<PAGE>
As filed with the Securities and Exchange Commission on November 29, 2000.
Registration No. 333-35936
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WORLDGATE COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 23-2866697
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
3190 TREMONT AVENUE
TREVOSE, PENNSYLVANIA 19053
(215) 354-5100
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
RANDALL J. GORT, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
WORLDGATE COMMUNICATIONS, INC.
3190 TREMONT AVENUE
TREVOSE, PENNSYLVANIA 19053
(215) 354-5100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
---------------
WITH A COPY TO:
JAMES D. ROSENER, ESQUIRE
PEPPER HAMILTON LLP
1235 WESTLAKES DRIVE, SUITE 400
BERWYN, PENNSYLVANIA 19312-2401
(610) 640-7800
---------------
Approximate date of commencement of proposed sale to public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS 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 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 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
<TABLE>
<CAPTION>
Proposed
Maximum Proposed Maximum
Title of Each Class Amount Offering Price Aggregate Amount of
of Securities to be Registered to be Registered Per Security(1) Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 250,000 $11.375 $2,843,750.00 $ 751.00(2)
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act based upon the average of the high
and low prices of our Common Stock on the Nasdaq National Market on
November 27, 2000.
(2) A registration fee of $660 was paid on April 28, 2000 with respect
to 119,047 shares and therefore, a registration fee of $91.00 is being
submitted herewith.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 29, 2000
PROSPECTUS
WORLDGATE COMMUNICATIONS, INC.
250,000 Shares
of
Common Stock
This prospectus relates to the resale of common stock that we issued to
the selling stockholder listed on page 14 as well as an additional number of
shares of common stock which may be issued to the selling stockholder. We will
not receive any proceeds from the sale of the shares by the selling stockholder.
The selling stockholder may offer the common stock through public or
private transactions, at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices.
Our common stock is traded on the Nasdaq National Market under the
symbol "WGAT." On November 27, 2000, the last sale price for the common stock
was $11.50 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. YOU SHOULD CAREFULLY
CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS BEFORE YOU
DECIDE TO INVEST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Our principal executive offices are located at 3190 Tremont Avenue,
Trevose, Pennsylvania 19053 and our telephone number is (215) 354-5100.
The date of this prospectus is November 29, 2000.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. You
should read this entire prospectus carefully.
WORLDGATE COMMUNICATIONS, INC.
OVERVIEW
We are a leading global interactive TV solutions provider for the cable
television industry. Our suite of services and products includes:
o WORLDGATE(SM) SERVICE - this service provides high-speed
Internet access and other interactive applications through
television and existing cable television infrastructure,
o CHANNEL HYPERLINKING(SM) - this proprietary technology
enables viewers watching a television program or
advertisement to link to the related Internet site
without having to enter an Internet address, or URL,
o CABLEWARE 2000(SM) - middleware platform that enables broad
deployment of interactive TV applications,
o ENHANCED TELEVISION, or eTV, APPLICATIONS - we provide
various additional applications for our cable operators
and their subscribers, including an electronic program
guide offered by our joint venture, TVGateway, LLC
(described in more detail below) and additional
Internet content designed for television viewing developed
through our Certified Developers Program.
PRODUCTS
We believe that we are the only company that can currently provide an
Internet television service through both existing advanced analog and digital
cable boxes. We believe this is particularly important to the many cable
operators who have deployed, or will deploy, both types of cable boxes.
Our television-based WORLDGATE(SM) Service delivers high-speed Internet
access and other interactive applications to cable television subscribers
through their current television set-top box configurations, without the
need for a personal computer, telephone line or other specialized set-top
device.
The WORLDGATE(SM) Service provides:
o Full featured, high speed, low cost Internet access, including web
surfing, e-mail, Web chat, e-commerce and other Java-based applications,
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o The ability to access the Internet with standard cable set-top boxes that
have been WorldGate enabled, with no need for an additional set-top
device, and
o A centralized computer network design that allows for easy deployment and
set-up, central system management and centrally administered upgrades
based on WorldGate's patented ULTRA-THIN CLIENT(SM) architecture.
As of September 30, 2000, there were approximately 68,000 subscribers to the
WorldGate Service. WorldGate is deployed, has agreements to deploy or is in
trials to deploy our service with 34 cable system operators in 17 countries
worldwide, including five of the six largest cable operators in the United
States.
Our CHANNEL HYPERLINKING(SM) technology integrates the dynamics of the Internet
with television's proven advertiser-sponsored entertainment model. This
technology enables a viewer watching a television program or advertisement to
link within seconds to a related interactive Web site without having to enter
an Internet address, or URL. We are working with our television programmers,
advertisers, advertising agencies and e-commerce merchants to develop a
centralized database that provides viewers with our CHANNEL HYPERLINKING(SM)
capability.
In September, we introduced our CableWare 2000(SM) middleware platform as a
new stand-alone product. CableWare 2000(SM) will include an interface to our
Application-Launcher software, which is licensed to our MSO partners in the
TVGateway joint venture as well as to several of the major vendors of
video-on-demand. Our CableWare 2000(SM) features an open software
environment, small memory footprint, low CPU usage and standard application
interfaces, will allow us to enable broad deployment of the ITV applications
on the 2000-class of digital set-top boxes.
We provide various additional applications for our cable operators and their
subscribers. Through our joint venture, TVGateway, LLC, we offer an
interactive electronic program guide that includes such features as parental
control, access to pay-per-view events, advertising and the ability to
receive messages from a cable operator. We also provide additional enhanced
TV features in conjunction with our content provider partners through our
Certified Developers Program.
