e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-138029
PROSPECTUS
1,676,451 Shares
DIGI INTERNATIONAL INC.
COMMON STOCK
This prospectus relates to 1,676,451 shares of Common Stock of Digi International Inc. (“Digi”
or the “Company”), which may be offered for sale from time to time by the selling stockholders
named under “Selling Stockholders.” Such shares were issued to the former shareholders and option
holders of MaxStream, Inc. (“MaxStream”) in connection with the Company’s acquisition of MaxStream.
All of the proceeds from the sale of the shares covered by this prospectus will be received by
the selling stockholders. We will not receive any proceeds from the sale of these shares.
Our common stock is traded on the NASDAQ Global Select Market under the symbol “DGII.” On
October 13, 2006, the last sale price for our common stock, as reported on the NASDAQ Global Select
Market, was $13.88 per share.
See “Risk Factors” beginning on page 3 for factors you should consider before buying shares of
our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus
is November 7, 2006.
TABLE OF CONTENTS
In making your investment decision, you should rely only on the information contained in this
prospectus and in any prospectus supplement, including the information we are incorporating by
reference. Neither we nor the selling stockholders have authorized anyone to provide you with any
other information. If you receive any unauthorized information, you must not rely on it. You
should not assume that the information contained in this prospectus is accurate as of any date
other than the date on the front cover of this prospectus.
i
SUMMARY
The following summary contains basic information about Digi and this offering. It does not
contain all of the information that you should consider in making your investment decision. You
should read and consider carefully all of the information in this prospectus, including the
information set forth under “Risk Factors,” as well as the more detailed financial information,
including the consolidated financial statements and related notes thereto, appearing elsewhere or
incorporated by reference in this prospectus, before making an investment decision. Unless the
context indicates otherwise, all references in this prospectus to “Digi,” the “Company,” the
“Registrant,” “our,” “us” and “we” refer to Digi International Inc. and its subsidiaries as a
combined entity.
Digi was formed in 1985 as a Minnesota corporation and reorganized as a Delaware corporation
in 1989 in conjunction with our initial public offering. The common stock of Digi is traded on the
NASDAQ Global Select Market under the symbol DGII. Digi’s principal executive office and worldwide
headquarters are located at 11001 Bren Road East, Minnetonka, Minnesota 55343. Our phone number is
(952) 912-3444. Digi also has regional sales and engineering offices throughout North America,
Europe, and Asia Pacific.
We develop and provide our customers with innovative connectivity solutions that have a common
core technology base. Digi has positioned itself in the growing market of integrated hardware and
software connectivity solutions to network-enable the coming generation of intelligent devices in
commercial applications. Digi’s objective is to allow customers the ability to seamlessly migrate
through various connectivity technologies without making major changes to their software
applications, thus making device networking easy. Digi offers solutions that enable a virtually
unlimited number of devices or users to be connected to local area networks (LANs), multi-user
systems and the internet. These solutions allow customers to automatically collect, track,
measure, monitor and control the critical data they need to gain a competitive advantage and build
their businesses.
A more detailed description of our business is contained in our Annual Report on Form 10-K,
which we have incorporated by reference into this prospectus.
OFFERING
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Issuer
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Digi International Inc. |
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Common stock offered
by the selling stockholders
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1,676,451 shares |
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Common stock to be outstanding
immediately after this offering
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25,054,596 shares (1) |
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Use of proceeds
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The net proceeds from the sale of the
securities covered by this prospectus will
be received by the selling stockholders.
We will not receive any of the proceeds
from any sale by any selling stockholder
of the securities covered by this
prospectus. See “Use of Proceeds.” |
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Listing of common stock
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Our common stock is listed on the NASDAQ
Global Select Market under the symbol
“DGII.” |
(1) Based
on the outstanding shares on October 12, 2006.
The information in this prospectus reflects the consummation of a merger between the Company
and MaxStream, Inc., which occurred on July 27, 2006 pursuant to the Agreement and Plan of Merger
among Digi International Inc., Ocean Acquisition Sub Inc., MaxStream, Inc. and the former
shareholders of MaxStream, Inc. Pursuant to that agreement and plan of merger, we agreed to file
the registration statement of which this prospectus is a part to register resales of the shares of
our common stock by the selling stockholders.
