8-K 1 v019039.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 17, 2005 ----------------- NAYNA NETWORKS, INC. (Exact name of registrant as specified in its charter) Nevada 000-13822 83-0210455 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 180 ROSE ORCHARD WAY SAN JOSE, CALIFORNIA 95134 (Address of principal executive offices, including zip code) (408) 956-8000 (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On May 17, 2005, Nayna Networks, Inc. ("Nayna") entered into an Agreement and Plan of Reorganization (the "Agreement") with South Seas Data, Inc. ("SSDI"), which provides for the acquisition of SSDI. SSDI is a privately held company located in Englewood, Colorado, that provides sophisticated, enterprise-class network solutions and services. Under the terms of the Agreement, SSDI will merge with a wholly-owned subsidiary of Nayna and the holders of SSDI's securities will be entitled to receive shares of Nayna common stock. Nayna will issue 600,000 shares to stockholders of SSDI at the closing. 350,000 of these shares will be subject to adjustment based on the trading price of Nayna common stock over the course of a certain period of time prior to the effective date of their registration with the Securities and Exchange Commission (the "SEC"), as described in the Agreement. The transaction is subject to the approval of SSDI's stockholders, applicable regulatory approval and other customary closing conditions and is expected to close in June 2005. A copy of the Agreement is attached hereto as Exhibit 10.1. A copy of the press release announcing the signing of the Agreement is attached hereto as Exhibit 99.1. Item 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS On May 17, 2005, the Nayna board of directors (the "Board") elected three new members: Richard Berman, William Boller and William O'Connor, and increased the authorized number of members of the Board to six (6). There are no arrangements or understandings between any of Messrs. Berman, Boller and O'Connor and any other persons pursuant to which they were appointed as directors. The Board determined that none of Messrs. Berman, Boller and O'Connor have any material relationship with Nayna and are otherwise "independent" in accordance with the applicable listing requirements of the Nasdaq Stock Market and the rules and regulations of the SEC. Mr. Berman has been appointed to serve as chairperson of the Compensation Committee of the Board (the "Compensation Committee") as well as a member of the Audit Committee of the Board (the "Audit Committee"). Mr. Boller has been appointed to serve as chairperson of the Nominating and Corporate Governance Committee of the Board (the "Nominating Committee") as well as a member of both the Audit Committee and the Compensation Committee. Mr. O'Connor has been appointed to serve as chairperson of the Audit Committee as well as a member of the Nominating Committee. Prior to each of their appointments to the Board, none of Messrs. Berman, Boller or O'Connor owned any shares of Nayna. On May 17, 2005, the Board granted each of Messrs. Berman, Boller and O'Connor, pursuant to Nayna's 2000 Stock Option Plan, a nonqualified stock option to purchase 150,000 shares of Nayna common stock, which shall vest quarterly, in equal installments over three years. Mr. O'Connor was also granted a nonqualified stock option to purchase 10,000 shares of Nayna common stock, which shall vest in full on the one-year anniversary of the date of grant, as consideration for his service as the chairperson of the Audit Committee. Each of Messrs. Berman and Boller were granted nonqualified stock options to purchase 5,000 shares of Nayna common stock, each of which shall vest in full on the one-year anniversary of the date of grant, as consideration for their service as chairpersons of the Compensation Committee and the Nominating Committee, respectively. In addition, each of Messrs. Berman, Boller and O'Connor are eligible to receive a nonqualified stock option grant of an additional 25,000 shares of Nayna common stock at each annual meeting of shareholders, each of which shall vest in full on the one-year anniversary of the date of grant. A copy of the press release announcing the election of new members of the Board is attached hereto as Exhibit 99.2. Item 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR On May 17, 2005, the Board resolved to change Nayna's fiscal year from one ending August 31 to one ending December 31. Pursuant to Rule 13a-10 under the Securities Exchange Act of 1934, Nayna will file a separate transition period report on Form 10-KSB for the period commencing September 1, 2004 and concluding December 31, 2004. Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. Exhibit No. Description ----------- ----------- 10.1 Agreement and Plan of Reorganization by and among Nayna Networks, Inc., SSDI Acquisition Corporation and South Seas Data, Inc. 99.1 Press Release, dated May 18, 2005, announcing the signing of the Agreement and Plan of Reorganization with South Seas Data, Inc. 99.2 Press Release, dated May 23, 2005, announcing the election of new members of the Board. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NAYNA NETWORKS, INC. By: /s/ Naveen S. Bisht ------------------------------------ Naveen S. Bisht President and Chief Executive Officer Date: May 23, 2005 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 10.1 Agreement and Plan of Reorganization, dated May 17, 2005, by and among Nayna Networks, Inc., SSDI Acquisition Corporation and South Seas Data, Inc. 99.1 Press Release, dated May 18, 2005, announcing the signing of the Agreement and Plan of Reorganization with South Seas Data, Inc. 99.2 Press Release, dated May 23, 2005, announcing the election of new members of the Board.