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RECENT EVENTS
The following events have occurred since December 31, 1999:
On April 11, 2000 the U.S. Patent and Trademark Office
issued a third patent to us covering aspects of the technology
listed below:
o Our CHANNEL HYPERLINKING(SM) technology, and
o Our ULTRA-THIN CLIENT(SM) architecture.
On April 28, 2000, we acquired Digital Video Arts, Inc., a Campbell,
California based engineering services operation providing out-sourced
product development, with expertise in digital television and 3D
graphics.
On July 24, 2000, we entered into multi-year agreements with Adelphia
Communications Corporation, Comcast Cable Communications Inc. and Cox
Communications, Inc. and agreed to an extension of an existing
agreement with Charter Communications, Inc. for the digital deployment
of the WorldGate Internet on EVERY TV(SM) Service to a pre-determined
number of households. Along with the deployment agreements, these cable
operators, purchased $24.5 million of our common stock and we issued
each of them warrants to purchase additional shares of our common
stock. These warrants vest based upon the distribution of the WorldGate
service beyond the initial commitments.
We also entered into a joint venture with the cable operators called
TVGateway(SM). TVGateway will license WorldGate's patented Channel
HyperLinking(SM) and Ultra-Thin Client(SM) technology from us,
which can provide the back office infrastructure support necessary
to implement interactive advertising and programming for the
Partners' digital set-top boxes. The TVGateway joint venture
will also license WorldGate's Application Launcher technology,
in which multiple applications can be easily interchanged in
the digital set-top box.
On September 13, 2000, we announced CableWare 2000(SM), an
open-standard middleware platform designed to address the need to
deploy enhanced and interactive TV applications, such as
video-on-demand, Internet access, Interactive Program Guides, or
IPGs, and enhanced TV, on the approximately eight million digital
set-top boxes in the market today. Developers of enhanced TV content
and advertising that have been targeting next-generation advanced
set-top boxes, will now be able to port the majority of those
applications to the CableWare 2000 environment on the current
generation of digital converters.
On November 6, 2000, WorldGate and AT&T Broadband, the nation's largest
cable operator, announced that they will deploy WorldGate interactive
services for currently deployed digital cable set-top boxes in Cedar
Falls and Waterloo, Iowa and Tacoma, Washington. The service will be
available to AT&T Digital Cable customers and will use Motorola
DCT-2000 set top boxes, remote controls and optional wireless
keyboards.
Our executive offices are located at 3190 Tremont Avenue, Suite 100, Trevose,
Pennsylvania 19053.
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FORWARD LOOKING STATEMENTS
Some statements in this prospectus and the documents incorporated in it
by reference contain forward-looking statements about our plans, objectives,
expectations and intentions. You can identify these statements by words such as
"estimate," "expect," "project," "plan," "intend," "believe," "may," "will,"
"anticipate" or other similar words. You should read statements that contain
these words carefully. They discuss our future expectations, contain projections
concerning our future results of operations or our financial conditions or state
other forward-looking information, and may involve known and unknown risks over
which we have no control. We cannot guarantee any future results, level of
activity, performance or achievements. Moreover, we assume no obligation to
update forward-looking statements or update the reasons why actual results could
differ materially from those anticipated in forward-looking statements. The
factors discussed in the section captioned "Risk Factors," and elsewhere in this
prospectus and the documents incorporated in it by reference identify important
factors that may cause our actual results to differ materially from the
expectations we described in our forward-looking statements.
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RISK FACTORS
THIS SECTION HIGHLIGHTS SPECIFIC RISKS WITH RESPECT TO AN INVESTMENT IN
OUR BUSINESS. INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND
YOU SHOULD BE ABLE TO BEAR THE COMPLETE LOSS OF YOUR INVESTMENT. WE ALSO CAUTION
YOU THAT THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS THAT ARE BASED ON
MANAGEMENT'S BELIEFS AND ASSUMPTIONS AND ON INFORMATION CURRENTLY AVAILABLE TO
MANAGEMENT. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND THE
OTHER INFORMATION IN THIS PROSPECTUS AND DOCUMENTS INCORPORATED BY REFERENCE
HEREIN BEFORE PURCHASING OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN BY US OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY IMPAIR OUR
BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS
COULD BE HARMED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
WE MAY EXPERIENCE DIFFICULTIES DEVELOPING AND IMPLEMENTING OUR MARKETING AND
BUSINESS PLANS.
We began operations in March 1995 and our service was first made
commercially available in the third quarter of 1998. As a result, our operating,
sales and marketing and other strategies are still being developed, and we do
not have a history which may give us or you an indication of how we may respond
to situations presented to us. If we are not successful in implementing our
marketing and business plans on a timely basis or otherwise effectively managing
our development, our business, operating results and financial condition will be
materially adversely affected.
IF WE CONTINUE TO INCUR LOSSES, WE MAY NOT BE ABLE TO FINANCE THE COMMERCIAL
DEPLOYMENT OF THE WORLDGATE SERVICE.
We have experienced losses and have had negative cash flow in each
quarter and year since inception, and we expect to continue to operate at a loss
for the foreseeable future. To make a profit, we must increase our revenues and
gross profit margin. If we are not able to do so, our losses may extend beyond
the foreseeable future and we may not be able to continue financing the
commercial deployment, development and enhancement of the WORLDGATE Service.
Our aggregate revenues from inception to September 30, 2000 were
approximately $18.6 million, and our aggregate accumulated deficit at September
30, 2000 was approximately $123.8 million. In addition, we currently intend to
increase our operating expenses and capital expenditures in order to continue
the commercial deployment of the WorldGate Service and the TVGateway service. As
a result, we expect to experience substantial additional operating losses and
negative cash flow for the foreseeable future
WE MAY BE UNABLE TO OBTAIN NECESSARY ADDITIONAL CAPITAL TO FUND OPERATIONS IN
THE FUTURE.