2
RISK FACTORS
You should consider carefully the following risks before you decide to buy our common stock.
You should also consider the other information in this prospectus and incorporated by reference
herein. If any of the following risks actually occur, our business, financial condition and
results of operations would likely suffer. In such case, the trading price of our common stock
could decline, and you may lose all or part of the money paid to buy our common stock.
Risks Relating to Our Business
The Company’s dependence on new product development and the rapid technological change that
characterizes the Company’s industry make it susceptible to loss of market share resulting from
competitors’ product introductions and similar risks.
The communications technology industry is characterized by rapidly changing technologies,
evolving industry standards, frequent new product introductions, short product life cycles and
rapidly changing customer requirements. The introduction of products embodying new technologies
and the emergence of new industry standards can render existing products obsolete and unmarketable.
The Company’s future success will depend on its ability to enhance its existing products, to
introduce new products to meet changing customer requirements and emerging technologies, and to
demonstrate the performance advantages and cost-effectiveness of its products over competing
products. Failure by the Company to modify its products to support new alternative technologies or
failure to achieve widespread customer acceptance of such modified products could cause the Company
to lose market share and cause its revenues to decline.
The Company may experience delays in developing and marketing product enhancements or new
products that respond to technological change, evolving industry standards and changing customer
requirements. There can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful development, introduction, and marketing of these products or
product enhancements, or that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve any significant or sustainable degree of market
acceptance in existing or additional markets. Failure by the Company, for technological or other
reasons, to develop and introduce new products and product enhancements in a timely and
cost-effective manner could have a material adverse effect on the Company. In addition, the future
introductions or announcements of products by the Company or one of its competitors embodying new
technologies or changes in industry standards or customer requirements could render the Company’s
then-existing products obsolete or unmarketable. There can be no assurance that the introduction
or announcement of new product offerings by the Company or one or more of its competitors will not
cause customers to defer the purchase of the Company’s existing products, which could cause its
revenues to decline.
The Company intends to continue to devote significant resources to its research and
development, which, if not successful, could cause a decline in its revenues and harm its business.
The Company intends to continue to devote significant resources to research and development in
the coming years to enhance and develop additional products. For the fiscal years ended 2005,
2004, and 2003, the Company’s research and development expenses comprised 13.2%, 15.4%, and 15.5%,
respectively, of total net sales. If the Company is unable to develop new products as a result of
its research and development efforts, or if the products the Company develops are not successful,
its business could be harmed. Even if the Company develops new products that are accepted by its
target markets, the net revenues from these products may not be sufficient to justify its
investment in research and development.
3
A substantial portion of the Company’s recent development efforts have been directed toward
the development of new products targeted to manufacturers of intelligent, network-enabled devices
and other embedded systems in various markets, including markets in which networking solutions for
embedded systems have not historically been sold, such as markets for industrial automation
equipment, security equipment and medical equipment. The Company’s financial performance is
dependent upon the development of the intelligent device markets that the Company is targeting, and
the Company’s ability to successfully compete and sell its products to manufacturers of these
intelligent devices.
Certain of the Company’s products that generate a substantial amount of its revenue are sold
into mature markets, which could limit the Company’s ability to continue to generate revenue from
these products.
Certain of the Company’s products provide asynchronous and synchronous data transmissions via
add-on cards. The market for add-on asynchronous and synchronous data communications cards is
mature. Furthermore, certain applications of the Company’s embedded network interface cards are
also considered mature. Asynchronous, synchronous, and network interface cards generated
approximately 37.5% of the Company’s revenues in fiscal 2005. As the overall market for these
products decreases due to the adoption of new technologies, the Company expects that its revenues
from these products will continue to decline. As a result, the Company’s future prospects depend
in large part on its ability to acquire or develop and successfully market additional products that
address growth markets.
The Company’s failure to effectively manage product transitions could have a material adverse
effect on the Company’s revenues and profitability.
From time to time, the Company or its competitors may announce new products, capabilities, or
technologies that may replace or shorten the life cycles of the Company’s existing products.
Announcements of currently planned or other new products may cause customers to defer or stop
purchasing the Company’s products until new products become available. Furthermore, the
introduction of new or enhanced products requires the Company to manage the transition from older
product inventories and ensure that adequate supplies of new products can be delivered to meet
customer demand. The Company’s failure to effectively manage transitions from older products could
have a material adverse effect on the Company’s revenues and profitability.