Nevada 000-13822 83-0210455 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.)

ASSETS Current assets: Cash and cash equivalents $ 1,663 Restricted cash $ 48 Accounts receivable, net 121 Inventory 0 Prepaid expenses 63 -------- Total current assets 1,895 Property and equipment, net 1,388 Other Assets 9 -------- Total assets $ 3,292 ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 682 Accrued liabilities 523 Current Portion - Notes payable & Equipment Leases 1,027 -------- Total current liabilities 2,232 -------- Long Term Debt 1,006 Redeemable conveertible prefeerred stock: Series A preferred stock, $0.001 par value: Authorized shares - 15,000,000: issued and outstanding shares - 15,000,000 at December 31, 2003 and 2002 (Liquidation preference $12,000) 11,953 Series B preferred stock, $0.001 par value: Authorized shares - 11,111,112: issued and outstanding shares - 7,999,997 at December 31, 2003 and 2002 (Liquidation preference $36,000) 36,118 Series C preferred stock, $0.001 par value: Authorized shares - 13,840,000: issued and outstanding shares - 4,680,647 at December 31, 2003 (issued for consideration other than cash; liquidation preference $5,041) -- -------- Total redeemable convertible preferred stock 48,071 -------- Stockholders' deficit: Preferred stock, $0.001 par value; 72,000,000 shares authorized; none issued and outstanding at December 31, 2002 -- Common stock, $0.001 par value, 72,000,000 shares authorized; 20,512,289 at December 31, 2003 and 15,552363 at December 31, 2002 267 Deficit accumulated during the development stage (48,284) -------- Total stockholders' deficit (48,017) -------- Total liabilities and stockholders' deficit $ 3,292 ========

NAYNA NETWORKS, INC. (a development stage enterprise) Audited STATEMENT OF STOCKHOLDERS' DEFICIT for the Cumulative Period from February 10, 2000 (date of inception) to December 31, 2003 (000's) except share and per share data Series A Redeemable Series B Redeemable Convertible Convertible Preferred Stock Preferred Stock -------------------------- -------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash $0 $0 Exercise of common stock options for cash Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash Repurchase of common stock for $0.10 to $0.90 per share Cancellation of previously issued common stock subject to restriction Issuance of common stock for consideration other than cash in connection with Xpeed acquisition Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash 15,000,000 11,953 Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash 7,999,997 35,927 Issuance cost related to Series B preferred stock (30) Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 259 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock (38) Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition Compensation expense related to accelerated stock options issued to terminated employees Compensation expense related to stock option grants to consultants Net loss - February 10, 2000 - December 31, 2003 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 15,000,000 $11,953 7,999,997 $36,118 ============ ============ ============ ============ Series C Redeemable Series D Redeemable Convertible Convertible Preferred Stock Preferred Stock -------------------------- -------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash $0 $0 Exercise of common stock options for cash Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash Repurchase of common stock for $0.10 to $0.90 per share Cancellation of previously issued common stock subject to restriction Issuance of common stock for consideration other than cash in connection with Xpeed acquisition Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash Issuance cost related to Series B preferred stock Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition 4,680,647 Compensation expense related to accelerated stock options issued to terminated employees Compensation expense related to stock option grants to consultants Net loss - February 10, 2000 - December 31, 2003 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 4,680,647 $0 0 $0 ============ ============ ============ ============ Deficit Accumulated Common Stock During the Total -------------------------- Developmental Stockholders' Shares Amount Stage Deficit ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash 15,000,000 $15 $15 Exercise of common stock options for cash 4,288,124 434 434 Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash (1,241,066) (117) (117) Repurchase of common stock for $0.10 to $0.90 per share (1,410,841) (105) (105) Cancellation of previously issued common stock subject to restriction (1,472,500) (1) (1) Issuance of common stock for consideration other than cash in connection with Xpeed acquisition 5,348,572 0 Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash Issuance cost related to Series B preferred stock Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition Compensation expense related to accelerated stock options issued to terminated employees 28 28 Compensation expense related to stock option grants to consultants 12 12 Net loss - February 10, 2000 - December 31, 2003 (48,284) (48,284) ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 20,512,289 $266 ($48,284) ($48,018) ============ ============ ============ ============