To date, we have funded operations primarily through private sales of
equity securities and through our initial public offering of common stock in
April 1999. If we are unable to obtain additional financing on terms acceptable
to us as needed, our business, operating results and financial condition would
be materially adversely affected.
Our capital requirements in the future will depend on numerous factors,
including:
o the rate of acceptance of the WorldGate Service by cable
operators, cable subscribers, advertisers, television
programmers, e-commerce companies and Internet content
providers,
o our ability to maintain and increase the number of
subscribers, and
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o the rate of commercialization of the WorldGate Service and the
acquisition of related businesses or technology, if any.
We cannot predict with certainty the timing or amount of our capital
requirements. Any additional equity financing, if available, may be dilutive to
our stockholders, and debt financing, if available, may involve significant
restrictions on our financing and operating activities.
BECAUSE TELEVISION-BASED INTERNET ACCESS IS NEW, WE CANNOT BE CERTAIN THAT A
MARKET OR SUSTAINABLE DEMAND FOR THE WORLDGATE SERVICE WILL DEVELOP.
The market for television-based Internet access is new and evolving,
and no single technology or approach to providing this access has been widely
adopted by consumers or cable operators. As a result, we cannot guarantee that a
market for television-based Internet access in general, or for the WORLDGATE
Service in particular, will develop or that demand for the WORLDGATE Service
will be sustainable. If the market does not develop, develops more slowly than
expected or becomes saturated with competitors or competing technology becomes
more widely accepted, our business, operating results, and financial condition
will be materially adversely affected.
THE COMPETITIVE MARKET FOR INTERNET ACCESS MAY LIMIT DEMAND OR PRICING FOR THE
WORLDGATE SERVICE.
We experience intense competition. Many companies provide and others
may in the future provide Internet access and other services with functionality
similar to those comprising the WORLDGATE Service. As a result of this and
future competition, demand for the WORLDGATE Service may suffer, we may be
restricted in the pricing we can charge for the WORLDGATE Service and our
business, financial condition and results of operations may be adversely
affected. Competitors provide their services through a variety of technologies,
which are in various stages of implementation and adoption. Many of our
competitors have significantly greater financial, technical, marketing,
distribution, customer support, name recognition, compelling content, access to
consumers and other resources, and more established relationships with cable
operators, advertisers and content and application providers than we have.
WE MAY NOT SUCCEED IF CABLE OPERATORS DO NOT OFFER THE WORLDGATE SERVICE TO
THEIR SUBSCRIBERS.
We have entered into a limited number of agreements with cable
operators providing for the commercial launch of the WORLDGATE Service in some
of the markets served by these cable operators. If cable operators determine
that our service is not viable as a business proposition or if they determine
that the service does not meet their business or operational expectations or
strategies, they will not offer the WORLDGATE Service to their subscribers.
Furthermore, because there are a limited number of cable operators, as well as
consolidation in the industry, the failure to reach agreements with those major
cable operators which service a significant number of cable subscribers could
materially adversely affect the market for the WORLDGATE Service.
OUR REVENUES WILL DEPEND ON THE MANNER IN WHICH CABLE OPERATORS MARKET AND PRICE
THE WORLDGATE SERVICE.
We depend on cable operators to provide the WORLDGATE Service to their
subscribers and therefore have limited or no control over a number of important
factors, including:
o the cable operators' advertising or marketing strategy, if
any, regarding their offering of the WORLDGATE Service to
their subscribers,
o the monthly fees cable operators charge to their subscribers
for the WORLDGATE Service, and
o the extent to which cable operators purchase additional
WorldGate equipment to avoid reduction in performance if
subscriber demand grows.
Our revenues may not meet our expectations if the cable operators'
marketing, pricing and operating
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strategies are inconsistent with our business model.
THE MARKET FOR THE WORLDGATE SERVICE WILL BE ADVERSELY AFFECTED IF CABLE
OPERATORS DO NOT CONTINUE TO UPGRADE THEIR SYSTEM INFRASTRUCTURES TO SUPPORT
TWO-WAY DATA TRANSMISSIONS.
The adoption of the WORLDGATE Service is dependent upon continued
investment by cable operators to upgrade their infrastructures to support
two-way data transmissions. It is uncertain whether cable operators will upgrade
their infrastructures and the failure of cable operators to complete these
upgrades in a timely and satisfactory manner would adversely affect the market
for the WORLDGATE Service.
Although the WORLDGATE Service can operate over one-way cable plant
that is only capable of transmitting programming to subscribers, it can do so
only in conjunction with a telephone line. As such, it is less convenient and
efficient for a subscriber to use the WORLDGATE Service over one-way cable plant
and, to date, the majority of cable operators who are deploying the WORLDGATE
Service have done so over two-way cable plants that are capable of transmitting
information from the cable operator's facility to the subscribers and vice
versa. We cannot assure you that cable operators will upgrade their cable plant
to two-way plant or that they will do so in a timely and satisfactory manner. In
the event that they do not do so, our business, financial condition and results
of operations could be materially adversely affected.
CABLE OPERATORS MAY BE CONTRACTUALLY LIMITED IN THEIR ABILITY TO OFFER THE
WORLDGATE SERVICE.
