As
filed
with the Securities and Exchange Commission on September 23,
2005
Registration
No. 333-125185
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 3 to
Form
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Globix
Corporation
(Exact
name of registrant as specified in its charter)
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Delaware
(State
or Other Jurisdiction of
Incorporation
or Organization)
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7389
(Primary
Standard Industrial
Classification
Code Number)
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13-3781263
(I.R.S.
Employer
Identification
Number)
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|
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139
Centre Street, New York, New York 10013
Telephone:
(212) 334-8500
(Address,
Including Zip Code, and Telephone Number,
Including
Area Code, of Registrant’s Principal Executive
Offices)
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Peter
K. Stevenson
President
and Chief Executive Officer
139
Centre Street, New York, New York 10013
Telephone:
(212) 334-8500
(Name,
Address, Including Zip Code, and Telephone Number,
Including
Area Code, of Agent For Service
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With
a copy to:
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Bonnie
J. Roe, Esq.
Day,
Berry & Howard LLP
875
Third Avenue
New
York, NY 10022
Telephone:
(212) 829-3600
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Approximate
date of commencement of proposed sale to the public: As
soon
as practicable on or 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 are 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
|
Title
of Each Class of
Securities
to be Registered
|
Amount
to be Registered
|
Proposed
Maximum
Offering
Price
Per
Share
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount
of
Registration
Fee
|
|
Common
Stock, par value $0.01 per share
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11,183,876
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$2.04
(1)
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$22,815,107.04
(2)
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$2,685.34
(3)
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| (1) |
Pursuant
to Rule 457(c) of the Securities Act, the proposed maximum
offering price
per unit and the proposed maximum aggregate offering price
are based on
the average of the high and low prices of the common stock
on the American
Stock Exchange, as reported on September 21,
2005.
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| (2) |
Estimated
solely for the purpose of calculating the registration fee pursuant
to
Rule 457(a) of the Securities Act.
|
| (3) |
Previously
paid.
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THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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The
information in this prospectus
is not complete and may be changed. The selling holders may not
sell these
securities until the registration statement filed with the Securities
and
Exchange Commission is declared effective. This prospectus is not
an offer
to sell these securities and is not soliciting an offer to buy
these
securities in any state where the offer or sale is not
permitted.
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PROSPECTUS
(Subject
to Completion) Dated September __, 2005
Globix
Corporation
11,183,876
Shares of Common Stock
Shares
of
our common stock are being offered from time to time by the selling holders
named in this prospectus under the caption “Selling Holders.” We will not
receive any proceeds from the sale of shares of our common stock or notes
by the
selling holders.
The
shares of common stock are being registered to permit the selling holders
to
sell these shares from time to time to the public. The selling holders may
sell
the common stock through ordinary brokerage transactions or through any other
means described in the section of this prospectus entitled “Plan of
Distribution.” We do not know when or in what amounts a selling holder may offer
securities for sale. The selling holders may sell any, all or none of the
common
stock or notes offered by this prospectus.
Our
common stock trades on the American Stock Exchange under the ticker symbol
“GEX.” On September 21, 2005, the closing sale price of one share of our common
stock was $2.13.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 2.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined whether this
prospectus is truthful or complete. Any representation to the contrary is
a
criminal offense.
The
date
of this prospectus is September __, 2005
TABLE
OF CONTENTS
PAGE
i
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus or
incorporated herein by reference. In this prospectus, "we," "us," "our company"
and "our" refer to Globix Corporation and its subsidiaries, unless the context
otherwise requires.
Our
Company
We
are a
provider of application, media and infrastructure management services. We
provide flexible business solutions which combine skills, support, technology
and experience to enable our customers to use the Internet as a way to provide
business benefits and sustain a competitive advantage. By managing complex
applications, media and infrastructure environments, we help our clients
protect
Internet revenue streams, improve user satisfaction and reduce technology
operating costs and risks. Our clients include operating divisions of Fortune
100 companies as well as mid-sized enterprises in a number of vertical markets
including media and publishing, technology, financial services, health care
and
government.
Through
our wholly owned subsidiary, NEON Communications, Inc. (“NEON”), we own and
operate a high bandwidth fiber optic network, extending from Portland, ME
to
Washington, DC. Through this network we provide metro and intercity
telecommunications coverage, as well as co-location space, to local and long
distance telecommunications carriers and a small number of non-carrier
customers, including universities, colleges and financial institutions, in
various markets in the Northeast and mid-Atlantic regions, including Boston,
New
York, Philadelphia, Newark, NJ, Baltimore, MD, Washington, DC, Portland,
ME,
Portsmouth, NH, Springfield, MA, Worcester, MA, Albany, NY, White Plains,
NY,
Providence, RI, Hartford, CT, Hackensack, NJ, Reston, VA and smaller communities
along our network routes.
We,
and
our subsidiaries, have operations in New York, NY, London, UK, Boston, MA,
Santa
Clara, CA, Fairfield, NJ, and Atlanta, GA. Our common stock is traded on
the
American Stock Exchange under the symbol “GEX”.
Our
principal executive offices are located at 139 Centre Street, New York, New
York
10013, and our telephone number at that location is (212) 334-8500. Although
we
maintain a website at www.globix.com, we do not intend that the information
available through our website be incorporated into this registration statement.
Our SEC filings will be available on our website.
Globix
was founded in 1989 and in 1998 undertook a major expansion plan in order
to
pursue opportunities resulting from the growth of the Internet. On March
1,
2002, Globix filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code, together with a prepackaged plan of reorganization, with
the
United States Bankruptcy Court for the District of Delaware. We continued
to
operate in Chapter 11 in the ordinary course of business and received permission
from the bankruptcy court to pay our employees, trade, and certain other
creditors in full and on time, regardless of whether these claims arose prior
to
or after the Chapter 11 filing.
Effective
April 25, 2002, all conditions necessary for our plan of reorganization to
become effective were satisfied or waived and we emerged from Chapter 11
bankruptcy protection. For additional information, see “Our Chapter 11
Bankruptcy Reorganization” in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on December 9, 2004, for a discussion
of our
plan of reorganization.
On
March
7, 2005, we acquired NEON through the merger of a wholly owned subsidiary
of
Globix with and into NEON, resulting in NEON becoming a wholly owned subsidiary
of Globix.
The
Offering
The
selling holders named in this prospectus are offering up to 11,183,876 shares
of
common stock from time to time through ordinary brokerage transactions or
through any other means described in the section of this prospectus entitled
“Plan of Distribution.” We have agreed to register these shares on their behalf.
We will not receive any of the proceeds of the offering.
As
of
August 11, 2005 we had outstanding 48,678,461 shares of common stock and
2,971,753 shares of preferred stock. The preferred stock is convertible into
common stock on a share-for-share basis.
1
Risk
Factors
An
investment in our common stock involves a high degree of risk. You should
carefully consider all of the information contained in this prospectus or
incorporated herein by reference before making an investment in our common
stock. In particular, you should consider the risk factors described under
"Risk
Factors" beginning on page 2.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. There are
a
number of important factors that could affect our business and future operating
results, including without limitation, the factors set forth below. The
information contained in this prospectus should be read in light of such
factors.
Risks
Related to Our Financial Condition and Highly Leveraged Financial
Structure
We
have a history of losses which if it continues in the future will eventually
make us unable to meet our financial obligations.
We
have
experienced significant losses since we began operations. Despite improvement
in
our operating margins since our emergence from bankruptcy, we may continue
to
incur losses in the future. For the nine months ended June 30, 2005,
we had
a loss from operations of $13.1 million and a net loss of $23.6 million,
while
for the year ended September 30, 2004, we had a loss from operations
of
$33.9 million and a net loss of $41.4 million. $18.0 million
of
the loss from operations and net loss during the year ended September 30,
2004 was attributable to a writedown of our property located at 415 Greenwich
Street in New York City, which we sold in January 2004.
NEON
has
also experienced significant losses since it commenced operations. For the
year
ended December 31, 2004, it had a loss from operations of $29.4 million
(including $22 million in asset write-downs associated with its acquisition
by
Globix and $2 million attributable to costs incurred in connection with the
acquisition) and a net loss of $29.1 million.
Our
ability to achieve and sustain operating profits depends on our ability to
reduce our indebtedness and operating expenses and increase our revenue base
while integrating the operations of NEON. If we are unable to reduce expenses
sufficiently or build up our revenue base, we will not become profitable.
If we
are unable to become profitable, we will eventually become unable to meet
our
financial obligations.
Our
ability to pay the principal amount of our 11% senior notes when due depends
on
our future operating performance and ability to obtain new financing, and
failure to satisfy these obligations could result in these obligations becoming
due and payable, resulting in bankruptcy.
Historically,
we have not generated positive cash flows from operations. Our ability to
pay
principal and interest on our 11% senior notes and on our other indebtedness
depends on our future operating performance. Our outstanding indebtedness
as
of June 30, 2005 was approximately $88 million. If our cash flows
and
capital resources are insufficient to allow us to make scheduled payments
on our
indebtedness, we may have to reduce or delay capital expenditures, sell assets,
seek additional capital or restructure or refinance our indebtedness. We
can
provide no assurance as to the availability or terms of any new financing.
The
terms of our indebtedness may also restrict the use of some alternative means
of
satisfying our obligations, and we cannot assure you that any alternative
measures would satisfy our scheduled debt service obligations. If we cannot
make
scheduled payments on our indebtedness, we will be in default and, as a result:
| • |
our
debt holders could declare all outstanding principal and interest
to be
due and payable; and
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| • |
we
could be forced into bankruptcy.
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2
Our
outstanding indebtedness restricts our financial and operating flexibility.
This
could place us at a competitive disadvantage that could in turn affect our
ability to generate cash flow and fulfill our obligations.
We
are
highly leveraged and our outstanding indebtedness could:
| • |
limit
our ability to obtain additional financing to operate or grow our
business;
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require
us to use the proceeds of certain asset sales to redeem
indebtedness;
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limit
our financial flexibility in planning for and reacting to industry
changes;
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place
us at a competitive disadvantage as compared to less leveraged
companies;
and
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in
2007, after the fourth anniversary of the issuance of the 11% senior
notes, require us to dedicate a significant portion of our cash
flow to
payments on our debt, reducing the availability of our cash flow
for other
purposes.
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Covenants
in the indenture governing our 11% senior notes impose limitations on our
ability to borrow and invest, which could severely impair our ability to
expand
or finance our future operations.
The
indenture governing our 11% senior notes contains covenants that limit our
ability to incur additional indebtedness, create liens on assets, dispose
of
assets, enter into business combinations or engage in certain activities
with
our subsidiaries.
Our
leverage will increase as a result of the payment of interest in kind, which
could make it more difficult to repay or refinance our indebtedness and place
us
at an operational and competitive disadvantage, causing us to lose customers
and
revenues.
The
indenture under which our 11% senior notes permits us to pay interest in
kind at
the discretion of our board of directors through 2006. The additional issuances
of 11% senior notes could further restrict our financial and operating
flexibility, limit our ability to obtain additional financing, place us at
a
competitive disadvantage when compared to our competitors with less debt,
and
make it more difficult to meet our financial obligations upon the maturity
of
the 11% senior notes. The payment of interest in kind on May 1, 2005 resulted
in
an additional $6.8 million in 11% senior notes.