The Company’s failure to compete successfully in its highly competitive market could result in
reduced prices and loss of market share.
The market in which the Company operates is characterized by rapid technological advances and
evolving industry standards. The market can be significantly affected by new product introductions
and marketing activities of industry participants. The Company competes for customers on the basis
of product performance in relation to compatibility, support, quality and reliability, product
development capabilities, price, and availability. Certain of the Company’s competitors and
potential competitors may have greater financial, technological, manufacturing, marketing, and
personnel resources than the Company. Present and future competitors may be able to identify new
markets and develop products more quickly, which are superior to those developed by the Company.
They may also adapt new technologies faster, devote greater resources to research and development,
promote products more aggressively, and price products more competitively than the Company. There
are no assurances that competition will not intensify or that the Company will be able to compete
effectively in the markets in which the Company competes.
4
The cyclicality of the semiconductor industry may result in substantial period-to-period
fluctuations in operating results.
The Company’s semiconductor products provide networking capabilities for intelligent,
network-enabled devices and other embedded systems. The semiconductor industry is highly cyclical
and subject to rapid technological change and has been subject to significant economic downturns at
various times, characterized by diminished product demand, accelerated erosion of average selling
prices and production overcapacity. The semiconductor industry also periodically experiences
increased demand and production capacity constraints. As a result, the Company may experience
substantial period-to-period fluctuations in operating results due to general semiconductor
industry conditions.
Loss of one or more of the Company’s key customers could have an adverse effect on the
Company’s revenues.
Tech Data and Ingram Micro, distributors, comprised 12.9% and 8.6% of net sales, respectively,
during the fiscal year ended 2005. During fiscal 2004 and 2003 Tech Data comprised 15.6% and 15.2%
of net sales, respectively, and Ingram Micro comprised 9.7% and 11.3% of net sales, respectively.
The potential loss of distributors Tech Data and Ingram Micro would have less impact than if
end-user customers were lost. The Company’s sales are primarily made on the basis of purchase
orders rather than under long-term agreements, and therefore, any customer could cease purchasing
the Company’s products at any time without penalty. The decision of any key customer to cease
using the Company’s products or a material decline in the number of units purchased by a
significant customer could have a material adverse effect on the Company’s revenues.
The long and variable sales cycle for certain of the Company’s products makes it more
difficult for the Company to predict its operating results and manage its business.
The sale of the Company’s products typically involves a significant technical evaluation and
commitment of capital and other resources by potential customers and end users, as well as delays
frequently associated with end users’ internal procedures to deploy new technologies within their
products and to test and accept new technologies. For these and other reasons, the sales cycle
associated with certain of the Company’s products is typically lengthy and is subject to a number
of significant risks, including end users’ internal purchasing reviews, that are beyond the
Company’s control. Because of the lengthy sales cycle and the large size of certain customer
orders, if orders forecasted for a specific customer for a particular quarter are not realized in
that quarter, the Company’s operating results for that quarter could be materially adversely
affected.
The Company depends on manufacturing relationships and on limited-source suppliers, and any
disruptions in these relationships may cause damage to the Company’s customer relationships.
The Company procures all parts and certain services involved in the production of its products
and subcontracts most of its product manufacturing to outside firms that specialize in such
services. Although most of the components of the Company’s products are available from multiple
vendors, the Company has several single-source supplier relationships, either because alternative
sources are not available or because the relationship is advantageous to the Company. There can be
no assurance that the Company’s suppliers will be able to meet the Company’s future requirements
for products and components in a timely fashion. In addition, the availability of many of these
components to the Company is dependent in part on the Company’s ability to provide its suppliers
with accurate forecasts of its future requirements. Delays or lost sales could be caused by other
factors beyond the Company’s control, including late deliveries by vendors of components. If the
Company is required to identify alternative suppliers for any of its required components,
qualification and pre-production periods could be lengthy and may cause an
5
increase in component costs and delays in providing products to customers. Any extended
interruption in the supply of any of the key components currently obtained from limited sources
could disrupt the Company’s operations and have a material adverse effect on the Company’s customer
relationships and profitability.
The Company’s use of suppliers in Southeast Asia involves risks that could negatively impact
the Company.