We are aware that some cable operators, such as Cablevision, Comcast
Corporation, Cox Communications, Inc. and AT&T Corporation, whose cable systems
serve more than 26 million U.S. homes, or at least 26% of all U.S. homes, have
entered into distribution agreements with At Home Corporation. These agreements
contain exclusivity provisions that purport to prohibit these cable operators
from conducting or participating in any business in the United States that
involves the provision of residential Internet services over their cable plants
at data transmission speeds greater than 128 Kbps. These agreements could be
interpreted to preclude or hinder these cable operators from offering the
WORLDGATE Service to their subscribers at speeds in excess of 128 Kbps. If cable
operators are unwilling or unable to offer the WORLDGATE Service to subscribers
in these cable systems, our business, financial condition and results of
operations would be materially adversely affected.
CABLE OPERATORS AND CABLE BOX MANUFACTURERS MAY NOT OFFER THE WORLDGATE SERVICE
BECAUSE THEY MAY HAVE POTENTIAL CONFLICTS OF INTEREST.
Some cable operators and cable box manufacturers are stockholders of
other companies that provide Internet services. To the extent that these cable
operators elect not to offer the WORLDGATE Service because of these
affiliations, our business, financial condition and results of operations could
be materially adversely affected. For example, AT&T, Comcast, Cox and
Cablevision are stockholders of At Home; and AT&T Broadband and Time Warner have
established their own cable-based Internet service, called Road Runner, with
proprietary content featuring various Time Warner publications and services.
Also, some companies that provide Internet services, such as Microsoft
Corporation, are stockholders of cable operators or cable box manufacturers. We
cannot assure you that there will not be other investments among providers of
Internet services, cable operators and/or cable box manufacturers. As a result,
these cable operators and cable box manufacturers may be reluctant to provide
any service, including the WORLDGATE Service, or to otherwise work with any
entity that provides other Internet services in competition with their
affiliates.
ONLY CABLE TELEVISION SUBSCRIBERS WHO UTILIZE A CABLE SET-TOP BOX CAN RECEIVE
THE WORLDGATE SERVICE.
For cable television subscribers to receive the WORLDGATE Service, they
must have a cable set-top box that can be WorldGate enabled. Currently, many
cable television subscribers receive their cable television service
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through the cable line directly into their televisions, without a set-top box.
We cannot assure you that cable operators serving these subscribers will elect
to provide them with set-top boxes for the purpose of offering the WORLDGATE
Service, or that these customers will choose to utilize a set-top box in order
to receive the WORLDGATE Service.
WE CANNOT OFFER THE WORLDGATE SERVICE IF CABLE BOX MANUFACTURERS DO NOT
INCORPORATE OUR TECHNOLOGY INTO THEIR CABLE BOXES.
In order to access the WORLDGATE Service, a consumer needs a WorldGate
enabled digital or advanced analog cable box. We rely on cable box
manufacturers, particularly General Instrument (now a part of Motorola) and
Scientific Atlanta, the two largest suppliers of cable boxes to cable operators,
to install our technology in their cable boxes. Neither General Instrument nor
Scientific Atlanta is required to install our technology in its cable boxes and
neither company is prohibited from establishing relationships with any of our
competitors and incorporating our competitors' technologies into their cable
boxes. In addition, our technology must be certified by General Instrument and
Scientific-Atlanta for each model of cable box before cable operators are
willing to deploy them to their subscribers, and, although we have certification
for some models, we cannot assure you that our technology will be certified for
other models on a timely basis, if at all.
Additionally, because General Instrument and Scientific-Atlanta are the
two largest suppliers of cable boxes, their decision not to install our
technology in their cable boxes or to develop similar technology with our
competitors would have a material adverse effect on our future success. Both
General Instrument and Scientific-Atlanta have joined us in promoting the
WORLDGATE Service and if either company severed this relationship with us, we
would lose a valuable sales and marketing resource.
WE ARE SUBJECT TO CAPACITY CONSTRAINTS AND SYSTEM FAILURES.
Due to the limited deployment of the WORLDGATE Service, the ability of
our service to accommodate a substantial number of users is not yet known. We
cannot assure you that we will be able to provide high quality performance and
high transaction speeds as the number of subscribers grows or their usage
increases. In addition, as subscriber penetration grows it may be necessary for
cable operators to purchase additional equipment, and we cannot assure you that
they will do so.
The performance of the WORLDGATE Service is also subject to reduction
in performance and interruption from human errors, telecommunication failures,
computer viruses and similar events. Any of these problems in our systems or
those of cable operators could result in reduced subscriber demand. We have
experienced performance reduction and service interruptions from time to time in
the past and we expect that these problems will continue from time to time. Our
failure to provide uninterrupted service at a level of performance acceptable to
subscribers would have a material adverse effect on our business, financial
condition and results of operations.
INTELLECTUAL PROPERTY CLAIMS AGAINST US COULD BE COSTLY AND RESULT IN THE LOSS
OF SIGNIFICANT RIGHTS.
Our success depends, in part, on our ability to maintain and continue
to develop a strong patent position for our products and technologies both in
the United States and other countries. As with most technology companies, our
patent position involves complex legal and factual questions. Without our patent
and other intellectual property protections, other companies could offer
substantially identical products for sale without incurring the sizeable
development and testing costs that we have incurred. Our ability to recoup these
expenditures and realize profits upon the licensing of our products and services
could be diminished.
The process of obtaining patents is time consuming and expensive. Even
if we spend the necessary time and money, a patent may not issue or it may
insufficiently protect the technology it was intended to protect. We can
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never be certain that we were the first to develop the technology or that we
were the first to file a patent application for the particular technology
because U.S. patent applications are maintained in secrecy until a patent issues
and publications in the scientific or patent literature lag behind actual
discoveries. Even after the U.S. Patent and Trademark Office issues patent
rights to us, our competitors may develop similar or duplicate technologies or
design around the patented aspects of our technology, which may decrease sales
of our prospective products, therefore causing a negative impact on our profit.