If
our board of directors determines to engage in certain change of control
transactions, or if a third party were to acquire more than 50% of our stock
or
acquire control of our board of directors, we or the third party could be
required to purchase our 11% senior notes and our convertible preferred stock,
and the failure to do so would result in an event of default under the indenture
governing the notes and/or a breach of our obligations with respect to our
convertible preferred stock.
In
the
event that:
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•
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subject
to certain exceptions, any person, entity or group of persons or
entities
becomes the beneficial owner, directly or indirectly, of more than
50% of
our outstanding voting securities;
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•
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at
any time during any two-year period following the distribution
of the 11%
senior notes, the individuals who comprised a majority of our board
of
directors at the beginning of such two year period, plus any new
directors
whose election to our board was approved by a majority of those
directors,
cease to comprise a majority of our board of directors;
or
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•
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subject
to certain exceptions, we consolidate with or merge with or into
another
entity, we sell or lease all or substantially all of our assets
to another
entity or any entity consolidates with or merges into or with our
company,
in each case pursuant to a transaction in which our outstanding
voting
securities are changed into or exchanged for cash, securities or
other
property, unless no person, entity or group of persons or entities
owns,
immediately after the transaction, more than 50% of our outstanding
voting
stock,
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3
then
each
holder of the 11% senior notes will have the right to require us to repurchase
all or a portion of its 11% senior notes for a purchase price equal to 101%
of
the principal amount of that holder’s 11% senior notes plus accrued and unpaid
interest to the date of repurchase. There can be no assurance that we will
have
sufficient funds available to make any required repurchases of 11% senior
notes
or that the terms of our other indebtedness will permit us to make any required
repurchases of 11% senior notes. If we are unable to repurchase a holder’s 11%
senior notes in connection with one of the events described above, then this
would constitute an event of default under the indenture governing the 11%
senior notes.
Additionally,
in the event of a change in control, each holder of our convertible preferred
stock will have the option to require us to redeem its shares at a price
equal
to $3.636 per share plus all accrued and unpaid dividends up to the date
that
such shares are redeemed. We cannot redeem any shares of our convertible
preferred stock upon a change in control prior to repurchasing any securities
ranking senior to our convertible preferred stock, including the 11% senior
notes. Therefore, if we are unable to repurchase all of the 11% senior notes
in
connection with a change in control we would not be able to redeem any shares
of
our convertible preferred stock.
Risks
Related to Our Acquisition Strategy
We
may encounter unexpected costs in integrating the operations of Globix and
NEON
and cannot assure you that the integration will be
successful.
The
merger with NEON involved the combination of two companies that previously
operated independently in markets with different economic, demographic and
competitive characteristics. The process of integrating operations could
cause
an interruption of, or loss of momentum in, the activities of one or more
of our
combined businesses and the loss of key personnel. Among the risks that may
be
incurred as a result of the merger are:
| • |
failure
to successfully cross-sell services to customers of the two
businesses;
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| • |
failure
to achieve expected cost savings in integrating
operations;
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| • |
diversion
of management attention from business matters to integration
issues;
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| • |
difficulties
in identifying and retaining key
personnel;
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| • |
difficulties
in integrating accounting, engineering, information technology
and
administrative systems, which may be unexpectedly
costly;
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| • |
the
need for significant cash expenditures to retain personnel, eliminate
unnecessary resources and integrate the two
businesses;
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| • |
difficulties
in imposing uniform standards, controls, procedures and policies,
which
may be harder than we anticipate and interfere with efficient
administration of the combined company;
and
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| • |
the
impairment of relationships with employees, customers or vendors
as a
result of changes in the business.
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In
addition, as a result of the merger we acquired NEON's liabilities. These
liabilities may include liabilities to customers, suppliers or employees,
as
well as potential liabilities that can arise in the ordinary course of business.
Failure
to overcome these risks or any other problems encountered in connection with
the
merger could weaken our financial condition and result in further operating
losses.
4
Our
acquisition strategy may prove to be unsuccessful, which could result in
further
losses and an inability to meet our financial obligations.
In
order
to increase our revenue base, we may make investments in or acquire businesses,
products, services or technologies. Consequently, we are subject to the
following risks:
| • |
we
may not be able to make investments or acquisitions on terms which
prove
advantageous;
|
| • |
acquisitions
may cause a disruption in our ongoing business, distract our management
and other resources and make it difficult to maintain the operations,
organization and procedures of our company or the acquired business;
and
|
| • |
we
may not be able to retain key employees of the acquired business
or to
maintain good relations with its customers or
suppliers.
|
We
may not be able to use either Globix's or NEON's or both companies’ net
operating losses for U.S. federal income tax purposes, which may increase
our
tax liability.
Changes
in the ownership of NEON securities as a result of NEON’s plan of reorganization
have caused there to be an annual limitation on the use of net operating
loss
carry forwards that arose prior to the effective date of NEON’s plan of
reorganization. Similarly, changes in the ownership of our securities as
a
result of our plan of reorganization have caused there to be an annual
limitation on the use of net operating loss carry forwards that arose prior
to
the effective date of our plan of reorganization. As a result of the merger
with
NEON, we or NEON or both, may experience another ownership change. Further,
whether or not the merger causes an ownership change, we may experience an
ownership change as a result of future changes of ownership. Additional
limitations would be imposed as a result of any such ownership change which
may
increase our U.S. federal income tax liability.
Risks
Related to Our Business Generally
Our
revenues could decline significantly if we continue to lose customers or
have
our existing customers reduce their level of spending on our services.
We
have
experienced and may continue to experience declines in revenue due to customers
leaving us or staying with us but choosing to decrease their spending on
our
services. One of our biggest challenges has been to limit these revenue
declines. Although we have reduced the level of revenue declines due to customer
loss, we continue to experience declines in price per service. Continued
declines in revenue could eventually result in an inability to meet our
financial obligations.
Intense
competition and overcapacity in the telecommunications market could also
result
in a decline in revenues at our NEON subsidiary, which could also eventually
result in our inability to meet our financial obligations.
Our
highly leveraged financial structure may affect the way we are viewed in
the
market.
Our
highly leveraged financial structure may limit our ability to negotiate
favorable terms with vendors or retain customers. Our bankruptcy, the bankruptcy
of NEON and our continued leverage may cause customers to question our financial
soundness and may also affect the contractual terms that are available to
us.
Our
business could suffer from a loss of management personnel, which could at
least
temporarily reduce our efficiency and control over our operations and reduce
our
revenues or earnings.
Since
our
emergence from bankruptcy, we have undertaken a number of changes in management
as well as reductions in staffing. In the year following our bankruptcy,
we
replaced our Chief Executive Officer and Chief Financial Officer as well
as
other members of senior management. As a result, our business experienced
a lack
of continuity in management. Our ability to operate effectively depends largely
on the experience, skills and performance of our senior management team.
The
loss or unavailability to us of any member of our senior management team
could
at least temporarily reduce our efficiency and control over operations and
could
reduce our revenues or earnings.
5
We
may not be able to attract or retain the personnel we need in critical areas
of
our business, which could reduce our efficiency, impair the quality of our
services or otherwise adversely affect the ability of our business to perform
its functions.
We
may
experience difficulties in attracting and retaining key personnel for
management, technical, sales and marketing and customer support positions.
The
failure to attract or retain qualified personnel in any of these critical
areas
could adversely affect the ability of our business to perform its functions.
Further efforts to control management costs, given our flat organizational
structure, could have an additional adverse impact on employee morale.
Because
we are dependent on computer and communication systems, a systems failure
would
cause a significant disruption to our business.
Our
business depends on the efficient and uninterrupted operation of our computer
and communications hardware systems and infrastructure. While we have taken
precautions against systems failure, interruptions could result from natural
disasters as well as power loss, our inability to acquire fuel for our backup
generators, telecommunications failure, terrorist attacks and similar events.
We
also lease telecommunications lines from local, regional and national carriers,
whose service may be interrupted. Any damage or failure that interrupts or
delays our operations could result in the loss of customers and revenues.
Risks
Related to the Internet Service Business
Competition
for the Internet services that we provide is intense and we expect that
competition will continue to intensify, which could result in our encountering
significant pricing pressure.
Our
competitors include other Internet service providers with a significant national
or global presence that focus on business customers, such as IBM, Digex,
EDS,
NaviSite, Savvis, Akamai, Speedera, Data Return, Rackspace and Equinix. Our
competitors also include telecommunications companies, such as AT&T, British
Telecom, Level 3, MCI and Sprint. Many of our existing competitors, as well
as a
number of potential new competitors, have:
| • |
longer
operating histories;
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| • |
greater
name recognition;
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| • |
larger
customer bases;
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| • |
larger
networks;
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| • |
more
and larger facilities; and
|
| • |
significantly
greater financial, technical and marketing
resources.
|
New
competitors, including large computer hardware, software, media and other
technology and telecommunications companies, may enter our market and rapidly
acquire significant market share. As a result of increased competition and
vertical and horizontal integration in the industry, we expect to continue
to
encounter significant pricing pressures. These pricing pressures could result
in
significantly lower average selling prices for our services. For example,
telecommunications companies operating outside of NEON’s geographic market may
be able to provide customers with reduced communications costs in connection
with their Internet access services, significantly increasing pricing pressures
on us. We may not be able to offset the effects of any price reductions with
an
increase in the number of our customers, higher revenue from value-added
services, cost reductions or otherwise.
If
we are unable to maintain and upgrade our network and facilities, we could
lose
customers and revenues or be unable to offer competitive services.
A
key
element of our business strategy is the maintenance and upgrading of our
facilities and network, which has required, and will continue to require,
management time and the periodic expenditure of capital. Any interruption
in our
ability to deliver services over our network due to market disruptions or
third
party insolvencies may make us less attractive to future customers and may
hamper our ability to retain our current customers which, in turn, could
adversely affect our entire business.
6
Our
business relies on third-party data communications and telecommunications
providers that could increase prices or interrupt service, which in turn
could
cause us to lose customers and revenues.
Our
existing network relies on many third-party data communications and
telecommunications providers, located in the United States and abroad. These
carriers are subject to price constraints, including tariff controls, that
in
the future may be relaxed or lifted. In addition, certain of these providers,
including MCI, Global Crossing and Cable and Wireless, have filed for protection
under Chapter 11 under the U.S. Bankruptcy Code, which may affect the
availability and quality of the services that these entities provide. Price
increases or the lack of service availability and quality could increase
the
costs of maintaining our network and result in the loss of customers and
revenues.
We
may not be able to obtain computer hardware and software on the scale and
at the
times we need at an affordable cost, and failure to do so over an extended
period of time could cause us to lose customers or be unable to offer
competitive service.
We
rely
on outside vendors to supply us with computer hardware, software and networking
equipment. We primarily use products from Cisco, Compaq, Juniper Networks
and
Sun Microsystems, either leased or purchased from the manufacturer or a
third-party vendor. Consequently, our expertise is concentrated in products
from
these manufacturers. We also rely on Cisco for network design and installation
services. If we are unable over an extended period of time to obtain the
products and services that we need on a timely basis and at affordable prices,
it could result in the loss of customers and revenues.
Our
dependence on a limited number of suppliers exposes us to possible interruptions
that could delay or prevent us from providing our
services.