The Company uses suppliers in Southeast Asia. Product delivery times may be extended due to
the distances involved, requiring more lead-time in ordering. In addition, ocean freight delays
may occur as a result of labor problems, weather delays or expediting and customs issues. Any
extended delay in receipt of the component parts could eliminate anticipated cost savings and have
a material adverse effect on the Company’s customer relationships and profitability.
The Company’s ability to compete could be jeopardized if the Company is unable to protect its
intellectual property rights.
The Company’s ability to compete depends in part on its proprietary rights and technology.
Its proprietary rights and technology are protected by a combination of copyrights, trademarks,
trade secrets and patents.
The Company enters into confidentiality agreements with all employees, and sometimes with its
customers and potential customers, and limits access to the distribution of its proprietary
information. There can be no assurance that the steps taken by the Company in this regard will be
adequate to prevent the misappropriation of its technology. The Company’s pending patent
applications may be denied and any patents, once issued, may be circumvented by the Company’s
competitors. Furthermore, there can be no assurance that others will not develop technologies that
are superior to the Company’s technologies. Despite the Company’s efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of its products or to obtain
and use information that the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company’s proprietary rights as fully as do the laws of the United
States. There can be no assurance that the Company’s means of protecting its proprietary rights in
the United States or abroad will be adequate or that competing companies will not independently
develop similar technology. The Company’s failure to adequately protect its proprietary rights
could have a material adverse effect on the Company’s competitive position and result in loss of
revenue.
From time to time, the Company is subject to claims and litigation regarding intellectual
property rights or other claims, which could seriously harm the Company and require the Company to
incur significant costs.
The communications technology industry is characterized by frequent litigation regarding
patent and other intellectual property rights. From time to time, the Company receives
notification of a third-party claim that its products infringe other intellectual property rights.
Any litigation to determine the validity of third-party infringement claims, whether or not
determined in the Company’s favor or settled by the Company, may be costly and divert the efforts
and attention of the Company’s management and technical personnel from productive tasks, which
could have a material adverse effect on the Company’s ability to operate its business and service
the needs of its customers. There can be no assurance that any infringement claims by third
parties, if proven to have merit, will not materially adversely affect the Company’s business or
financial condition. In the event of an adverse ruling in any such matter, the Company may be
required to pay substantial damages, cease the manufacture, use and sale of infringing products,
discontinue the use of certain processes or be required to obtain a license under the intellectual
6
property rights of the third party claiming infringement. There can be no assurance that a
license would be available on reasonable terms or at all. Any limitations on the Company’s ability
to market its products, or delays and costs associated with redesigning its products or payments of
license fees to third parties, or any failure by the Company to develop or license a substitute
technology on commercially reasonable terms could have a material adverse effect on its business
and financial condition.
The Company faces risks associated with its international operations and expansion that could
impair its ability to grow its revenues abroad.
In the fiscal years ended September 30, 2005, 2004, and 2003, net sales to customers outside
the United States were approximately 42.5%, 44.2%, and 35.5%, respectively, of total net sales.
The Company believes that its future growth is dependent in part upon its ability to increase
sales in international markets. These sales are subject to a variety of risks, including
fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers,
unexpected changes in regulatory requirements, longer accounts receivable payment cycles and
potentially adverse tax consequences, and export license requirements. In addition, the Company is
subject to the risks inherent in conducting business internationally, including political and
economic instability and unexpected changes in diplomatic and trade relationships. There can be no
assurance that one or more of these factors will not have a material adverse effect on the
Company’s business strategy and financial condition.
If the Company loses key personnel it could prevent the Company from executing its business
strategy.
The Company’s business and prospects depend to a significant degree upon the continuing
contributions of its executive officers and its key technical personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be successful in
attracting and retaining qualified personnel. Failure to attract and retain key personnel could
result in the Company’s failure to execute its business strategy.
Unanticipated changes in the Company’s tax rates could affect its future results.
The Company’s future effective tax rates could be favorably or unfavorably affected by
unanticipated changes in the mix of earnings in countries with differing statutory tax rates,
changes in the valuation of the Company’s deferred tax assets and liabilities, or by changes in tax
laws or their interpretation. In addition, the Company may be subject to the examination of its
income tax returns by the Internal Revenue Service and other U.S. and international tax
authorities. The Company regularly assesses the potential outcomes resulting from these
examinations to determine the adequacy of its provision for income taxes. There can be no
assurance that the outcomes from these examinations will not have an effect on the Company’s
consolidated operating results and financial condition.