Cash flows from operating activities: Net loss $(48,284) Adjustments to reconcile net loss to net cash used in operations: Noncash charges related to stock options granted to consultants and accelerated vesting of employee stock options $ 40 Depreciation $ 3,136 Amortization of discount on warrants associated with equipment financing $ 202 Impariment of goodwill related to acquisition of Xpeed, Inc. $ 5,825 Loss on sale of property and equipment 1,114 Changes in assets and liabilities: Restricted cash (48) Increase in accounts receivable (121) Increase in prepaid expenses (63) Increase in other assets (9) Increase in accounts payable 682 Increase in accrued liabilities 162 Increase in payroll liabilities 361 -------- Net cash used in operating activities: (37,004) -------- Cash flows used in investing activities: Purchase of property and equipment (1,193) Proceeds from sale of property and equipment 437 Costs associated with acquisition of Xpeed, Inc. (3,685) -------- Net cash used in investing activities (4,441) -------- Cash flows provided by financing activities: Proceeds from loan facility 327 Payments on capital lease obligations and loan facility -4,831 Proceeds from issuance of common stock, net of repurchases 227 Proceeds from issuance of Series A redeemable convertible preferred stock, net of issuance costs 11,953 Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs 35,927 Issuance of convertible notes receivable (300) Restricted Cash (165) Issuance costs related to Series B redeemable convertible preferred stock (30) -------- Net cash provided by financing activities 43,108 -------- Net increase in cash and cash equivalents 1,663 Cash and cash equivalents, beginning of period -- -------- Cash and cash equivalents, end of period $ 1,663 ========

as of December 31, 2004 2003 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 710 $ 1,663 Restricted cash $ 48 $ 48 Accounts receivable, net 160 121 Inventory 440 0 Prepaid expenses 42 63 -------- -------- Total current assets 1,400 1,895 Property and equipment, net 775 1,388 Other Assets 9 9 -------- -------- Total assets $ 2,184 $ 3,292 ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 636 $ 682 Accrued liabilities 569 523 Current Portion - Notes payable & Equipment Leases 1,016 1,027 -------- -------- Total current liabilities 2,221 2,232 -------- -------- Long Term Debt 1,006 Convertible Note Payable 921 Redeemable convertible preferred stock: Series A preferred stock, $0.001 par value: Authorized shares - 15,000,000: issued and outstanding shares - 0 at December 31, 2004 15,000,000 at December 31, 2003 and 2002 (Liquidation preference $12,000) 11,953 Series B preferred stock, $0.001 par value: Authorized shares - 11,111,112: issued and outstanding shares - 0 at December 31, 2004 7,999,997 at December 31, 2003 and 2002 (Liquidation preference $36,000) 36,118 Series C preferred stock, $0.001 par value: Authorized shares - 13,840,000: issued and outstanding shares - 0 at December 31, 2004 4,680,647 at December 31, 2003 (issued for consideration other than cash; liquidation preference $5,041) -- Series D preferred stock, $0.001 par value: Authorized shares - 52,500,000: 19,531,247 issued and outstanding shares - at December 31, 2004 3,649 -------- -------- Total redeemable convertible preferred stock 3,649 48,071 -------- -------- Stockholders' deficit: Common stock, $0.001 par value, 125,000,000 shares authorized; 48,794,091 issued and outstanding at December 31, 2004 and 20,512,289 at December 31, 2003 and 15,552363 at December 31, 2002 48,353 267 Deficit accumulated during the development stage (52,960) (48,284) -------- -------- Total stockholders' deficit (4,607) (48,017) -------- -------- Total liabilities and stockholders' deficit $ 2,184 $ 3,292 ======== ========