Approximately
39% of the cost of revenues of Globix for the year ended September 30, 2004
was
derived from services provided by three major telecommunication carriers,
MCI,
Verizon and British Telecom. While we believe that most of these services
can be
obtained from other alternative carriers, an interruption in service from
one of
these carriers or other suppliers could limit our ability to serve customers,
which would adversely affect our results of operations.
If
our security measures proved to be inadequate, we could lose
customers.
Our
infrastructure is potentially vulnerable to physical or electronic break-ins,
viruses, denial of service attacks or similar problems. If someone were to
circumvent our security measures, he or she could jeopardize the security
of
confidential information stored on our systems, misappropriate proprietary
information or cause interruptions in our operations. We may be required
to make
significant additional investments and efforts to protect against or remedy
security breaches. Security breaches that result in access to confidential
information could damage our reputation and expose us to a risk of loss or
liability. The security services that we offer in connection with our customers’
networks cannot assure complete protection from computer viruses, break-ins
and
other disruptive problems. Although we attempt to contractually limit our
liability in such instances, the occurrence of these problems may result
in
claims against us or liability on our part. These claims, regardless of their
ultimate outcome, could result in costly litigation and could harm our business
and reputation and impair our ability to attract and retain customers for
our
services.
Because
our business depends on the continued growth, use and improvement of the
Internet, any decrease in Internet usage could decrease the demand for our
services, and reduce our revenues.
Our
services are targeted toward businesses that use the Internet. The Internet
is
characterized by rapidly changing technology, evolving industry standards
and
frequent new service introductions. Accordingly, we are subject to the risks
and
difficulties frequently encountered in new and rapidly evolving
markets.
Critical
issues concerning the commercial use of the Internet remain unresolved and
may
affect the growth of Internet use, especially in the market we target. Despite
growing interest in the many commercial uses of the Internet, many businesses
have been deterred from purchasing Internet services for a number of reasons,
including:
| • |
inadequate
protection of the confidentiality of stored data and information
moving
across the Internet;
|
| • |
inconsistent
quality of service;
|
| • |
inability
to integrate business applications on the
Internet;
|
7
| • |
the
need to deal with multiple vendors, whose products are frequently
incompatible;
|
| • |
lack
of availability of cost-effective, high-speed services;
and
|
| • |
concern
over the financial viability of Internet service
providers.
|
Capacity
constraints caused by growth in Internet usage may, unless resolved, impede
further growth in Internet use.
Our
business requires us to adapt to technological changes, and significant
technological changes could render our existing services
obsolete.
We
must
adapt to our rapidly changing market by continually improving the
responsiveness, functionality and features of our services to meet our
customers’ needs. If we are unable to respond to technological advances and
conform to emerging industry standards in a cost-effective and timely basis,
we
could lose customers and there could cease to be a market for our
services.
Changes
in government regulations related to the Internet could restrict our activities,
expose us to liability or increase our costs.
There
are
an increasing number of laws and regulations pertaining to the Internet.
These
laws or regulations relate to liability for content and information received
from or transmitted over the Internet, user privacy and security, taxation,
the
enforcement of online contracts, consumer protection and other issues concerning
services. The government may also seek to regulate some aspects of our
activities as basic telecommunications services. Moreover, the applicability
to
the Internet of existing laws governing copyright, trademark, trade secret,
obscenity, libel, consumer protection, privacy and other issues is uncertain
and
developing. We cannot predict the impact that future regulation or regulatory
changes may have on our business.
We
could be liable for violating the intellectual property rights of third parties,
which could result in us having to pay a license fee or damages to third
parties, which would reduce our revenues.
Despite
our efforts to protect the intellectual property that is important to the
operation of our business, a third party could bring a claim of infringement
against us or any of our material suppliers. If such a claim were settled
or
adjudicated against us or one of our material suppliers, we could be forced
to
pay for a license to continue using the intellectual property. There is no
guarantee that we could obtain such a license, or that it would be available
on
reasonable terms. Alternatively, we could be forced to defend ourselves against
infringement claims, which could be costly and which could result in us having
to pay damages to third parties.
We
may be liable for the material that our customers distribute over the Internet,
which could result in legal claims against us.
The
law
relating to the liability of online service providers, private network operators
and Internet service providers for content and information carried on or
disseminated through their networks is currently unsettled. While we have
taken
steps to contractually limit our liability in these areas, we could become
subject to legal claims relating to the content of the web sites we host.
For
example, lawsuits could be brought against us claiming that material
inappropriate for viewing by young children can be accessed from the web
sites
that we host. Claims could also involve matters such as defamation, invasion
of
privacy, violations of "anti-spamming" legislation, copyright and trademark
infringement. Internet service providers have been sued in the past, sometimes
successfully, based on the material disseminated over their networks. We
may
take additional measures to reduce our exposure to these risks, which could
be
costly or result in some customers not doing business with us. In addition,
defending ourselves against claims, or paying damage awards to third parties,
could strain our management and financial resources.
We
face risks associated with differing regulatory regimes and markets as a
result
of our international operations, which could expose us to liability for
noncompliance or increase the cost of our international
operations.
A
substantial percentage of our business is located in the United Kingdom.
We face
problems of managing our business under differing regulatory regimes in areas
such as intellectual property, telecommunications and employee relations.
As a
result, we may find it more difficult and expensive to hire and train employees
and to manage international operations together with our United States
operations. Because we have limited experience operating in markets outside
the
United States and the United Kingdom, we may have difficulty adapting our
services to different international market needs. We may also be unsuccessful
in
our efforts to market and sell these services to customers abroad. If we
fail to
successfully address these risks, our international operations may be adversely
affected.
8
Currency
exchange rate fluctuations could reduce our revenues or increase our
costs.
We
are
subject to market risk associated with foreign currency exchange rates.
Approximately
42% of Globix’s revenues and approximately 28% of its operating costs and
expenses for the year ended September 30, 2004 were denominated in
British
Pounds. An increase in the cost of the British Pound would increase our revenues
but also increase costs incurred in the United Kingdom. We believe that an
immediate increase or decrease of 5% of the Dollar in comparison to the British
Pound would not have a material impact on our operating results or cash flows.
To date, we have not utilized financial instruments to minimize our exposure
to
foreign currency fluctuations. We will continue to analyze risk management
strategies to minimize foreign currency exchange risk in the future.
Our
results of operations fluctuate on a quarterly and annual basis and we expect
to
continue experiencing fluctuations in our future quarterly and annual results
of
operations, which could affect the market price of our securities.
Our
results of operations fluctuate on a quarterly and annual basis. We expect
to
continue experiencing fluctuations in our future quarterly and annual results
of
operations due to a variety of factors, many of which are outside our control,
including:
|
•
|
timing
of contractual cancellations and
renewals;
|
|
•
|
demand
for and market acceptance of our
services;
|
|
•
|
introductions
of new services by us and our
competitors;
|
|
•
|
customer
retention;
|
|
•
|
capacity
utilization of our data centers and
assets;
|
|
•
|
timing
of customer installations;
|
|
•
|
our
mix of services sold;
|
|
•
|
the
timing and magnitude of our capital
expenditures;
|
|
•
|
changes
in our pricing policies and those of our
competitors;
|
|
•
|
fluctuations
in bandwidth used by customers;
|
|
•
|
our
retention of key personnel;
|
|
•
|
reliable
continuity of service and network
availability;
|
|
•
|
costs
related to the acquisition of network
capacity;
|
|
•
|
arrangements
for interconnections with third-party
networks;
|
|
•
|
the
provision of customer discounts and
credits;
|
9
|
•
|
the
introduction by third parties of new Internet and networking
technologies;
|
|
•
|
licenses
and permits required to construct facilities, deploy networking
infrastructure or operate in the United States and foreign countries;
and
|
|
•
|
other
general economic factors.
|
Fluctuations
in our quarterly or annual results as a result of one or more of these factors
could affect the market price of our securities.
Risks
Related to the NEON Fiber Optic Network Business
Our
business strategy depends upon anticipated customer demand for our fiber
optic
network services, and failure to obtain customers for these services at
profitable rates would reduce NEON’s
revenues and therefore our revenues.
NEON’s
ability to become profitable depends upon its ability to secure a market
for its
services and obtain service contracts with its communications customers.
Many of
NEON’s targeted customers may also be its potential competitors. If its services
are not satisfactory or cost competitive, NEON’s targeted customers may utilize
other providers where available, or construct their own networks, which would
reduce their need for NEON’s services and create future sources of competition
for NEON.
Intense
competition in the telecommunications industry from a broad range of competitors
may prevent NEON from obtaining customers, require it to lower prices and
reduce
its revenues and therefore our revenues.
The
telecommunications industry is highly competitive. Our fiber optic network
business faces substantial competition from companies with significantly
greater
financial and other resources, whose capacity is interchangeable with the
capacity that NEON offers, including incumbent local telephone companies,
national long-haul and regional carriers, dark fiber providers and metro
carriers. In addition, potential competitors capable of offering services
similar to those offered by NEON include other communications service providers
that own and operate their own networks and equipment, including cable
television companies, electric utilities, microwave carriers, satellite
carriers, wireless communication system operators and end-users with private
communications networks.
Because
NEON offers a relatively narrow range of services in comparison to some of
its
competitors, it cannot achieve revenues comparable to companies offering
a
broader array of services and may be at a competitive disadvantage with respect
to the services it offers.
Unlike
more diversified telecommunications providers, NEON derives and expects to
continue to derive substantially all of its revenues from the leasing of
fiber
optic capacity on a wholesale basis to our customers, most of whom are
telecommunications companies and Internet service providers serving end-users.
The limited nature of its current services could limit its potential revenues
and result in NEON having lower revenues than competitors which provide a
wider
array of services. While NEON is currently attempting to expand the breadth
of
its product offering, we cannot assure you that any new product offerings
will
achieve market acceptance.
Due
to rapidly evolving technologies in the fiber optic network industry and
the
uncertainty of future government regulation, NEON’s current business plan may
become obsolete and it may lose customers and revenue if it is unable to
successfully adjust its products, services and business strategies as
required.
In
the
future, we may become subject to more intense competition due to the development
of new technologies, an increased supply of domestic and international
transmission capacity, the consolidation in the industry among local and
long
distance service providers and the effects of deregulation resulting from
the
Telecommunications Act of 1996. The introduction of new services and products
or
the emergence of new technologies may change the cost or increase the supply
of
services and products similar to those that it provides. We cannot predict
which
of many possible future product and service offerings will be crucial to
maintain Neon’s competitive position or what expenditures will be required to
develop profitably and provide such products and services. Prices for NEON’s
services to carriers specifically, and interstate services in general, may
decline over the next several years due primarily to price competition to
the
extent that network providers continue to install networks that compete with
our
fiber optic network. We also believe that there will be technological advances
that will permit substantial increases in the transmission capacity of both
new
and existing fiber.
10
A
limited number of customers have accounted for a significant percentage of
NEON’s revenues and accounts receivable, and the loss of any single one of these
customers could result in a significant loss of revenues for NEON and therefore
for us.