Any acquisitions the Company has made or will make could disrupt its business and seriously
harm its financial condition.
The Company will continue to consider acquisitions of complementary businesses, products or
technologies. In the event of any future purchases, the Company could issue stock that would
dilute the Company’s current stockholders’ percentage ownership; incur debt; assume liabilities; or
incur large and immediate write-offs.
The Company’s operation of any acquired business may also involve numerous risks, including:
7
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problems combining the purchased operations, technologies, or products; |
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unanticipated costs; |
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diversion of management’s attention from the Company’s core business; |
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difficulties integrating businesses in different countries and cultures; |
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adverse effects on existing business relationships with suppliers and customers; |
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risks associated with entering markets in which the Company has no or limited prior
experience; and |
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potential loss of key employees, particularly those of the purchased organization. |
The Company cannot assure that it will be able to successfully integrate any businesses,
products, technologies, or personnel that the Company has acquired or that the Company might
acquire in the future and any failure to do so could disrupt its business and have a material
adverse effect on its financial condition and results of operations. Moreover, from time to time
the Company may enter into negotiations for a proposed acquisition, but be unable or unwilling to
consummate the acquisition under consideration. This could cause significant diversion of
management’s attention and out-of-pocket expenses to the Company. The Company could also be
exposed to litigation as a result of an unconsummated acquisition, including claims that it failed
to negotiate in good faith or misappropriated confidential information.
The Company’s failure to effectively comply with the requirements of applicable environmental
legislation and regulation could have a material adverse effect on the Company’s revenues and
profitability.
Production and marketing of products in certain states and countries may subject the Company
to environmental and other regulations. In addition, certain states and countries may pass
regulations requiring the Company’s products to meet certain requirements to use environmentally
friendly components. Such laws and regulations have recently been passed in jurisdictions in which
the Company operates. The European Union has issued two directives relating to chemical substances
in electronic products. The Waste Electrical and Electronic Equipment Directive (WEEE) makes
producers of certain electrical and electronic equipment financially responsible for collection,
reuse, recycling, treatment and disposal of equipment placed in the European Union market after
August 13, 2005. The Restrictions of Hazardous Substances Directive (RoHS) bans the use of certain
hazardous materials in electric and electrical equipment which are put on the market in the
European Union after July 1, 2006. In the future, China and other countries are expected to adopt
environmental compliance programs. If the Company fails to comply with these regulations, it may
not be able to sell its products in jurisdictions where these regulations apply, which could have a
material adverse effect on the Company’s revenues and profitability.
Risks Related to Our Common Stock
The price of our common stock has been volatile and could continue to fluctuate in the future.
The market price of our common stock, like that of many other high-technology companies, has
fluctuated significantly and is likely to continue to fluctuate in the future. During
fiscal year 2006, the closing price of our common stock on the NASDAQ Global Select Market ranged
from $10.63 to
8
$14.33
per share. Our closing sale price on October 13, 2006 was
$13.88 per share.
Announcements by us or others regarding the receipt of customer orders, quarterly variations in
operating results, acquisitions or divestitures, additional equity or debt financings, results of
customer field trials, scientific discoveries, technological innovations, litigation, product
developments, patent or proprietary right, government regulation and general market conditions may
have a significant impact on the market price of our common stock.
Certain provisions of the Delaware General Corporation Law and our charter documents have an
anti-takeover effect.