Period from February 10, 2000 (date Three Months Ended Twelve Months Ended of inception) December 31, December 31, to December ----------------------------- ----------------------------- 31, 2004 2004 2003 2004 2003 ------------ ------------ ------------ ------------ ------------ Sales $ 425 $ 133 $ -- $ 425 $ -- Cost of sales 345 91 0 345 0 ------------ ------------ ------------ ------------ ------------ Gross profit 80 42 0 80 0 ------------ ------------ ------------ ------------ ------------ Operating expenses: Engineering 38,187 642 739 2,209 3,051 Sales and marketing 2,379 268 208 779 720 General and administrative 8,194 418 729 1,730 3,675 ------------ ------------ ------------ ------------ ------------ Total operating expenses 48,761 1,328 1,676 4,718 7,447 ------------ ------------ ------------ ------------ ------------ Loss from operations (48,681) (1,286) (1,676) (4,638) (7,447) Other income (expense) Interest Income 2,390 1 12 14 121 Interest expense (832) (3) (29) (40) (137) Loss on Sale of Assets (12) (12) (12) Impairment of goodwill related to the acquisition of Xpeed, Inc. (5,825) (5,825) (5,825) ------------ ------------ ------------ ------------ ------------ Net loss $ (52,960) $ (1,288) $ (7,518) $ (4,676) $ (13,288) ============ ============ ============ ============ ============

Period from February 10, 2000 Twelve Months Ended (date of inception) December 31, to December ----------------------------- 31, 2004 2004 2003 ----------- ----------- ----------- Cash flows from operating activities: Net loss $ (52,960) $ (4,676) $ (13,288) Adjustments to reconcile net loss to net cash used in operations: Noncash charges related to stok options granted to consultants and accelerated vesting of employee stock options $ 40 Depreciation $ 3,699 $ 563 $ 930 Amortization of discount on warrants associated with equipment financing $ 11 $ (191) $ 67 Impariment of goodwill related to acquisition of Xpeed, Inc. $ 5,825 $ 5,825 Loss on sale of property and equipment 1,164 50 364 Changes in assets and liabilities: Restricted cash (48) 117 (Increase)/decrease in accounts receivable (160) (39) (121) (Increase)/decrease in Inventory (440) (440) (Increase)/decrease in prepaid expenses (42) 21 13 (Increase)/decrease in other assets (9) (9) Increase/(decrease) in accounts payable 636 (46) 306 Increase/(decrease) in accrued liabilities 569 46 295 ----------- ----------- ----------- Net cash used in operating activities: (41,716) (4,712) (5,502) ----------- ----------- ----------- Cash flows used in investing activities: Purchase of property and equipment (1,193) (108) Proceeds from sale of property and equipment 437 193 Costs associated with acquisition of Xpeed, Inc. (3,685) (3,685) ----------- ----------- ----------- Net cash used in investing activities (4,441) 0 (3,600) ----------- ----------- ----------- Cash flows provided by financing activities: Payments on capital lease obligations and loan facility (5,521) (1,017) (1,373) Proceeds from convertible notes payable, net of of costs 921 921 Proceeds from issuance of common stock, net of repurchases 48,313 48,086 4 Proceeds from issuance of Series A redeemable convertible preferred stock, net of issuance costs 0 (11,953) Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs 0 (35,927) Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs 3,649 3,649 Issuance of convertible notes receivable (300) Restricted Cash (165) Issuance costs related to Series B redeemable convertible preferred stock (30) ----------- ----------- ----------- Net cash provided by financing activities 46,867 3,759 (1,369) ----------- ----------- ----------- Net increase in cash and cash equivalents 710 (953) (10,471) Cash and cash equivalents, beginning of period -- 1,663 12,134 ----------- ----------- ----------- Cash and cash equivalents, end of period with an advisory agreement $ 710 $ 710 $ 1,663 =========== =========== ===========