Historically,
a limited number of customers have accounted for a significant percentage
of
NEON’s revenues and accounts receivable. For the year ended December 31, 2004,
one customer accounted for approximately 15% of net revenues. For the years
ended December 31, 2003 and 2002 two customers each accounted for approximately
10% of net revenues. As of December 31, 2004, one customer represented
approximately 50% of accounts receivable. This amount was subsequently collected
in full from the customer.
Continuing
weakness in the telecommunications industry may result in a loss of revenue
for
NEON.
The
continued downturn in the telecommunications industry may have a significant
impact on NEON. Several of NEON’s competitors and customers have filed for
protection under the bankruptcy laws and NEON may be unable to collect
receivables due to bankruptcies and business difficulties among its customers.
Oversupply of capacity and an ongoing downward trend in bandwidth prices
may
continue if its competitors do not successfully consolidate. Even if they
do
successfully consolidate, they may do so to our detriment. Competitors who
successfully complete restructuring or bankruptcy reorganization processes
or
who introduce new product offerings may put NEON at a competitive
disadvantage.
Terrorist
attacks or war may adversely affect NEON’s financial condition and operating
results.
The
occurrence of terrorist attacks or armed conflicts may directly impact NEON’s
facilities or the facilities of its suppliers or customers. In addition,
such
attacks or conflicts may result in increased volatility in the United States
and
global financial markets. Any of these occurrences could potentially have
a
material impact on NEON’s financial condition and operating results and
therefore our financial condition and operating results.
The
successful, timely and cost-effective expansion of our fiber optic network
within the Northeast and mid-Atlantic regions is crucial to our business
plan,
and depends upon numerous factors beyond our control.
Our
ability to achieve our strategic objectives depends in large part upon the
successful, timely and cost-effective expansion of our fiber optic network
within the Northeast and mid-Atlantic regions. The failure of both affiliated
and third party suppliers or contractors to meet their obligations to construct
and maintain significant portions of our fiber optic network in a timely
and
cost-effective manner could affect our ability to execute our business
plan.
The
expenditures necessary to sufficiently expand our fiber optic network and
develop NEON’s
services in order to satisfy the current and forecasted demands of its customers
may surpass its available cash, and we may be unable to obtain additional
capital to develop these services on a timely basis and on acceptable
terms.
Although
NEON has expended significant resources in building its network and the
development of its customer base, NEON will require additional cash in order
to
expand its geographic coverage and the range of services which it can offer
throughout its service area in order to be competitive in its market and
to meet
customer demands. These expenditures for expansion and for more services,
together with associated operating expenses, will reduce its cash flow and
profitability until it establishes an adequate customer base throughout all
of
our coverage areas. To date, NEON has expended substantial amounts on
construction of its network from the proceeds of its financing activities
and
has generated negative cash flow.
NEON
obtains some of the key components used in its fiber optic network from a
single
source or a limited group of suppliers, and the partial or complete loss
of one
of these suppliers could disrupt its operations and result in a substantial
loss
of revenues.
NEON
depends upon a small group of suppliers for some of the key components and
parts
used in its network. In particular, NEON purchases fiber optic equipment
from
Nortel Networks, Cisco Systems, Lucent Technologies and ECI Telecom. Any
delay
or extended interruption in the supply of any of the key components, changes
in
the pricing arrangements with our suppliers and manufacturers or delay in
transitioning a replacement supplier’s product into its network could disrupt
its operations.
11
NEON’s
fiber optic network, which is its sole source of revenue, is vulnerable to
physical damage, catastrophic outages, power loss and other disruptions beyond
our control, and the occurrence of any of these failures could result in
immediate loss of revenues, payment of outage credits to its customers and,
more
importantly, the loss of NEON’s customers’ confidence and its business
reputation.
NEON’s
success in marketing its services to its customers requires that NEON provide
high reliability, high bandwidth and a secure network. NEON’s network and the
infrastructure upon which it depends are subject to physical damage, power
loss,
capacity limitations, software defects, breaches of security and other
disruptions beyond NEON’s control that may cause interruptions in service or
reduced capacity for customers. NEON’s agreements with its customers typically
provide for the payment of outage related credits (a predetermined reduction
or
offset against NEON’s lease rate when a customer’s leased facility is
non-operational or otherwise does not meet certain operating parameters)
or
damages in the event of a disruption in service. These credits or damages
could
be substantial and could significantly decrease NEON’s net revenues. Significant
or lengthy outages would also undermine customers confidence in NEON’s fiber
optic network and injure its business reputation.
NEON
could lose the contract rights upon which it relies to operate and maintain
its
network in the event of bankruptcy proceedings relating to one or more of
the
third parties that have granted to NEON the right to build and operate its
network using their rights-of-way.
The
construction and operation of significant portions of NEON’s fiber optic network
depends upon contract rights known as indefeasible rights-of-use. Indefeasible
rights-of-use are commonly used in the telecommunications industry, but remain
a
relatively new concept in property law. Although indefeasible rights-of-use
give
the holder a number of rights to control the relevant rights-of-way or fiber
optic filaments, legal title remains with the grantor of the rights. Therefore,
the legal status of indefeasible rights-of-use remains uncertain, and NEON’s
indefeasible rights-of-use might be voidable in the event of bankruptcy of
the
grantor. If NEON were to lose an indefeasible right-of-use in a key portion
of
its network, its ability to service its customers could become seriously
impaired and NEON could be required to incur significant expense to resume
the
operation of its fiber optic network in the affected areas.
Despite
NEON’s existing rights-of-way, we may be forced to make substantial additional
payments to the affected landowners or remove its network from their property,
which would significantly harm our business and results of
operations.
NEON’s
indefeasible rights-of-use and other rights-of-way depend on the grantor’s
interest in the property on which its network is located. To the extent that
a
grantor of an indefeasible right-of-use or other rights-of-way has a limited
easement in the underlying property and not full legal title, the adequacy
of
NEON’s indefeasible rights-of-use or other rights-of-way could be challenged in
court. We believe that the easements granted by a substantial number of
landowners to grantors of NEON’s indefeasible rights-of-use are similar in scope
to those with respect to which claims have been asserted, and we cannot
guarantee that claims will not be made in the future.
Because
significant portions of NEON’s fiber optic network are constructed upon
rights-of-way controlled by utility companies and municipalities which generally
place the operation of their facilities ahead of the operation of NEON’s fiber
optic network, NEON may be unable to construct and operate its fiber optic
network in the affected areas without periodic interruptions and delays caused
by the day-to-day operations of these entities.
NEON’s
rights-of-way agreements with Northeast Utilities, Central Maine Power and
Consolidated Edison Communications, Inc. and various other entities contain
provisions which acknowledge the right of these entities to make the provision
of their services to their own customers their top priority. These companies
are
required only to exercise “reasonable care” with respect to NEON’s facilities
and are otherwise free to take whatever actions they deem appropriate with
respect to ensuring or restoring service to their customers, any of which
actions could impair operation of NEON’s network.
Municipal
regulation of NEON’s access to public rights-of-way is subject to change and
could impose administrative burdens that would result in additional costs
to us
or limit our fiber optic network operations.
Local
governments typically retain the ability to license public rights-of-way,
subject to the federal requirement that local governments may not prohibit
the
provision of telecommunications services. Changes in local government regulation
could impose additional costs on our business and limit its operations. Local
authorities affect the timing and costs associated with its use of public
rights-of-way.
12
Federal
regulation of the telecommunications industry is changing rapidly and we
could
become subject to unfavorable new rules and requirements which could impose
substantial financial and administrative burdens on us and interfere with
our
ability to successfully execute our fiber optic network business
strategies.
Regulation
of the telecommunications industry is changing rapidly. Existing and future
federal, state, and local governmental regulations will greatly influence
NEON’s
viability. Consequently, undesirable regulatory changes could adversely affect
our business, financial condition and results of operations. For example,
the
FCC recently issued rules under the Telecommunications Act of 1996 which
would
have required that competitive local exchange carriers, such as NEON, be
allowed
to purchase the use of certain elements of the telecommunications network
owned
and operated by incumbent local exchange carriers. By purchasing these elements,
competitive local exchange carriers would have been able to provide services
in
a cost-effective manner to their customers. However, the FCC's rules were
challenged in court by the incumbent local exchange carriers. The U.S. Court
of
Appeals for the District of Columbia Circuit sided with the incumbent local
exchange carriers and has required the FCC to formulate new rules. Any new
rules
issued by the FCC may not provide competitive local exchange carriers with
the
ability to purchase the use of all of the elements of the incumbent local
exchange carrier's network, and as a result the competitive local exchange
carriers may not be able to continue providing services to their customers
that
they are currently providing.
Revenues
from telecommunications provided to end-users, which represent a portion
of
NEON’s revenues, are subject to contributions to the FCC’s universal service
fund, and increases in the amount NEON is required to contribute could increase
our costs unexpectedly.
While
NEON generally does not deal directly with end-users of telecommunications
and
are therefore generally exempt from contributing to the FCC’s Universal Service
Fund, the FCC treats certain Internet service providers purchasing
telecommunications as end-users. NEON’s revenues from providing
telecommunications to end-users, which represent a portion of our revenues,
are
therefore currently subject to an assessment of 8.9%. Such assessments vary
and
may increase from quarter to quarter. If the annual contribution amount would
be
less than $10,000, NEON would qualify for a de minimus exemption from
contribution to the Fund. NEON’s required contributions to the Universal Service
Fund for the year ended December 31, 2003 and the nine months ended
September 30, 2004 were approximately $168,000 and $140,000,
respectively.
If
NEON becomes subject to regulation as a common carrier in the future, we
would
be subject to additional regulatory requirements.
We
do not
believe that NEON is currently a “common carrier,” but that status could change
based on differing interpretations of current regulations, regulatory changes
and changes in the way we conduct our fiber optic network business. If NEON
becomes regulated as a common carrier by the FCC, it would have to publicize
the
rates for its services and submit other reports, and would be required to
contribute to federal funds including, but not limited to, those established
for
Telecommunications Relay Services, for the management of the North American
Numbering Plan and for Local Number Portability. These regulatory requirements
could impose substantial burdens on Globix.
The
Telecommunications Act of 1996 requires incumbent local telephone companies
to
provide elements of their networks to competitors on an unbundled basis.
The FCC
determined that dark fiber is a network element that incumbent local telephone
companies must provide to others. The availability of this alternative source
of
supply may increase competition among providers of dark fiber services and
could
decrease the demand for our fiber optic network services.
State
regulation of companies providing telecommunications services varies
substantially from state to state and NEON may become subject to burdensome
and
restrictive state regulations as it expands its fiber optic network into
a
broader geographic area, which could interfere with its operations and our
ability to meet our strategic objectives.
NEON
may
be subject to state regulation, which can vary substantially from state to
state. NEON subsidiaries have obtained authority to provide intrastate
telecommunications services on a competitive common carrier basis in its
market
area. Therefore, these subsidiaries are subject to the obligations that
applicable law places on all similarly certificated common carriers including
the filing of tariffs, state regulation of certain service offerings, pricing,
payment of regulatory fees and reporting requirements. The costs of compliance
with these regulatory obligations, or any of the regulatory requirements
of
other states to which we might become subject, could have a material adverse
effect on NEON’s operations. Moreover, some of NEON’s rights-of-way depend on
its status as a common carrier in these states, and if that status were to
be
successfully challenged, those rights-of-way could be terminated.