Competitors and others may also challenge our patent rights in court by
alleging patent infringement. If we lose a patent infringement suit, third
parties may claim significant damages, require us to license the disputed
technology or require us to cease using the disputed technology. For example,
Advanced Interactive, Inc. filed a complaint against us and several other
defendants alleging that all of the defendants infringed a patent assigned to
Advanced Interactive. On February 27, 2000, the court for this matter granted
defendants' joint motion for partial summary judgment, and the plaintiff has
appealed. If the plaintiff ultimately wins this lawsuit, we could be
precluded from offering the WORLDGATE Service. We cannot assure you that
licenses to the technology owned by the plaintiff in this lawsuit would be
available to us on commercially reasonable terms, if at all. Irrespective of
the validity or the successful assertion of this claim, it could result in
significant costs and diversion of management time and resources. This would
have a material adverse effect on our business, financial condition and
results of operations.
THE SUCCESS OF OUR CHANNEL HYPERLINKING TECHNOLOGY WILL BE ADVERSELY AFFECTED IF
ADVERTISERS AND TELEVISION PROGRAMMERS DO NOT PROVIDE US WITH NECESSARY CONTENT.
Our future growth and long-term success depends substantially on our
ability to convince advertisers and television programmers to use our CHANNEL
HYPERLINKING technology with their advertisements and television programs. As of
September 30, 2000, no advertiser or programmer had paid us to use our CHANNEL
HYPERLINKING technology, or was obligated to use our CHANNEL HYPERLINKING
technology in their advertisements or programs. We believe that the adoption of
the CHANNEL HYPERLINKING technology is substantially dependent on:
o our service meeting advertisers' and programmers' business or
operational expectations or strategies, and
o us achieving a significant number of subscribers to the
WORLDGATE Service.
We cannot assure you that we will achieve either of the above goals. If
we fail to incorporate our CHANNEL HYPERLINKING technology in a substantial
number of advertisements and programs, our business, operating results and
financial condition could be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE COULD RENDER OUR SERVICES OBSOLETE.
The market for consumer Internet access services and online content is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The nature of the market for
these products and services and their rapid evolution requires that we
continually improve the performance, features and reliability of the WORLDGATE
Service, particularly in response to competitive offerings. We may not be
successful in responding quickly, cost-effectively and adequately to these
developments. There may be a time-limited market opportunity for the WORLDGATE
Service, and we may not be successful in achieving widespread acceptance of the
WORLDGATE Service before competitors offer products and services with speed and
performance similar to, or better than, our current offerings.
THE LOSS OF ANY ONE OF OUR LARGEST CUSTOMERS COULD ADVERSELY AFFECT OUR REVENUES
AND FUTURE PROSPECTS.
We have in the past derived, and expect in the future to derive, a
significant portion of our revenues from a
10
<PAGE>
limited number of customers. In the event that any of these customers cease to
offer the WORLDGATE Service, our business, operating results and financial
condition could be materially adversely affected. In 1997, three cable operators
accounted for approximately 100% of our revenues, in 1998, ten cable operators
accounted for approximately 98% of our revenues, and in 1999, ten cable
operators accounted for 79% of our revenues. Moreover, in 1998, Charter and
Click!Network accounted for 44% and 10%, respectively, of our revenues, and in
1999, Charter, Click!Network, Buckeye Cable Systems and Singapore CableVision
Ltd. accounted for 26%, less than 10%, 17% and 13%, respectively, of our
revenues. We cannot assure you that any of these customers will continue to
offer the WORLDGATE Service to their cable subscribers.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO MANY UNCERTAINTIES.
A key component of our strategy is the expansion of the WORLDGATE
Service into international markets. We have limited experience in developing
localized versions of our service and in developing relationships with
international cable system operators. We may not be successful in expanding our
service offerings into foreign markets. In addition to the uncertainty regarding
our ability to generate revenues from foreign operations and expand our
international presence, there are certain risks inherent in doing business on an
international level, such as:
o difficulties in collecting accounts receivable and longer
collection periods,
o regulatory requirements, including the regulation of Internet
access,
o export and import restrictions, including tariffs and other
trade barriers,
o difficulties in staffing and managing foreign operations,
o political instability, and
o fluctuations in currency exchange rates.
Any of these factors could materially adversely affect the success of
our current and future international operations.
WE MAY HAVE LIABILITY FOR INFORMATION RETRIEVED OR REPLICATED ON THE INTERNET.
Claims for negligence, copyright or trademark infringement or other
legal theories could be made against us because information can be downloaded
and redistributed by users of the WORLDGATE Service. Copyright and trademark
laws are evolving both domestically and internationally and we are uncertain how
they apply to the WORLDGATE Service. The imposition of liability for information
carried by us would have a material adverse effect on our business, operating
results and financial condition.
WE MAY HAVE LIABILITY FOR E-COMMERCE TRANSACTIONS.
As part of our business, we are seeking to enter into agreements with
content providers, advertisers and e-commerce merchants under which we will
receive a share of revenue from the purchase of goods and services by users of
the WORLDGATE Service. These arrangements may expose us to additional legal
risks and uncertainties, including potential liabilities to consumers of these
products and services. Our insurance may not cover potential claims of this type
or may not be adequate to indemnify us for all liability that may be imposed.
WE COULD BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION WHICH AFFECTS OUR
ABILITY TO OFFER OUR SERVICE OR WHICH AFFECTS DEMAND FOR OUR SERVICE.