NAYNA NETWORKS, INC. (a development stage enterprise) CONDENSED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT for the Cumulative Period from February 10, 2000 (date of inception) to December 31, 2004 (000's) except share and per share data Series A Redeemable Series B Redeemable Convertible Convertible Preferred Stock Preferred Stock -------------------------- -------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash $0 $0 Exercise of common stock options for cash Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash Repurchase of common stock for $0.10 to $0.90 per share Cancellation of previously issued common stock subject to restriction Issuance of common stock for consideration other than cash in connection with Xpeed acquisition Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash 15,000,000 11,953 Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash 7,999,997 35,927 Issuance cost related to Series B preferred stock (30) Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 259 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock (38) Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition Compensation expense related to accelerated stock options issued to terminated employees Compensation expense related to stock option grants to consultants Net loss - February 10, 2000 - December 31, 2003 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 15,000,000 $11,953 7,999,997 $36,118 ============ ============ ============ ============ Conversion of Series A convertible, redeemable preferred stock into common stock (15,000,000) (11,953) Conversion of Series B convertible, redeemable preferred stock into common stock (7,999,997) (36,118) Conversion of Series C convertible, redeemable preferred stock into common stock Issuance of Series D redeemable convertible preferred stock in July 2004 at $0.19072 per share for cash Exercise of common stock options for cash Issuance of common stock for consideration other than cash on the purchase of the Accordion asset acquisition Issuance of common stock on conversion of note payable Net loss for the twelve months ending December 31, 2004 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2004 0 $0 0 $0 ============ ============ ============ ============ Series C Redeemable Series D Redeemable Convertible Convertible Preferred Stock Preferred Stock -------------------------- -------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash $0 $0 Exercise of common stock options for cash Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash Repurchase of common stock for $0.10 to $0.90 per share Cancellation of previously issued common stock subject to restriction Issuance of common stock for consideration other than cash in connection with Xpeed acquisition Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash Issuance cost related to Series B preferred stock Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition 4,680,647 Compensation expense related to accelerated stock options issued to terminated employees Compensation expense related to stock option grants to consultants Net loss - February 10, 2000 - December 31, 2003 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 4,680,647 $0 0 $0 ============ ============ ============ ============ Conversion of Series A convertible, redeemable preferred stock into common stock Conversion of Series B convertible, redeemable preferred stock into common stock Conversion of Series C convertible, redeemable preferred stock into common stock (4,680,647) Issuance of Series D redeemable convertible preferred stock in July 2004 at $0.19072 per share for cash 19,531,247 3,649 Exercise of common stock options for cash Issuance of common stock for consideration other than cash on the purchase of the Accordion asset acquisition Issuance of common stock on conversion of note payable Net loss for the twelve months ending December 31, 2004 ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2004 0 $0 19,531,247 $3,649 ============ ============ ============ ============ Deficit Accumulated Common Stock During the Total -------------------------- Developmental Stockholders' Shares Amount Stage Deficit ------------ ------------ ------------ ------------ Issuance of common stock to founders in March 2000 at at $0.001 per share for cash 15,000,000 $15 $15 Exercise of common stock options for cash 4,288,124 434 434 Repurchase of common stock issued to founders at $0.001 to $0.10 per share for cash (1,241,066) (117) (117) Repurchase of common stock for $0.10 to $0.90 per share (1,410,841) (105) (105) Cancellation of previously issued common stock subject to restriction (1,472,500) (1) (1) Issuance of common stock for consideration other than cash in connection with Xpeed acquisition 5,348,572 0 Issuance of Series A redeemable convertible preferred stock in March 2000 at $0.80 per share for cash Issuance of Series B redeemable convertible preferred stock in December 2000 at $4.50 per share for cash Issuance cost related to Series B preferred stock Issuance of warrants to purchase Series B redeemable convertible preferred stock in connection with an equipment lease in July 2000 Adjustment to valuation of warrant issued to a lessor to purchase Series B redeemable convertible preferred stock Issuance of Series C redeemable convertible preferred stock for consideration other than cash in connection with Xpeed acquisition Compensation expense related to accelerated stock options issued to terminated employees 28 28 Compensation expense related to stock option grants to consultants 12 12 Net loss - February 10, 2000 - December 31, 2003 (48,284) (48,284) ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2003 20,512,289 $266 ($48,284) ($48,018) ============ ============ ============ ============ Conversion of Series A convertible, redeemable preferred stock into common stock 15,000,000 11,953 11,953 Conversion of Series B convertible, redeemable preferred stock into common stock 7,999,997 36,118 36,118 Conversion of Series C convertible, redeemable preferred stock into common stock 4,680,647 0 Issuance of Series D redeemable convertible preferred stock in July 2004 at $0.19072 per share for cash Exercise of common stock options for cash 301,158 16 16 Issuance of common stock for consideration other than cash on the purchase of the Accordion asset acquisition Issuance of common stock on conversion of note payable 300,000 0 Net loss for the twelve months ending December 31, 2004 (4,676) (4,676) ------------ ------------ ------------ ------------ BALANCES, DECEMBER 31, 2004 48,794,091 $48,353 ($52,960) ($4,607) ============ ============ ============ ============