13
Risks
Relating to Financial Accounting
As
a result of various financial accounting complexities, accounting staff turnover
and accounting staff shortages, we experienced material weaknesses in our
accounting and internal control environment in summer 2003 that resulted
in the
delay and late filing of SEC reports filed during summer 2003. As a result,
our
disclosure controls and procedures were ineffective until the material
weaknesses were remediated.
Since
our
emergence from bankruptcy effective April 25, 2002, we have had to face many
challenging and complex accounting and financial reporting issues, including
fresh start accounting, restructuring and the restatement of amounts in our
financial statements as of and for the quarter ended March 31, 2002 and as
of
and for the year ended September 30, 2004. In addition, we experienced
significant turnover in our financial reporting staff, as well as limited
management resources. We fell behind in our SEC reporting for the year ended
September 30, 2002, and experienced difficulty in catching up with our filing
obligations for the year ended September 30, 2002 while fulfilling our
responsibilities for the fiscal year 2003. The combined effect of these
challenges placed a strain on our internal accounting resources in summer
2003
and resulted in further delays in the preparation and filing of periodic
reports
that were filed in summer 2003. The strain on our internal accounting resources
and the delays in the preparation and filing of periodic reports resulted
in
material weaknesses in our accounting and internal control environment in
summer
2003. We addressed these issues and implemented necessary changes by hiring
additional personnel and returning to a normal recurring closing timetable
that
includes formal management reviews and monthly financial reporting and have
significantly reduced the burden on our internal accounting staff. Any controls
and procedures, no matter how well designed and operated, however, can provide
only reasonable assurance of achieving the desired control objectives. For
further information concerning our internal controls, see “Changes In and
Disagreements With Accountants on Accounting and Financial Disclosure” in our
Annual Report on Form 10-K, filed with the Securities and Exchange Commission
on
December 9, 2004.
Risks
Related
to Our Common Stock
Because
our common stock is thinly traded, prices are more likely to be volatile
and it
may be harder for our stockholders to sell any sizable number of
shares.
Our
common stock is currently traded on the American Stock Exchange. Until April
13,
2005 our common stock was quoted on the OTC Bulletin Board. We cannot assure
you
that an active and liquid trading market will develop in our common stock,
or if
one does develop that it will continue. The development of an active public
trading market depends upon the existence of willing buyers and sellers and
is
not within our control. For these reasons, we cannot assure our stockholders
that they will be able to resell shares of our common stock for a price that
is
equal to or greater than the price of our common stock on the date the stock
is
acquired.
Future
sales of our common stock, including those issued in the merger with NEON,
may
depress our stock price.
If
our
stockholders or option holders, including former NEON stockholders and option
holders who received our common stock and stock options in the merger, sell
substantial amounts of our common stock in the public market, the market
price
of our common stock could fall. All the shares sold in the merger with NEON
are
freely tradable, subject to limitations applicable to affiliates of NEON.
14
CAUTIONARY
STATEMENT
REGARDING FORWARD-LOOKING
STATEMENTS
This
prospectus contains historical and forward-looking statements. The
forward-looking statements are based on current information and expectations
and
are subject to risks and uncertainties that could cause the company's actual
results to differ materially from those expressed or implied in such statements.
You should carefully review all information, including the financial statements
and the notes to the financial statements included in this
prospectus.
In
addition to the risk factors described in “Risk Factors” beginning on page 2 of
this prospectus, the following important factors could affect future results,
causing these results to differ materially from those expressed in our
forward-looking statements:
|
·
|
our
successful integration of the NEON
operations;
|
|
·
|
our
ability to maintain and increase revenue by retaining existing
customers
and attracting new customers;
|
|
·
|
our
ability to match our operating cost structure with revenue to achieve
positive cash flow;
|
|
·
|
our
ability to conduct business with critical vendors on acceptable
terms;
|
|
·
|
the
sufficiency of existing cash and cash flow to complete our business
plan
and fund our working capital
requirements;
|
|
·
|
the
insolvency of vendors, customers and other parties critical to
our
business;
|
|
·
|
our
existing debt obligations and history of operating losses;
|
|
·
|
our
ability to integrate, operate and upgrade or downgrade our
network;
|
|
·
|
our
ability to recruit and retain sufficient and qualified personnel
needed to
staff our operations;
|
|
·
|
our
ability to raise additional capital, if necessary;
|
|
·
|
potential
marketplace or technology changes, rendering existing products
and
services obsolete;
|
|
·
|
changes
in or the lack of anticipated changes in the regulatory environment,
including potential legislation increasing our exposure to content
distribution and intellectual property liability;
|
|
·
|
commencement
of war, armed hostilities, terrorist activities or other similar
international calamity directly or indirectly involving or affecting
the
United States or the United
Kingdom;
|
|
·
|
our
ability to obtain and retain customers for our fiber optic network
business; and
|
|
·
|
our
ability to successfully adjust our products, services and business
strategies as required for our fiber optic network
business.
|
These
factors and the other risk factors described in this prospectus are not
necessarily all of the important factors that could cause our actual results
to
differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could harm our future results.
The
forward-looking statements included in this prospectus are made only as of
the
date of this prospectus and we cannot assure you that projected results or
events will be achieved. We do not assume any responsibility for updating
the
forward-looking information contained in this prospectus.
15
USE
OF
PROCEEDS
We
will
not receive any of the proceeds from the sale of the shares of our common
stock
offered by the selling holders.
Under
this prospectus, the selling holders and the transferees, assignees, donees,
distributees, pledgees or other successors-in-interest for certain of their
shares may offer and sell from time to time up to an aggregate of 11,183,876
shares of our common stock, consisting of the following:
|
·
|
4,545,455
shares issued in the debt-for-equity exchange described
below;
|
|
·
|
4,744,735
shares issued in connection with our bankruptcy in April 2002 to
persons
who may be deemed affiliates of us, and who are party to the registration
rights agreement described below;
|
|
·
|
1,796,686
shares acquired in private transactions from persons who were party
to the
registration rights agreement; and
|
|
·
|
97,000
shares acquired in an additional private transaction described
below.
|
Debt-for-Equity
Exchange
On
March
7, 2005 we acquired NEON through the merger of a wholly owned subsidiary
of
Globix with and into NEON, resulting in NEON becoming a wholly owned subsidiary.
NEON’s obligations to effect the merger were conditioned in part upon our
completing a number of private debt-for-equity exchange transactions with
some
of our existing debt holders. We were obligated to exchange certain of our
11%
senior notes in an aggregate amount of $12,500,000 in principal and accrued
interest in return for issuing approximately 4,545,455 shares of our common
stock at a price per share of $2.75, the approximate trading price of our
common
stock at the time the parties reached an agreement on the overall amount
of the
exchange. The terms of the exchange were set forth in separate securities
exchange agreements with York Capital Management, MacKay Shields LLC, LC
Capital
Master Fund Ltd., Goldman Sachs & Co., the Singer Children’s Management
Trust, Lloyd Miller, an individual investor, and Cypress Management Partnership.
The exchange with each of these holders took place simultaneously with the
merger.
Under
the
terms of the securities exchange agreements, we agreed to file a registration
statement with the Securities and Exchange Commission as promptly as possible
in
order to register the shares of common stock issued in exchange for our 11%
senior notes. With respect to registration of the shares of common stock
issued
in the debt-for-equity exchange, we granted the exchanging holders the right
to
purchase additional shares of Globix common stock equal to (1) up to 5% of
the
shares acquired by them at a purchase price of $2.75 per share if the
registration statement is not effective within 120 days after the closing
of the
merger, and (2) an additional 5% of the shares acquired by them at a purchase
price of $2.75 per share if the registration statement is not effective for
more
than 90 days during the first twelve months commencing on the 90th day following
the closing of the merger. These shares are not being offered for sale under
this prospectus.
We
agreed
to indemnify the holders of the securities issued in the debt-for-equity
exchange against all liabilities, whether under the securities laws or
otherwise, arising out of disclosure deficiencies in the registration statement.
Our indemnity obligation does not, however, extend to liability for information
pertaining to a holder and furnished to Globix by or on behalf of such holder
for inclusion in the registration statement.
We
are
obligated to file and keep the registration statement continuously effective,
supplemented and amended for a period of three years, or until such earlier
time
as all of the shares of common stock issued in the debt-for-equity exchange
have
been sold or may be sold without restriction under Rule 144(k) under the
Securities Act of 1933.
16
Registration
Rights Agreement
In
connection with our emergence from bankruptcy on April 25, 2002, we entered
into
a registration rights agreement with certain persons who received more than
10%
of our common stock in the bankruptcy. Among these persons were MacKay Shields
LLC and certain affiliates of Hicks Muse Tate & Furst Incorporated (the
persons referred to as the “HM Parties” in the table below). The parties to the
registration rights agreement received their shares of Globix common stock
covered by the registration rights agreement as a result of their ownership
of
senior notes or preferred stock of our predecessor in bankruptcy.
Under
the
registration rights agreement, we are required to bear all expenses incident
to
the registration of our common stock under the registration rights agreement.
We
agreed to indemnify the holders of the restricted securities against all
liabilities, whether under the securities laws or otherwise, arising out
of
disclosure deficiencies in the registration statement. Our indemnity obligation
does not, however, extend to liability for information pertaining to a holder
and furnished to Globix by or on behalf of such holder for inclusion in the
registration statement.
Subject
to certain adjustments, we are obligated to file and keep the registration
statement continuously effective, supplemented and amended for a period ending
on the earlier of:
| · |
the
date on which all of the shares of our common stock have been
sold
pursuant to the registration statement or pursuant to Rule 144
under the
Securities Act of 1933;
|
| · |
the
three year anniversary of the date on which the Securities and
Exchange
Commission declares the registration statement effective;
or
|
| · |
the
date on which there are no longer any shares of our common stock
outstanding.
|
Other
Transactions
In
September 2003, a former holder of 1,796,686 shares of our common stock sold
all
such shares in private transactions, and the purchasers succeeded to such
former
holder’s rights under the registration rights agreement. In March 2005, a trust
for the benefit of the children of Steven G. Singer, our Chairman of the
Board,
and a trust for the benefit of family members of Peter K. Stevenson, our
President and Chief Executive Officer, purchased 80,000 and 17,000 shares,
respectively, from a former employee of Globix in connection with the settlement
of certain employment-related litigation between Globix and the former employee.
In connection with this transaction, our board of directors agreed to grant
registration rights for the shares purchased from the former
employee.
Table
of Selling Holders
The
table
below sets forth the names of the selling holders of shares of our common
stock
and the number of shares of our common stock beneficially owned by these
selling
holders as of August 11, 2005. Each of the following selling holders, is
itself
or is affiliated with a holder of 5% or more of our common stock: LC Capital
Master Fund Ltd., Loeb Partners Corp., MacKay Shields, LLC, Singer Children’s
Management Trust and Gary and Karen Singer Children’s Trusts. Except as
otherwise indicated, each person listed in the table below has informed us
that
it has (1) voting and investment power with respect to its shares of our
common
stock and (2) record and beneficial ownership with respect to its shares
of our
common stock.
If
all of
the shares of our common stock listed below are sold pursuant to this
prospectus, then the selling holders will sell 11,183,876 shares of our common
stock, or 22.97% of the total number of shares of our common stock
outstanding.
