, 2002, Andersen was found guilty on federal obstruction of justice
charges arising from the government's investigation of Enron Corporation.
Following this indictment, Andersen informed the SEC that it would cease its
operations. On June 10, 2002, we dismissed Andersen and on June 11, 2002, we
retained PricewaterhouseCoopers LLP as our independent auditors for the fiscal
year ended December 31, 2002.
WHERE YOU CAN FIND MORE INFORMATION
Concord files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on operation of the Public Reference Room. Our SEC filings are also
available to the public from the SEC's website at "http://www.sec.gov." Our
website is located at "http://www.concord.com." Information contained on our
website is not part of this prospectus.
The SEC allows Concord to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to other documents previously filed with the SEC, including
Concord's annual, current and quarterly reports. The information incorporated
herein by reference is considered to be part of this document, except to the
extent such information is modified or superseded by information provided
herein. Any information that we file later with the SEC, specifically those
documents
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filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act will be
automatically incorporated by reference and will automatically update and
supersede the information in this Prospectus.
The following documents have been filed by Concord with the SEC (File
No. 0-23067) and are hereby incorporated by reference:
1. Concord's Annual Report on Form 10-K for the year ended
December 31, 2002, filed on March 19, 2003;
2. Concord's Quarterly Report on Form 10-Q, for the quarter ended
March 31, 2003, filed on May 2, 2003;
3. Concord's Quarterly Report on Form 10-Q, for the quarter ended
June 30, 2003, filed on August 7, 2003;
4. Concord's Amended Quarterly Report on Form 10-Q/A, for the
quarter ended June 30, 2003, filed on August 11, 2003;
5. Concord's Definitive Proxy Statement on Form 14A, dated and
filed on March 31, 2003; and
6. The "Description of Registrant's Securities to be Registered"
contained in Concord's registration statement filed on Form
8-A, filed on September 12, 1997.
You may request a copy of all of the information incorporated by
reference herein, at no cost, by writing or telephoning our Chief Financial
Officer at the following address:
Concord Communications, Inc.
600 Nickerson Road
Marlborough, MA 01752
(508) 460-4646
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
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