There exist certain mechanisms under the Delaware General Corporation Law and our charter
documents that may delay, defer or prevent a change of control. For instance, under Delaware law,
the Company is prohibited from engaging in certain business combinations with interested
stockholders for a period of three years after the date of the transaction in which the person
became an interested stockholder unless certain requirements are met, and majority stockholder
approval is required for certain business combination transactions with interested parties. Our
Certificate of Incorporation contains a “fair price” provision requiring majority stockholder
approval for certain business combination transactions with interested parties, and this provision
may not be changed without the vote of at least 80% of the outstanding shares of the Company’s
voting stock. Other mechanisms in our charter documents may also delay, defer or prevent a change
of control. For instance, our Certificate of Incorporation provides that our Board of Directors
has authority to issue series of our preferred stock with such voting rights and other powers as
the Board of Directors may determine. Furthermore, we have a classified board of directors, which
means that our directors are divided into three classes that are elected to three-year terms on a
staggered basis. Since the three-year terms of each class overlap the terms of the other classes
of directors, the entire board of directors cannot be replaced in any one year. In addition, under
Delaware law, directors serving on a classified board may not be removed by shareholders except for
cause. Pursuant to the terms of a shareholder rights plan adopted in 1998, each outstanding share
of common stock has one attached right. The rights will cause substantial dilution of the
ownership of a person or group that attempts to acquire Digi on terms not approved by the Board of
Directors and may have the effect of deterring hostile takeover attempts. The effect of these
anti-takeover provisions may be to deter business combination transactions not approved by our
Board of Directors, including acquisitions that may offer a premium over the market price to some
or all stockholders.
We have not paid cash dividends on our common stock and do not expect to do so.
We have never declared or paid a cash dividend on our common stock. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
USE OF PROCEEDS
The net proceeds from the sale of the common stock covered by this prospectus will be received
by the selling stockholders. We will not receive any proceeds from the sale by any selling
stockholder of the shares of common stock offered by this prospectus.
SELLING STOCKHOLDERS
We are registering 1,676,451 shares of our common stock for resale by the selling stockholders
identified below. The shares are being registered to permit public secondary trading of the
shares, and the selling stockholders may offer the shares for resale from time to time.
9
The following table presents the number of outstanding shares of our common stock beneficially
owned by the selling stockholders as of October 2, 2006. The table also presents the maximum
number of shares proposed to be sold by the selling stockholders and the number of shares they will
own after the sales. The percentages are based on 25,054,596 shares outstanding on October 2,
2006.
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Shares Owned |
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Prior to |
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Shares Owned |
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Offering(1) |
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Shares Offered |
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After Offering |
Canopy Ventures I, L.P. |
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632,147 |
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632,147 |
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0 |
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Bradley J. Walters |
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267,210 |
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267,210 |
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0 |
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Hugh C. Nielsen |
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263,818 |
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263,818 |
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0 |
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David C. Steed, Jr. |
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263,818 |
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263,818 |
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0 |
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Jan Finlinson |
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130,213 |
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130,213 |
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0 |
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Nicholas Evan Mecham |
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63,409 |
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63,409 |
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0 |
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Martin Johnson |
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3,013 |
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3,013 |
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0 |
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John Schwartz |
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2,567 |
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2,567 |
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0 |
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Andrew Adams |
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1,863 |
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1,863 |
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0 |
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Devry Arnett |
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118 |
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118 |
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0 |
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Reuben Badger |
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385 |
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385 |
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0 |
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Robert Byard |
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474 |
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474 |
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0 |
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Amy Cardon |
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326 |