as at as at PRO FORMA December 31, November 30, ADJUSTMENTS PRO FORMA 2004 NAYNA 2004 RESCON (NOTE #4) COMBINED ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 710 $ 2 $ (2) $ 710 Restricted cash $ 48 $ 48 Accounts receivable, net 160 -- 160 Inventory 440 -- 440 Prepaid expenses 42 20 (20) 42 ------------ ------------ ------------ ------------ Total current assets 1,400 22 (22) 1,400 Property and equipment, net 775 24 (24) 775 Other assets 9 760 -760 9 ------------ ------------ ------------ ------------ Total assets $ 2,184 $ 806 $ (806) $ 2,184 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 636 $ 25 $ (25) 636 Accrued liabilities 569 -- 569 Current portion - notes payable & equipment leases 1,016 -- 1,016 Due to related parties -- 691 (691) 0 ------------ ------------ ------------ ------------ Total current liabilities 2,221 716 (716) 2,221 Minority Interest (1) 1 0 Convertible note payable, net 921 921 Stockholders' equity (deficit) Preferred stock 3,649 -- 3,649 Common stock 48,353 0 0 48,353 Additonal paid in capital 6,342 (6,342) 0 Deficit accumulated prior to development stage (4,468) 4,468 0 Deficit accumulated during the development stage (52,960) (1,784) 1,784 (52,960) ------------ ------------ ------------ ------------ Stockholders' equity (deficit) (958) 90 (90) (958) ------------ ------------ ------------ ------------ Total liabilities and stockholders' deficit $ 2,184 $ 806 $ (806) $ 2,184 ============ ============ ============ ============

for the for the twelve months twelve months PRO FORMA ending December ending November ADJUSTMENTS PRO FORMA 31, 2004 NAYNA 30, 2004 RESCON (NOTE #4) COMBINED -------------- -------------- -------------- -------------- Sales $ 425 $ -- $ -- $ 425 Cost of sales 345 -- -- 345 -------------- -------------- -------------- -------------- Gross profit 80 -- -- 80 -------------- -------------- -------------- -------------- Operating expenses: Engineering 2,209 -- -- 2,209 Sales and marketing 779 -- -- 779 General and administrative 1,730 697 (697) 1,730 -------------- -------------- -------------- -------------- Total operating expenses 4,718 697 (697) 4,718 -------------- -------------- -------------- -------------- Loss from operations (4,638) (697) 697 (4,638) Loss on sales of assets (12) (12) Other income 14 -- 14 Interest expense (40) -- (40) -------------- -------------- -------------- -------------- Net loss $ (4,676) $ (697) $ 697 $ (4,676) ============== ============== ============== ============== Net loss per share, basic $ (0.32) ============== Net loss per share, diluted $ (0.25) ============== Weighted average shares used in computing net loss per share, basic 14,789,996 ============== Weighted average shares used in computing net loss per share, diluted 18,729,670 ==============

Series A Series B Series C Series D Common Nayna balance as at December 31, 2003 15,000,000 7,999,997 4,680,647 0 20,512,289 Pre-merger post-reverse split Rescon 3,550,000 Conversion to common (15,000,000) (7,999,997) (4,680,647) 27,680,644 Issuance of Series D on July 2004 19,531,247 Issuance on purchase of Accordion asset on August 2004 300,000 Exercise of employee stock options on September 2004 301,158 --------------------------------------------------------------------- Total basic shares as at December 31, 2004 0 0 0 19,531,247 52,344,091 ===================================================================== as converted to common 47,533,726 --------------------------------------------------------------------- Total fully diluted shares as at December 31, 2004 0 0 0 67,064,973 52,344,091 ===================================================================== Weighted Average as converted Weighted as converted Total to Rescon Average to Rescon Nayna balance as at December 31, 2003 48,192,933 9,586,346 48,192,933 9,586,346 Pre-merger post-reverse split Rescon 3,550,000 3,550,000 Conversion to common 0 0 0 0 Issuance of Series D on July 2004 19,531,247 3,885,078 8,138,020 1,618,782 Issuance on purchase of Accordion asset on August 2004 300,000 59,675 100,000 19,892 Exercise of employee stock options on September 2004 301,158 59,905 75,290 14,976 ----------------------------------------------------- Total basic shares as at December 31, 2004 71,875,338 13,591,003 56,506,242 14,789,996 ===================================================== as converted to common 47,533,726 9,455,219 19,805,719 3,939,675 ----------------------------------------------------- Total fully diluted shares as at December 31, 2004 119,409,064 23,046,222 76,311,961 18,729,670 ===================================================== 47,758,853 9,500,000

Filing Compare · Nayna Networks, Inc.