The
information set forth in the table below was provided to us by the selling
holders listed below.
17
|
Name
and Address of Beneficial Owner
|
Beneficial
Ownership of
Common
Stock Before
Offering(1)
(2)
|
Shares
of Common
Stock
to be Sold
|
Beneficial
Ownership
of
Common Stock
After
Offering
|
||||
|
Shares
|
Percentage
|
Shares
|
Percentage
|
||||
|
Cypress
Management Partnership(3)
100
Pine Street, Suite 2700
San
Francisco, CA 94111
|
267,272
|
0.55
|
254,545
|
12,727
|
.03
|
||
|
Goldman,
Sachs & Co.(4)
85
Broad Street
New
York, NY 10004
|
2,302,786
|
4.73
|
854,546
|
1,448,240
|
2.97
|
||
|
HM
Parties
(5)
c/o
Hicks, Muse, Tate & Furst Incorporated
200
Crescent Court, Suite 1600
Dallas,
Texas 75201
|
2,304,400
|
4.73
|
2,304,400
|
0
|
0
|
||
|
JGD
Management Corp.
(6)
d/b/a
York Capital Management
350
Park Avenue
New
York, NY 10022
|
2,190,578
|
4.50
|
1,249,172
|
941,406
|
1.93
|
||
|
LC
Capital Master Fund Ltd. (7)
Lampe
Conway & Co. LLC
680
Fifth Avenue, Suite 1202
New
York, NY 10019
|
5,395,868
|
10.97
|
903,716
|
4,492,152
|
9.14
|
||
|
Lloyd
Miller(8)
4550
Gordon Drive
Naples,
FL 34102
|
434,608
|
.89
|
400,000
|
34,608
|
.07
|
||
|
Loeb
Partners Corp. (9)
61
Broadway
New
York, NY 10006
|
3,843,470
|
7.88
|
449,171
|
3,394,299
|
6.95
|
||
|
MacKay
Shields, LLC (10)
c/o
MacKay Shields Financial Corp.
9
West 57th Street
New
York, NY 10019
|
12,967,705
|
25.84
|
3,822,154
|
9,145,551
|
18.22
|
||
|
Singer
Children's Management Trust
(11)
560
Sylvan Avenue
Englewood
Cliffs, NJ 07632
|
4,112,596
|
8.33
|
400,000
|
3,712,596
|
7.52
|
||
|
Gary
and Karen Singer Children's Trusts (12)
560
Sylvan Avenue
Englewood
Cliffs, NJ 07632
|
915,623
|
1.88
|
449,172
|
466,451
|
0.96
|
||
|
Steven
Singer Children's Trust(13)
113
Jackson Drive
Cresskill
NJ 07626
|
80,000
|
.16
|
80,000
|
0
|
0
|
18
|
Kathryn
Ann Stevenson Trust(14)
c/o
Peter K. Stevenson
Globix
Corporation
139
Centre Street
New
York, NY 10013
|
565,667
|
1.15
|
17,000
|
548,667
|
1.11
|
||
|
Total:
|
11,183,876
|
|
(1)
|
The
information regarding beneficial ownership of our common stock
has been
presented in accordance with the rules of the Securities and
Exchange
Commission. Under these rules, a person may be deemed to beneficially
own
any shares as to which such person, directly or indirectly, has
or shares
voting power or investment power and also any shares of our common
stock
as to which such person has the right to acquire voting or investment
power within 60 days through the exercise of any stock option
or other
right. The percentage of beneficial ownership as to any person
as of a
particular date is calculated by dividing (a) (i) the number
of shares
beneficially owned by such person plus (ii) the number of shares
as to
which such person has the right to acquire voting or investment
power
within 60 days by (b) the total number of shares outstanding
as of such
date, plus any shares that such person has the right to acquire
from
Globix within 60 days. For purposes of calculating the beneficial
ownership percentages set forth above, the total number of shares
of our
common stock deemed to be outstanding as of August 11,
2005 was
48,678,461. As used in this proxy statement, "voting power''
is the power
to vote or direct the voting of shares and "investment power''
is the
power to dispose or direct the disposition of shares. Except
as noted,
each stockholder listed has sole voting and investment power
with respect
to the shares shown as being beneficially owned by such
stockholder.
|
|
(2)
|
On
June 25, 2002, we entered into a Stipulation and Order with the
lead
plaintiffs in the class action lawsuit described in the section
of the
Annual Report on Form 10-K entitled “Business—Legal Proceedings.” Under
the Stipulation and Order, 229,452 shares of our common stock
were held in
reserve in escrow pending the outcome of the class action lawsuit.
As a
result of the settlement of such lawsuit in February 2005, and
the
subsequent expiration of the appeals period relating thereto,
each of
MacKay Shields and Goldman Sachs & Co. (and each other former holder
of our 12.5% senior notes on the effective date of our plan of
reorganization) will be entitled to receive a portion of these
229,452
shares of common stock based on its percentage ownership of our
12.5%
senior notes on the effective date of the
plan.
|
|
|
|
|
(3)
|
Cypress
Management Partnership received all of its shares in the debt-for-equity
exchange. Also
included in these shares are 12,727 shares that the selling
holder has the
right to acquire at a purchase price of $2.75 per share as
a result of the
provisions of the debt-for-equity exchange. Jonathan Marcus and
Richard Dirickson, stockholders of the investment advisor to
Cypress
Management Partnership, share voting and investment control
over these
securities. Cypress Management Partnership is an affiliate
of a
registered broker-dealer. Cypress Management Partnership may
also be
deemed to be an underwriter for the purposes of this registration
statement. We have been informed by Cypress Management Partners
that it
acquired the securities offered by this prospectus for its
own account in
the ordinary course of business, and that, at the time it acquired
the
securities, it had no agreement or understanding, direct or
indirect, with
any person to distribute the
securities.
|
|
(4)
|
Goldman
Sachs & Co. acquired 854,546 shares in the debt-for-equity
exchange. Also
included in these shares are 42,727 shares that the selling
holder has the
right to acquire at a purchase price of $2.75 per share as
a result of the
provisions of the debt-for-equity exchange. Goldman Sachs & Co.
is a registered broker-dealer and, as such, is also
an
underwriter for the purposes of this registration statement.
We have been
informed by Goldman Sachs & Co. that it acquired the securities
offered by this prospectus for its own account in the ordinary
course of
business, and that, at the time it acquired the securities,
it had no
agreement or understanding, direct or indirect, with any person
to
distribute the securities.
|
|
(5)
|
The
HM Parties received all of their shares in exchange for preferred
stock of
our predecessor company in our bankruptcy. The HM Parties are
party to the
registration rights agreement. “HM Parties” refers collectively to HM4
Globix Qualified Fund, LLC, HM4 Globix Private Fund, LLC, HM
PG-IV Globix,
LLC, HM 4-EQ Globix Coinvestors, LLC and HM 4-SBS Globix Coinvestors,
LLC.
Of the 2,304,400 shares held by the HM Parties: (i) 2,092,487
of these
shares are owned of record by HM4 Globix Qualified Fund, LLC;
(ii) 14,831
of these shares are owned of record by HM4 Globix Private Fund,
LLC; (iii)
111,430 of these shares are owned of record by HM PG-IV Globix,
LLC; (iv)
34,177 of such shares are owned of record by HM 4-EQ Globix Coinvestors,
LLC; and (v) 51,475 of these shares are owned of record by HM
4-SBS Globix
Coinvestors, LLC.
|
19
|
Thomas
O. Hicks is chairman of each of the HM Parties and is the sole
member of
the ultimate general partner of the controlling member of each
of the HM
Parties. Accordingly, Mr. Hicks may be deemed to beneficially own
all or a
portion of the shares of our common stock owned of record by the
HM
Parties. Peter S. Brodsky, a director of Globix from October 2001
to
March 7, 2005, Joe Colonnetta, Jack D. Furst, a director
of Globix
from December 1999 through April 2002, John R. Muse, Rick Neuman
and
Andrew Rosen are partners of Hicks, Muse, Tate & Furst Incorporated,
which is an affiliate of the HM Parties. In addition, Messrs. Muse
&
Furst are members of the management committee of Hicks, Muse, Tate
&
Furst Incorporated. Consequently, these individuals may be deemed
to
beneficially own all or a portion of the shares of our common stock
owned
of record by the HM Parties. Each of Messrs. Hicks, Brodsky, Colonnetta,
Furst, Muse, Neuman and Rosen disclaims the existence of a group
and
disclaims beneficial ownership of the shares of our common stock
of which
he is not the record owner.
|
|
(6)
|
York
Select, L.P., York Select Unit Trust, York Distressed Opportunities
Funds,
L.P. and York Global Value Partners, L.P. purchased an aggregate
of
449,172 shares in a private transaction from a former holder
of our common
stock, succeeding to such former holder’s rights under the registration
rights agreement with respect to such shares. JGD Management
Corp., d/b/a
York Capital Management, acquired 800,000 shares in the debt-for-equity
exchange. Also
included in these shares are 40,000 shares that the selling holder
has the
right to acquire at a purchase price of $2.75 per share as a
result of the
provisions of the debt-for-equity exchange. James
G. Dinan holds sole voting and investment control over certain
of the
shares listed in the table and holds a controlling interest in
certain
affiliated entities holding shares listed in the
table.
|
|
(7)
|
LC
Capital Master Fund Ltd. purchased 449,171 shares in a private
transaction
from a former holder of our common stock, succeeding to such former
holder’s rights under the registration rights agreement with respect to
such shares. In addition, LC Capital Master Fund Ltd. acquired
454,545
shares in the debt-for-equity exchange. LC Capital Master Fund
Ltd.
directly beneficially owns 5,363,639 shares of Globix common stock
(including 462,462 shares that may be acquired upon conversation
of the
preferred stock). LC Capital indirectly beneficially owns 9,502
shares of
Globix common stock pursuant to currently exercisable stock options
granted to Steven Lampe, who is a director of Globix and was a
director of
NEON. Also
included in these shares are 22,727 shares that the selling holder
has the
right to acquire at a purchase price of $2.75 per share as a result
of the
provisions of the debt-for-equity exchange. Mr.