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326 |
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0 |
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John Crockett |
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326 |
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326 |
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0 |
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Damon Darais |
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7,113 |
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7,113 |
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0 |
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Robert Eckery |
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1,069 |
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1,069 |
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0 |
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Joseph Faux |
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257 |
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257 |
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0 |
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Justin Ferguson |
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260 |
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260 |
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0 |
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John Filoso |
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1,794 |
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1,794 |
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0 |
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Eric Flanders |
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257 |
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|
257 |
|
|
|
0 |
|
|
Jay Frogley |
|
|
592 |
|
|
|
592 |
|
|
|
0 |
|
|
10
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Shares Owned |
|
|
|
|
|
|
| |
|
Prior to |
|
|
|
|
|
Shares Owned |
|
| Name |
|
Offering(1) |
|
Shares Offered |
|
After Offering |
Joshua Fuellenbach |
|
|
59 |
|
|
|
59 |
|
|
|
0 |
|
|
Mark Geller |
|
|
177 |
|
|
|
177 |
|
|
|
0 |
|
|
Jared Hofhiens |
|
|
810 |
|
|
|
810 |
|
|
|
0 |
|
|
Travis Holman |
|
|
257 |
|
|
|
257 |
|
|
|
0 |
|
|
E. Quinn Jones |
|
|
2,573 |
|
|
|
2,573 |
|
|
|
0 |
|
|
Robert Moore |
|
|
260 |
|
|
|
260 |
|
|
|
0 |
|
|
Ryan Mortensen |
|
|
260 |
|
|
|
260 |
|
|
|
0 |
|
|
Jason Neubert |
|
|
260 |
|
|
|
260 |
|
|
|
0 |
|
|
Jennette Price |
|
|
237 |
|
|
|
237 |
|
|
|
0 |
|
|
John Roberts |
|
|
1,387 |
|
|
|
1,387 |
|
|
|
0 |
|
|
Damon Stewart |
|
|
1,336 |
|
|
|
1,336 |
|
|
|
0 |
|
|
Helen Swain |
|
|
978 |
|
|
|
978 |
|
|
|
0 |
|
|
Stephen Thurber |
|
|
474 |
|
|
|
474 |
|
|
|
0 |
|
|
Robert Aaron Vickers |
|
|
118 |
|
|
|
118 |
|
|
|
0 |
|
|
Jeremy Willden |
|
|
1,831 |
|
|
|
1,831 |
|
|
|
0 |
|
|
Gilbert Worle |
|
|
177 |
|
|
|
177 |
|
|
|
0 |
|
|
John L. Conely, Sr. |
|
|
12,112 |
|
|
|
12,112 |
|
|
|
0 |
|
|
Philip Husby |
|
|
12,112 |
|
|
|
12,112 |
|
|
|
0 |
|
|
|
|
|
|
| |
| (1) |
|
Includes shares held in escrow pursuant to an Escrow Agreement, dated July 27, 2006, by and
among Canopy Ventures I, L.P. as the representative of the former shareholders of MaxStream,
the Company, Ocean Acquisition Sub Inc. and Wells Fargo Bank, National Association as follows:
Canopy Ventures, I, L.P., 60,088 shares; Bradley J. Walters, 28,276 shares; Hugh C. Nielsen,
27,917 shares; David C. Steed, Jr., 27,917 shares; Jan Finlinson, 13,779 shares; Nicholas Evan
Mecham, 6,710 shares; Martin Johnson, 220 shares; John Schwartz, 179 shares. |
Because the selling stockholders may offer all, some or none of their respective shares of
common stock, no definitive estimate as to the number of shares thereof that will be held by the
selling stockholders after such offering can be provided.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of common stock on the NASDAQ Global Select
Market or otherwise, in the over-the-counter market or in private transactions through one or more
underwriters,
11
broker-dealers or agents. If the shares of common stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for underwriting
discounts or commissions or agent’s
commissions. These sales may be at fixed prices; prevailing market prices at the time of
sale; prices related to the prevailing market prices; varying prices determined at the time of
sale; or negotiated prices.
The selling stockholders may use any one of the following methods when selling shares:
| |
• |
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers; |
| |
| |
• |
|
block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the transaction; |
| |
| |
• |
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| |
| |
• |
|
an exchange distribution in accordance with the rules of the applicable exchange; |
| |
| |
• |
|
privately negotiated transactions; |
| |
| |
• |
|
short sales; |
| |
| |
• |
|
broker-dealers may agree with the selling stockholder to sell a specified number of
such shares at a stipulated price per share; |
| |
| |
• |
|
a combination of any such methods of sale; and |
| |
| |
• |
|
any other method permitted pursuant to applicable law. |
Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved.
The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledge, transferee or other successors-in-interest as selling
stockholders under this prospectus.
The selling stockholders may transfer their shares of common stock in ways not involving
market makers or established trading markets, including directly by gift, distribution, or other
transfer. The selling stockholders may also sell any shares of common stock that qualify for sale
pursuant to Rule 144.
The selling stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. The selling stockholders have informed us that they do not
have any agreements or understandings, directly or indirectly, with any person to distribute any of
the shares subject to this Registration Statement.
12
We will receive no proceeds from the sale of shares under this registration statement. We are
required to pay all fees and expenses incident to the registration of the shares. We have agreed
to indemnify the selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
LEGAL OPINION
Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota
55402-3901, will pass on the validity of shares of common stock offered by this prospectus.
James E. Nicholson, Secretary of Digi, is a partner of Faegre & Benson LLP. Mr. Nicholson
holds options to purchase 71,000 shares of common stock of Digi, all of which are exercisable
within 60 days of the date of this prospectus. Such options are held by Mr. Nicholson under
nominee agreements for the benefit of Faegre & Benson. In addition, attorneys at Faegre & Benson
participating in matters relating to the offering beneficially own 10,085 shares of Digi common
stock.