We are subject to varying degrees of federal, state, local and foreign
regulations as well as laws enacted by the U.S. Congress and other governments.
The Federal Communications Commission has established regulations that, among
other things, set licensing, access, installation and equipment standards for
communications systems. We are uncertain how these regulations may be applied to
Internet services offered over cable television systems.
11
<PAGE>
We also anticipate that due to its increasing popularity and use, the
Internet will be subject to increased attention and regulation. These laws and
regulations may regulate issues such as user privacy, defamation, network
access, pricing, taxation, content, quality of products and services and
intellectual property ownership and infringement. These laws and regulations
could expose us to liability, materially increase our cost of providing our
service, and decrease the growth and acceptance of the Internet in general and
access to the Internet over cable systems.
OUR BUSINESS WOULD SUFFER IF WE WERE TO LOSE THE SERVICES OF HAL M. KRISBERGH OR
OTHER KEY PERSONNEL.
Our success depends in significant part upon the continued service of
our key technical, sales and senior management personnel, particularly Mr.
Krisbergh, who has significant relevant experience in the cable television
industry. No officer or employee of WorldGate is bound by an employment
agreement, and any officer or employee of WorldGate could terminate his or her
relationship with us at any time. Our future success will also depend on our
ability to attract, train, retain and motivate highly qualified senior
management, technical, marketing and sales personnel. Because competition for
these personnel is intense, we cannot assure you that we will be able to do so.
THE ABILITY TO INFLUENCE THE OUTCOME OF STOCKHOLDER VOTES MAY BE LIMITED BY THE
SIGNIFICANT OWNERSHIP INTEREST OF OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER.
Hal M. Krisbergh beneficially owns approximately 25% of the outstanding
common stock as of October 26, 2000. Mr. Krisbergh has the voting power to
exercise substantial control over the election of our entire board of directors
and all votes on matters requiring stockholder approval. This concentration of
ownership may also have the effect of delaying or preventing a change in control
of WorldGate.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS COULD DISCOURAGE UNWANTED
TAKEOVER ATTEMPTS AND COULD REDUCE THE OPPORTUNITY FOR STOCKHOLDERS TO GET A
PREMIUM FOR THEIR SHARES.
We are subject to Delaware laws and to provisions of our certificate of
incorporation and by-laws that could have the effect of delaying, deterring or
preventing a change in control of WorldGate. As a result, our management could
attempt to utilize these laws and provisions to discourage or reject unsolicited
bids to acquire us, including bids that would have paid stockholders a premium
over the then current market price of their shares.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
The market price of our common stock has been and will likely continue
to be highly volatile, as is the stock market in general, and the market for
Internet-related and technology companies in particular. Investors may not be
able to resell their shares of our common stock following periods of volatility
because of the market's adverse reaction to such volatility. Factors that could
cause such volatility may include, among other things:
o actual or anticipated variations in quarterly operating
results;
o announcements of technological innovations;
o new products or services;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet or cable industry;
o changes in the market valuations of other Internet or cable
companies;
o announcements by us or our competitors of significant
acquisitions, strategic partnerships or joint ventures;
o capital commitments;
o additions or departures of key personnel; and
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<PAGE>
o sales of common stock.
Many of these factors are beyond our control. These factors may
materially adversely affect the market price of our common stock, regardless of
our operating performance.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD LOWER OUR STOCK PRICE.
The market price for our common stock could drop as a result of sales
of a large number of our presently outstanding shares, including shares issued
upon the exercise of outstanding options and warrants, or the perception that
these sales could occur. These factors also could make it more difficult for us
to raise funds through future offerings of our common stock. Certain holders of
our common stock have demand and piggy-back registration rights. The exercise of
such rights could adversely affect the market price of our common stock.
In addition to this Registration Statement, we have also filed:
o on May 20, 1999 a registration statement (Registration No.
333-78943) to register 1,600,000 shares of common stock under
our stock option plan;
o on October 8, 1999, a shelf registration statement
(Registration No. 333-87029) under the Securities Act for
331,490 shares of common stock issuable upon exercise of
outstanding warrants and 373,83 shares of common stock;
o on July 28, 2000, a registration statement (Registration No.
333-42526) under the Securities Act for resale of 1,531,211
shares of common stock that we issued to four cable operators;
and
o on November 9, 2000, a registration statement (Registration
No. 333-49612) to register an additional 1,600,000 shares of
common stock under our stock option plan.
These shares are eligible for resale in the public market without
restriction.
13
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholder. The selling stockholder will receive all of the net
proceeds from the sale of the shares.
The selling stockholder will pay any underwriting discounts and
commissions and expenses incurred by them for brokerage, accounting, tax, legal
services or other expenses incurred by the selling stockholder in disposing of
their shares. We will bear all other costs, fees and expenses incurred in
effecting the registration of the shares covered by this prospectus, including,
without limitation, all registration and filing fees, Nasdaq National Market
listing fees, fees and expenses of our counsel, fees of our accountants, and
blue sky fees and expenses.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the
beneficial ownership of the shares of common stock by the selling stockholder as
of November 27, 2000. We issued the shares listed below to the selling
stockholder in connection with our acquisition of Digital Video Art, Inc. on
April 28, 2000. The selling stockholder was the President and sole
shareholder of Digital Video Art, Inc. and currently serves as the Vice
President of Advanced Technology of our wholly owned subsidiary. A
description of the terms of the acquisition is provided below.