Lampe and Richard F. Conway, each of whom is a Managing Member
of Lampe,
Conway & Co. LLC, the investment advisor to LC Capital Master Fund,
Ltd., exercise voting and investment control over these
securities.
|
|
(8)
|
Lloyd
Miller acquired 400,000 shares in the debt-for-equity exchange
through the
following entities over which he exercises voting and investment
control:
Lloyd I. Miller Trust A-4, Milgrat (GGG), Milfam I, L.P. and Milfam
II,
L.P. Milfam II also holds 14,608 shares of preferred stock which
are
convertible into the same number of shares of common stock. Also
included in these shares are 20,000 shares that the selling holder
has the
right to acquire at a purchase price of $2.75 per share as a result
of the
provisions of the debt-for-equity
exchange.
|
|
(9)
|
Loeb
Partners Corporation purchased 449,171 shares in a private
transaction
from a former holder of our common stock, succeeding to such
former
holder’s rights under the registration rights agreement with respect
to
such shares. Loeb Partners and its affiliates, Loeb Arbitrage
Fund and
Loeb Offshore Fund Ltd. together beneficially own 3,843,470
shares of
Globix common stock. Loeb Partners indirectly beneficially
owns 9,502
shares of Globix common stock pursuant to currently exercisable
stock
options granted to Mr. Grubin, a former director of NEON,
who is a Vice
President of Loeb Partners. Thomas L. Kempner is its President
and a
director and its Chief Executive Officer. Norman N. Mintz
is a Vice
President and also a director. Gideon King is its Executive
Vice
President. Loeb Partners and Loeb Arbitrage Fund are registered
broker-dealers and, as such, are also underwriters
for the
purposes of this registration statement. We have been informed
by Loeb
Partners that it acquired the securities offered by this
prospectus for
its own account in the ordinary course of business, and that,
at the time
it acquired the securities, it had no agreement or understanding,
direct
or indirect, with any person to distribute the
securities.
|
|
(10)
|
Of
the shares to be sold by MacKay Shields LLC pursuant to this
prospectus,
2,440,335 shares were acquired in our bankruptcy in exchange
for 12%
senior notes of our predecessor company, and 1,381,819 were
acquired in
the debt-for-equity exchange. According to information provided
to us by
MacKay Shields LLC, the pecuniary interests in the shares
listed under its
name in the table are held by a number of institutional investors
for whom
MacKay Shields is the discretionary investment advisor. Included
in these
shares are 1,434,939 shares that may be acquired on conversion
of
preferred stock. Also
included in these shares are 69,091 shares that the selling
holder has the
right to acquire at a purchase price of $2.75 per share as
a result of the
provisions of the debt-for-equity exchange. MacKay
Shields LLC has voting and investment control over these
shares and,
accordingly, is deemed to beneficially own these shares.
Donald E. Morgan
and a number of other individuals employed by MacKay Shields
LLC have
voting and investment control over these shares. MacKay Shields
LLC is
affiliated with two registered broker-dealers, NYLIFE Distributors
LLC and
NYLIFE Securities Inc., and may be deemed to be an underwriter
for
purposes of this registration statement. We have been informed
by MacKay
Shields LLC that the securities were acquired in the ordinary
course of
business and that, at the time the securities were acquired,
it had no
agreement or understanding, direct or indirect, with any
person to
distribute the securities.
|
20
|
(11)
|
The
Singer Children’s Management Trust acquired 400,000 shares in the
debt-for-equity exchange. Steven Singer’s sister-in-law, Karen Singer,
serves as sole trustee for the Singer Children’s Management Trust, a trust
for the benefit of Steven Singer’s brother’s children, which trust holds
4,092,596 shares of common stock (including 699,099 shares that
may be
acquired on conversion of the preferred stock). Also
included in these shares are 20,000 shares that the selling holder
has the
right to acquire at a purchase price of $2.75 per share as a result
of the
provisions of the debt-for-equity exchange. Steven
Singer and his sister-in-law disclaim membership in a group, as
such term
is defined in Section 13(d)(3) of the Securities Exchange Act of
1934, and
disclaim any other interest in the Globix common stock held in
the trusts.
|
|
(12)
|
The
Gary and Karen Singer Children’s Trust purchased 449,172 shares in a
private transaction from a former holder of our common stock, succeeding
to such former holder’s rights under the registration rights agreement
with respect to such shares. Steven G. Singer is co-trustee of
the Gary
and Karen Singer Children’s Trust and the Second Gary and Karen Singer
Children’s Trust, two trusts for the benefit of Steven Singer’s brother’s
children. As trustee, Mr. Singer has voting and investment control
over
the 915,623 shares of common stock held in the trusts (including
118,197
shares that may be acquired on conversion of the preferred stock).
Steven
G. Singer disclaims any other interest in the Globix common stock
held in
the trust.
|
|
(13)
|
The
Steven Singer Children’s Trust, a trust for the benefit of Steven Singer’s
children, acquired 80,000 shares in a private transaction from
a former
employee as described above. Mr. Singer’s brother, Gary Singer, is the
sole trustee of the trust. Steven Singer has no voting or investment
control over the shares held in the trust. Steven Singer and his
brother
disclaim membership in a group, as such term is defined in Section
13(d)(3) of the Securities Exchange Act of 1934, and disclaim any
other
interest in the Globix common stock held in the
trust.
|
|
(14)
|
The
Kathryn Ann Stevenson Trust, a trust for the benefit of certain
family
members of Peter K. Stevenson, acquired 17,000 shares in a private
transaction from a former employee as described above. Peter K.
Stevenson
and Kathryn Ann Stevenson are the initial trustees of the trust.
Mr.
Stevenson disclaims beneficial ownership of the shares held in
the trust.
Mr. Stevenson beneficially owns 548,667 shares of our common stock
that
may be acquired under a currently exercisable employee stock
option.
|
PLAN
OF
DISTRIBUTION
We
are
registering the shares of our common stock on behalf of the selling holders.
A
selling holder is a person named in the Table of Selling Holders that begins
on
page 17 and, in the case of shares covered by the registration rights agreement,
also includes any donee, pledgee, transferee or other successor-in-interest
selling shares of our common stock received after the date of this prospectus
from a selling holder as a gift, pledge, partnership distribution or other
non-sale related transfer. All costs, expenses and fees in connection with
the
registration of the shares of our common stock offered by this prospectus
will
be borne by our company, other than brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares of our common stock,
which
will be borne by the selling holders. Sales of shares of our common stock
may be
effected by selling holders from time to time in one or more types of
transactions (which may include block transactions) on the American Stock
Exchange, in the over-the-counter market, in negotiated transactions, through
put or call options transactions relating to the shares of our common stock,
through short sales of shares of our common stock, or a combination of these
methods of sale, at market prices prevailing at the time of sale, or at
negotiated prices. These transactions may or may not involve brokers or dealers.
We are not aware of any agreements, understandings or arrangements among
the
selling holders and any underwriters or broker-dealers regarding the sale
of the
shares of our common stock held by the selling holders, nor is there an
underwriter or coordinated broker acting in connection with the proposed
sale of
shares of our common stock by the selling holders.
21
The
selling holders may enter into hedging transactions with broker-dealers or
other
financial institutions. In connection with these transactions, broker-dealers
or
other financial institutions may engage in short sales of the shares of our
common stock in the course of hedging positions they assume with selling
holders. The selling holders may also enter into options or other transactions
with broker-dealers or other financial institutions which require the delivery
to these broker-dealers or other financial institutions of shares of our
common
stock, which shares of our common stock these broker-dealer or other financial
institution may resell pursuant to this prospectus (as amended or supplemented
to reflect such transaction). The selling holders may also engage in short
sales
of shares and, in those instances, this prospectus may be delivered in
connection with the short sales and the shares offered under this prospectus
may
be used to cover the short sales.
The
selling holders may make these transactions by selling shares of our common
stock directly to purchasers or to or through broker-dealers, which may act
as
agents or principals. These broker-dealers may receive compensation in the
form
of discounts, concessions or commissions from selling holders and/or the
purchasers of shares of our common stock for whom these broker-dealers may
act
as agents or to whom they sell as principal, or both (which compensation
as to a
particular broker-dealer might be in excess of customary
commissions).
As
registered broker-dealers, Goldman, Sachs & Co., Loeb Partners Corporation
and Loeb Arbitrage Fund are underwriters, and the other selling holders
and
any broker-dealers that act in connection with the sale of shares of our
common
stock may be deemed to be underwriters, within the meaning of Section 2(11)
of
the Securities Act of 1933. As a result, any commissions received
by them
or any profit on the resale of the shares of our common stock sold by them
while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act of 1933. Neither we nor any of the selling holders
can
currently estimate the amount of any such compensation. The selling holders
may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of shares of our common stock or notes against
certain liabilities, including liabilities arising under the Securities Act
of
1933.
The selling
holders that are underwriters within the meaning of Section 2(11)
of the
Securities Act of 1933 will be subject to the prospectus delivery
requirements of the Securities Act of 1933. The rules and regulations set
forth
in Regulation M promulgated under the Securities Exchange Act of 1934 provide
that during the period that any person is engaged in a distribution of the
shares within the meaning of Regulation M, that person usually may not purchase
the shares. The selling holders are subject to the rules and regulations
of the
Securities Act of 1933 and the Securities Exchange Act of 1934, including
Regulation M, which may limit the timing of purchases and sales of shares
by the
selling holders. Regulation M's prohibition on purchases may include purchases
to cover short positions by the selling holders, and a selling holder's failure
to cover a short position at a lender's request and subsequent purchases
by the
lender in the open market of shares to cover such short positions, may
constitute an inducement to buy shares which is prohibited by Regulation
M.
Consequently, this may affect the marketability of the shares. We have informed
the selling holders that the anti-manipulative provisions of Regulation M
may
apply to their sales in the market.
Selling
holders also may resell all or a portion of the shares of our common stock
in
open market transactions in reliance upon Rule 144 under the Securities Act
of
1933, provided that they meet the criteria and conform to the requirements
of
Rule 144.
Upon
our
company being notified by a selling holder that any material arrangement
has
been entered into with a broker-dealer for the sale of shares of our common
stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement
to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act of 1933, disclosing:
| - |
the
name of each such selling holder and of the participating
broker-dealer(s);
|
| - |
the
number of shares of our common stock
involved;
|
| - |
the
initial price at which these shares were
sold;
|
| - |
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
| - |
that
such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this prospectus;
and
|
| - |
other
facts material to the transactions.
|
22
In
addition, in the case of shares covered by the registration rights agreement,
upon our company being notified by a selling holder that a donee, pledgee,
transferee or other successor-in-interest intends to sell more than 500 shares
of our common stock, a supplement to this prospectus will be filed.
LEGAL
MATTERS
The
validity of the shares of our common stock offered hereby has
been passed upon for our company by Day, Berry & Howard LLP, New York,
NY 10022.
Our
consolidated financial statements as of September 30, 2004 and September
30,
2003 have been incorporated by reference in this prospectus and in the
registration statement of which this prospectus is a part in reliance upon
the
report of Amper, Politziner & Mattia, P.C. an independent registered public
accounting firm, given on the authority of said firm as experts in auditing
and
accounting. The consolidated financial statements incorporated in
this
Prospectus by reference to the Annual Report on Form 10-K for the seven months
ended April 30, 2002 and for the five months ended September 30, 2002 have
been
so incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
an
independent registered public accounting firm given on the authority of said
firm as experts in auditing and accounting.
NEON’s
consolidated financial statements as of and for the year ended December 31,
2004
have been incorporated by reference in this prospectus and in the registration
statement of which this prospectus is a part in reliance upon the report
of
Amper, Politziner & Mattia, P.C., an independent registered public
accounting firm, given on the authority of said firm as experts in auditing
and
accounting.
The
consolidated financial statements of Neon Communications, Inc. and subsidiaries
as of December 31, 2003 and for the years ended December 31, 2003 and 2002
incorporated by reference in this prospectus and in the Registration Statement
have been audited by BDO Seidman, LLP, an independent registered public
accounting firm, to the extent and for the periods set forth in their report
incorporated by reference in this Registration Statement, and are included
in
reliance upon such report given upon the authority of said firm as experts
in
auditing and accounting.