EXPERTS
The
audited financial
statements incorporated in this prospectus by reference to Digi International
Inc.’s Current Report on Form 8-K dated October 16, 2006 and the financial statement schedule
and management’s assessment of the effectiveness of internal control over financial reporting
(which is included in Management’s Report on Internal Control over Financial Reporting)
incorporated in this prospectus by reference to the Annual Report on Form 10-K of Digi
International Inc. for the year ended September 30, 2005 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.
The balance sheets of MaxStream, Inc. as of December 31, 2005 and 2004; and the related
statements of income, changes in stockholders’ equity, and cash flows for the years then ended
incorporated in this prospectus by reference from our Current Report on Form 8-K/A filed with the
SEC on October 12, 2006 have been audited by Squire & Company, PC, an independent registered public
accounting firm, as stated in their report dated March 31, 2006, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and file reports, proxy and information statements and other
information with the Securities and Exchange Commission (the “Commission” or the “SEC”).
Information filed with the SEC by us may be inspected and copied at the Public Reference Room
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of
this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC’s
Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a website that contains reports, proxy and information statements and
other information about issuers such as us who file electronically with the SEC. The address of
that site is http://www.sec.gov.
13
We maintain a website at http://www.digi.com and we make available on our website, free of
charge, our Annual Reports on Form 10-K, proxy statements, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, and amendments to those reports or statements filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after
filing such material electronically with the SEC. We also provide a variety of other information,
including all of our press releases. The information contained on our website, however, is not,
and should not be deemed to be, part of this prospectus.
We “incorporate by reference” into this prospectus the information we file with the SEC, which
means that we can disclose important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus and information that
we file subsequently with the SEC will automatically update this prospectus. We incorporate by
reference the documents listed below and any filings we make with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act after the initial filing of the registration statement that
contains this prospectus and prior to the effectiveness of such registration statement and after
the date of this prospectus and prior to the time that all the securities offered by this
prospectus are sold (but we do not incorporate by reference any documents or portions of documents
that we furnish to or are otherwise not deemed filed with the SEC):
| |
• |
|
Annual Report on Form 10-K for the fiscal year ended September 30, 2005; |
| |
| |
• |
|
Annual Report on Form 10-K/A for the fiscal year ended September 30, 2005; |
| |
| |
• |
|
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005; |
| |
| |
• |
|
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006; |
| |
| |
• |
|
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006; |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on October 3, 2005; |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on November 3, 2005 (except for
information furnished in connection with such Current Report pursuant to Items 2.02 and
9.01, which shall not be incorporated by reference into this prospectus); |
| |
| |
• |
|
Amended Current Report on Form 8-K filed with the SEC on January 20, 2006; |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on July 27, 2006 (except for
information furnished in connection with such Current Report pursuant to Items 2.01,
7.01 and 9.01, which shall not be incorporated by reference into this prospectus); |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on September 29, 2006; |
| |
| |
• |
|
Current Report on Form 8-K/A filed with the SEC on October
12, 2006; |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on October 16,
2006; |
| |
| |
• |
|
Current Report on Form 8-K filed with the SEC on October 24, 2006; |
| |
| |
• |
|
The description of our Common Stock which is contained in the Registration Statement
on Form 8-A (File No. 0-17972) filed on October 5, 1989, under the Exchange Act and all
amendments and reports filed for the purpose of updating such description; and |
| |
| |
• |
|
The description of our Purchase Rights which is contained in the Registration
Statement on Form 8-A (File No. 0-17972) filed on June 25, 1998, under the Exchange Act
and all amendments and reports filed for the purpose of updating such description. |
14
You may request a copy of these filings (other than an exhibit to a filing unless that exhibit
is specifically incorporated by reference into that filing) at no cost, by writing to or
telephoning us at the following address:
Mr. Subramanian Krishnan
Digi International Inc.
11001 Bren Road East
Minnetonka, Minnesota 55343
(952) 939-3444
You should rely only on the information incorporated by reference or presented in this
prospectus. We have not authorized anyone else to provide you with different information. We are
only offering these securities in states where the offer is permitted. You should not assume that
the information in this prospectus is accurate as of any date other than the date on the cover page
of this prospectus.
15