We do not know when or in what amounts the selling stockholder may
offer shares for sale. The selling stockholder may not sell all or any of the
shares offered by this prospectus. Because the selling stockholder may offer all
or some of the shares pursuant to this offering, and because there are currently
no agreements, arrangements or understandings with respect to the sale of any of
the shares that will be held by the selling stockholder after completion of the
offering, we cannot estimate the number of the shares that will be held by the
selling stockholder after completion of the offering. However, for purposes of
this table, we have assumed that, after completion of the offering, none of the
shares covered by this prospectus will be held by the selling stockholder.
The presentation is based on 23,287,394 shares of our common stock
outstanding as of November 27, 2000:
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING
NAME OF SELLING STOCKHOLDER NUMBER PERCENTAGE BEING OFFERED NUMBER PERCENT
--------------------------- ------ ---------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Michael Bruno 119,047 * 119,047 0 *
</TABLE>
----------
* Represents less than 1% of our outstanding common stock.
Acquisition of Digital Video Art, Inc.
The shares being registered in connection with this transaction were
issued to the selling stockholder as partial consideration for our acquisition
of Digital Video Art, Inc. on April 28, 2000. Digital Video Art, Inc. is a
supplier of custom software engineering services based in Campbell, CA employing
20 full-time software engineers. Its primary business activities are product
development, and the design and integration of custom technology solutions.
Digital Video Art also develops and maintains two products for high-resolution
CCD imaging.
In connection with the acquisition we will make payments to the selling
stockholder and certain other individuals who held options to acquire shares of
Digital Video Art, Inc. totaling no more than an aggregate of $8,005,750. The
payments may be made in cash or stock, at our option. The payments will
14
<PAGE>
be made over a period of four years, with the first payment to the selling
stockholder made at closing and the remaining payments made to the selling
stockholder and the optionholders on the first, second and third anniversaries
of the closing.
The aggregate amount of the merger consideration is subject to
adjustment based upon the continued employment of the software engineers and the
selling stockholder. If the selling stockholder or any former Digital Video Art,
Inc. optionholder voluntarily terminates his employment with us or is terminated
for cause, he will forfeit any unpaid consideration unless certain conditions
are met. In addition, the amount of merger consideration payable on the first
anniversary will be reduced in the event that less than 15 of the software
engineers employed by Digital Video Art prior to the acquisition remain employed
at such anniversary.
In the event that we issue shares of our common stock as payment, the
recipients have been granted the right to demand registration of such shares.
Such demand must be received by us not less than sixty days prior to the
anniversary on which such consideration is payable.
We have also provided the selling stockholder and the optionholders
with a guaranty that the recipient of our common shares as consideration for the
merger will receive as proceeds from sales of shares during the period that a
registration statement remains effective, an amount not less than the amount of
consideration owed to such individual pursuant to the merger agreement. In the
event that the aggregate amount of proceeds received by the individual upon the
sale of all of the registered shares is less than the amount of merger
consideration paid in registered shares pursuant to the terms of the merger
agreement, we will, at our election, either (i) pay the individual cash or (ii)
issue additional shares, in an amount equal to the difference between the
proceeds realized by the individual from the sale of the shares registered on
such registration statement during the period that the registration statement
remains effective and the amount of merger consideration paid in registered
shares pursuant to the terms of the merger agreement. Shares registered on a
registration statement, but not sold during the period that the registration
statement remains effective will be valued at the fair market value of the
shares on the date of their issuance and such value shall be counted towards the
guaranteed amount. The guarantee applies only to shares sold by the selling
stockholder during the period that the registration statement remains effective
and terminates upon the withdrawal of the registration statement.
In the event that the selling stockholder or optionholder receives
proceeds from the sale of the securities registered on a registration statement
during the period that the registration statement remains effective which exceed
the amount of merger consideration then payable to such individual, the amount
of any future payments to such individual pursuant to the merger agreement shall
be reduced on a dollar for dollar basis.
This registration statement includes the shares issued to the selling
stockholder, as well an additional amount of shares which may be issued to the
selling stockholder in the event any additional shares must be issued to the
selling stockholder pursuant to the guarantee.
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<PAGE>
PLAN OF DISTRIBUTION
The selling stockholder may, from time to time, elect to sell all or a
portion of the shares offered under this prospectus in the Nasdaq National
Market. Sales are anticipated to be made at prices prevailing in the Nasdaq
National Market at the times of such sales. The selling stockholder may also
make private sales directly or through a broker or brokers, who may act as agent
or principal. In connection with any sales, the selling stockholder and any
brokers participating in such sales may be deemed to be underwriters within the
meaning of the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling stockholder (and, if such broker acts as
agent for the purchaser of such shares, for such purchaser). The selling
stockholder will pay usual and customary brokerage fees. Broker-dealers may
agree with them to sell a specified number of shares at a stipulated price per
share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling stockholder, to purchase as principal any unsold shares at
the price required to fulfill the broker-dealer commitment to them.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the Nasdaq National
Market or any other over-the-counter market or stock exchange, if any, in which
our shares are traded, in negotiated transactions or otherwise at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive commissions from the purchasers of such
shares.
We have advised the selling stockholder that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), may apply to sales of shares in the market and to the
activities of the selling stockholder and their affiliates. In addition, we will
make copies of this prospectus available to the selling stockholder and have
informed them of the possible need for delivery of copies of this prospectus to
purchasers on or prior to sales of the shares offered under this prospectus. The
selling stockholder may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker, and any profits
received on the resale of such shares, may be deemed to be underwriting
discounts and commissions under the Securities Act, if any such broker-dealers
purchase shares as principal.
There can be no assurance that the selling stockholder will sell any or
all of the shares of common stock offered under this prospectus.
Pursuant to the merger and agreement of sale, the selling stockholder
has agreed not to effect any offers or sales of our common stock in any manner
other than as specified in this prospectus.