INCORPORATION
BY
REFERENCE
The
Securities and Exchange Commission allows us to “incorporate by reference” the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
the
information that we file later with the Securities and Exchange Commission
will
automatically update and supersede this information. We incorporate by reference
in this prospectus the following documents filed by us with the Securities
and
Exchange Commission:
| · |
Our
Annual Report on Form 10-K for the year ended September 30, 2004,
as
amended;
|
| · |
Our
Current Reports on Form 8-K filed with the SEC on October
13, 2004,
January 11, 2005, February 9, 2005, February 17, 2005, March
11, 2005 (as
amended on Form 8-K/A filed on May 20, 2005), May 4, 2005, May
13,
2005, May 24, 2005, May 27, 2005, July 8, 2005, August
16, 2005,
August 25, 2005, August 30, 2005, September 14, 2005,
September 19,
2005 and September 22, 2005;
|
| · |
Our
Quarterly Reports on Form 10-Q for the quarters ended December
31,
2004, March 31, 2005 and June 30, 2005;
and
|
23
| · |
The
description of our common stock contained in our registration statement
on
Form 8-A (File No. 001-14168) filed under the Securities Exchange
Act.
|
Any
statement made in a document incorporated by reference or deemed incorporated
herein by reference is deemed to be modified or superseded for purposes of
this
prospectus if a statement contained in this prospectus or in any other
subsequently filed document which is also incorporated or deemed incorporated
by
reference herein modifies or supersedes that statement. Any such statement
so
modified or superseded shall not be deemed except as modified or superseded,
to
constitute a part of this prospectus. We also incorporate by reference all
documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act after the date of this prospectus and prior to the termination
of
this offering.
Statements
made in this prospectus or in any document incorporated by reference in this
prospectus as to the contents of any contract or other document referred
to
herein or therein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit
to
the documents incorporated by reference, each such statement being qualified
in
all material respects by such reference.
You
may
request a copy of these filings, at no cost, by writing or telephoning us
at the
following address:
Globix
Corporation
139
Centre Street
New
York,
New York 10013
Telephone:
(212) 334-8500
WHERE
YOU
CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports and other information with the Securities
and Exchange Commission. Our Securities and Exchange Commission filings are
available at the Securities and Exchange Commission's web site at http://www.sec.gov.
You may
read and copy any document we file with the Securities and Exchange Commission
at the Securities and Exchange Commission's public reference facilities located
in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further
information on the operation of its public reference facilities. You may
request
a copy of any of our filings with the Securities and Exchange Commission,
or any
of the agreements or other documents that constitute exhibits to those filings,
at no cost, by writing or telephoning us at the following address or phone
number:
Globix
Corporation
139
Centre Street
New
York,
New York 10013
Telephone
(212) 334-8500
You
should rely only on the information provided in this prospectus or incorporated
by reference herein. No person has been authorized to provide you with different
information. The information in this prospectus is accurate as of the date
on
the front cover. You should not assume that the information contained in
this
prospectus is accurate as of any other date.
24
GLOBIX
CORPORATION
11,183,876
Shares of Common Stock
PROSPECTUS
25
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the expenses payable by our company in connection
with this registration statement. All of these expenses are estimates, other
than the filing fees payable to the Securities and Exchange
Commission.
|
Filing
fee-Securities and Exchange Commission
|
$
3,764.74
|
|
|
Fees
and expenses of legal counsel
|
$
80,000
|
|
|
Printing
expenses
|
$
5,000
|
|
|
Fees
and expenses of accountants
|
$
35,000
|
|
|
Miscellaneous
expenses
|
$
5,000
|
|
|
Total
|
$128,764.74
|
ITEM
15. INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Section
145 of the Delaware General Corporation Law, or DGCL, empowers a corporation
to
indemnify any person who was or is a party or is threatened to be made a
party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by
or in
the right of the corporation) by reason of the fact that he or she was or
is a
director, officer, employee or agent of the corporation, or was or is serving
at
the request of the corporation as a director, officer, employee or agent
of
another corporation or other enterprise against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
identified acted in good faith and in a manner he or she reasonably believed
to
be in or not opposed to the best interests of the corporation, and, with
respect
to any criminal action or proceeding, had no reasonable cause to believe
his or
her conduct was unlawful. Section 145 of the DGCL further empowers a corporation
to indemnify any person who was or is a party or is threatened to be made
a
party to any threatened, pending or completed action or suit by or in the
right
of the corporation to procure a judgment in its favor by reason of the fact
that
he or she was or is a director, officer, employee or agent of the corporation,
or was or is serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise against expenses
(including attorneys’ fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if the person identified
acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only
to the
extent that the court in which such action or suit was brought shall determine
that despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses that the court shall deem proper.
Section 145 further provides that to the extent a director or officer of
a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein,
he or
she shall be indemnified against expenses (including attorneys’ fees) actually
and reasonably incurred by him or her in connection therewith. The statute
provides that indemnification pursuant to its provisions is not exclusive
of
other rights of indemnification to which a person may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Our
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, provide, in effect, that to the full extent and under the circumstances
permitted by Section 145 of the DGCL, we shall indemnify any person who was
or
is a party or is threatened to be made a party to any action, suit or proceeding
of the type described above by reason of the fact that he or she was or is
a
director, officer, employee or agent of our company.
Our
Amended and Restated Certificate of Incorporation relieves our directors
from
monetary damages to our company or our stockholders for breach of such
director’s fiduciary duty as a director to the fullest extent permitted by the
DGCL. Under Section 102(b)(7) of the DGCL, a corporation may relieve its
directors from personal liability to such corporation or its stockholders
for
monetary damages for any breach of their fiduciary duty as directors except
(i)
for any breach of the director’s duty of loyalty to our company or our
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) under Section 174
of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
In
addition, we carry an insurance policy for the protection of our directors
and
executive officers against any liability asserted against them in their official
capacities.
26
ITEM
16. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
| (a) |
Exhibits
|
|
Exhibit
No.
|
Exhibit
Description
|
|
|
2.1
|
Agreement
and Plan of Merger dated as of July 19, 2004 by and between
Globix
Corporation and NEON Communications, Inc.(1)
|
|
|
2.2
|
First
Amendment to Agreement and Plan of Merger dated as of October
8, 2004 by
and between Globix Corporation and NEON Communications, Inc.
(1)
|
|
|
2.3
|
Amended
Joint Prepackaged Plan of Globix and certain of the Globix’s subsidiaries,
dated April 8, 2002 (2)
|
|
|
2.4
|
Form
of Securities Exchange Agreement, dated September 15, 2004 (3)
|
|
|
4.1
|
Indenture,
dated as of April 23, 2002, between Globix, as issuer, the
Subsidiary
Guarantors of Globix named therein and HSBC Bank USA, as
trustee, relating
to the 11% senior notes due 2008 (4)
|
|
|
4.2
|
Form
of Pledge and Security Agreement, dated as of April 23, 2002,
between each
Subsidiary Guarantor of Globix and HSBC Bank USA, as Collateral
Agent/Trustee (4)
|
|
|
4.3
|
Certificate
of Designation of Preferences and Relative, Participating
Optional and
Special Rights of Preferred Stock and Qualifications, Limitations
and
Restrictions Thereof of 6% Series A Cumulative Convertible
Preferred Stock
of Globix Corporation (5)
|
|
|
4.4
|
Registration
Rights Agreement between Globix and the holders of Globix’s securities
party thereto, dated as of April 23, 2002 (6)
|
|
|
5
|
Opinion
of Day, Berry & Howard LLP as to the validity of the shares of common
stock *
|
|
|
23.1
|
Consent
of PricewaterhouseCoopers LLP
|
|
|
23.2
|
Consent
of Amper, Politziner & Mattia, P.C. with respect to their report on
certain financial statements of Globix
|
|
|
23.3
|
Consent
of Amper, Politziner & Mattia, P.C. with respect to their report on
certain financial statements of NEON
|
|
|
23.4
|
Consent
of BDO Seidman, LLP, independent registered public accounting
firm
|
|
|
23.5
|
Consent
of Day, Berry & Howard LLP (included in Exhibit 5)
|
|
|
24
|
Powers
of Attorney*
|
|
|
*
|
Filed Previously. |
27
|
(1)
|
Incorporated
by reference to Globix’s Registration Statement on Form S-4 (No.
333-119666) originally field on October 12, 2004.
|
|
(2)
|
Incorporated
by reference to Globix’s Current Report on Form 8-K filed on April 23,
2002.
|
|
(3)
|
Incorporated
by reference to Globix’s Current Report on Form 8-K filed on October 13,
2004.
|
|
(4)
|
Incorporated
by reference to Globix’s Quarterly Report on Form 10-Q filed on May 15,
2002.
|
|
(5)
|
Incorporated
by reference to Globix’s Current Report on Form 8-K filed on March 11,
2005.
|
|
(6)
|
Incorporated
by reference to Globix’s Annual Report on Form 10-K filed on March 26,
2003.
|
28
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 to include
any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change
to such information in the registration statement;
|
| (2) |
That,
for the purpose of determining any liability under the Securities
Act of
1933, 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; and
|
| (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 of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange
Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities 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 of 1933
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 Securities Act
1933
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted
by such
director, officer or controlling person in connection with the securities
being
registered, the registrant will, unless in the opinion of its counsel the
matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by
the
final adjudication of such issue.
29
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-3 and has duly caused this Amendment No. 3 to the Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on September
23,
2005.
| GLOBIX CORPORATION | ||
| |
|
|
| By: | /s/ Peter K. Stevenson | |
|
|
||
|
Peter
K. Stevenson
President,
Chief Executive Officer
|
||
Pursuant
to the requirements of the Securities Act of 1933, this Amendment No. 3 to
the
Registration Statement on Form S-3 has been signed by the following persons
in
the capacities and on the dates indicated:
| /s/ Peter K. Stevenson | |
|
Peter
K. Stevenson
President,
Chief Executive Officer and Director
(principal
executive officer)
Date:
September 23, 2005
|
|
|
/s/
Robert M. Dennerlein
|
|
Robert
M. Dennerlein
Chief
Financial Officer
(principal
financial and accounting officer)
Date:
September 23, 2005
|
|
/s/
Wayne Barr, Jr.*
|
|
|
Wayne
Barr, Jr.
Director
Date:
September 23, 2005
|
30
|
|
/s/
José A. Cecin, Jr.*
|
|
José
A. Cecin, Jr.
Director
Date:
September 23, 2005
|
|
/s/
Stephen E. Courter*
|
|
|
Stephen
E. Courter
Director
Date:
September 23, 2005
|
|
/s/
John Forsgren*
|
|
|
John
Forsgren
Director
Date:
September 23, 2005
|
|
/s/
Peter L. Herzig*
|
|
|
Peter
L. Herzig
Director
Date:
September 23, 2005
|
|
/s/
Steven Lampe*
|
|
|
Steven
Lampe
Director
Date:
September 23, 2005
|
|
/s/
Steven G. Singer*
|
|
|
Steven
G. Singer
Director
Date:
September 23, 2005
|
|
/s/
Raymond L. Steele*
|
|
|
Raymond
L. Steele
Director
Date:
September 23, 2005
|
|
By:
/s/ Robert M. Dennerlein
|
|
|
Robert
M. Dennerlein
Attorney-in-Fact*
Date:
September 23, 2005
|
31