All costs, fees and expenses of registration incurred in connection
with the offering will be borne by us. All selling and other expenses incurred
by the selling stockholder will be borne by the selling stockholder.
We have agreed, subject to certain limitations set forth in the merger
and agreement of sale governing the registration rights of the selling
stockholder, to keep the Registration Statement of which this prospectus
constitutes a part effective for a period not less than seven (7) business days
nor more than thirty (30) business days.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with the Securities and Exchange Commission,
which means we can satisfy our legal obligations to disclose important
information contained in those documents by referring you to them. The
information included in the following documents is incorporated by reference and
is considered part of this prospectus.
16
<PAGE>
More recent information that we file with the Securities and Exchange Commission
automatically updates and supersedes any inconsistent information contained in
prior filings.
The documents listed below have been filed under the Exchange Act with
the Securities and Exchange Commission and are incorporated by reference:
(a) Our annual report on Form 10-K for the fiscal year ended
December 31, 1999;
(b) Our quarterly report on Form 10-Q for the quarters ended March
31, 2000, June 30, 2000 and September 30, 2000;
(c) Our current report on Form 8-K as filed with the Securities
and Exchange Commission on July 26, 2000; and
(d) The description of our common stock contained in the our
registration statement on Form 8-A filed under Section 12 of
the Exchange Act, including any amendments or reports filed
for the purpose of updating such description.
We also incorporate by reference all documents subsequently filed by us
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the
offering of the shares of common stock under this prospectus is completed. You
may request a copy of these filings, at no cost, by writing or telephoning us at
WorldGate Communications, Inc., 3190 Tremont Avenue, Trevose, Pennsylvania,
19053, attn: Secretary, telephone: (215) 354-5100.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities
and Exchange Commission registering the shares of our common stock that are
being offered by this prospectus. This prospectus is a part of the registration
statement and, as the Securities and Exchange Commission rules permit, does not
contain all of the information that stockholders can find in the registration
statement or the exhibits to the registration statement.
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Securities and Exchange Commission's regional offices in New York (7 World Trade
Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511). In addition,
registration statements and certain other filings made with the Securities and
Exchange Commission through its "EDGAR" system are publicly available through
the Securities and Exchange Commission's Web site on the Internet located at
http://www.sec.gov. This registration statement, including all exhibits, has
been filed with the Securities and Exchange Commission through EDGAR. Reports,
proxy and information statements and other information concerning us can be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1506.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for us by Pepper Hamilton LLP, Berwyn, Pennsylvania.
EXPERTS
The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
17
<PAGE>
-------------------
No dealer, salesman or other person has
been authorized to give any information
or to make any representations other
than those contained in this prospectus
in connection with the offer made
hereby, and, if given or made, such
information or representations must not
be relied upon as having been authorized 250,000 Shares
by WorldGate Communications, Inc. This
prospectus does not constitute an offer
to sell, or a solicitation of an offer
to buy, the securities offered hereby to WORLDGATE COMMUNICATIONS, INC.
any person in any state or other
jurisdiction in which such offer or
solicitation is unlawful. Neither the
delivery of this prospectus nor any sale COMMON STOCK
made hereunder shall, under any
circumstances, imply that information
contained herein is correct as of any
time subsequent to its date or that
there has not been any change in the
facts set forth in this prospectus or in ----------
our affairs since the date hereof.
PROSPECTUS
----------
-------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY...............................2
RECENT EVENTS....................................4
FORWARD LOOKING STATEMENTS.......................5
RISK FACTORS.....................................6
USE OF PROCEEDS.................................14
SELLING STOCKHOLDER.............................14
PLAN OF DISTRIBUTION............................16
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE..........................16
WHERE YOU CAN FIND MORE
INFORMATION.....................................17
LEGAL MATTERS AND EXPERTS.......................17 November 29, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee.............................................$660
Printing fees .................................................$3,500
Legal fees and expenses* ......................................$5,000
Accounting fees and expenses* .................................$5,000
Miscellaneous fees and expenses* ..............................$5,000
TOTAL ..............................................$25,100
</TABLE>
* Represents the Registrant's estimate of such expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Certificate of Incorporation, as amended, currently
states that a director of the registrant shall have no personal liability to the
registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director except to the extent that Section 102(b)(7) (or any successor
provision) of the Delaware General Corporation Law, as amended from time to
time, expressly provides that the liability of a director may not be eliminated
or limited. No amendment or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director of the registrant
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
The registrant's Bylaws require the registrant 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, by reason of the fact that such person is or
was a director or officer of the registrant, or is or was serving while a
director or officer of the registrant at its request as a director, officer,
employee, agent, fiduciary or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines, excise taxes and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under Delaware law. Any person claiming indemnification as provided in the
Bylaws shall be entitled to advances from the registrant for payment of the
expenses of defending actions against such person in the manner and to the full
extent permissible under Delaware law. On the request of any person requesting
indemnification under such provisions, the Board of Directors of the registrant
or a committee thereof shall determine whether such indemnification is
permissible or such determination shall be made by independent legal counsel if
the Board or committee so directs or if the Board or committee is not empowered
by statute to make such determination. The indemnification and advancement of
expenses provided by the Bylaws shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any insurance or other agreement, vote of shareholders or
disinterested directors or otherwise, both as to actions in their official
capacity and as to actions in another capacity while holding an office, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such
person. The registrant shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the registrant or is or was serving at its request as a director, officer,
employee, agent, fiduciary or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the registrant
would have the power to indemnify him against such liability under the
provisions of the Bylaws. The duties of the registrant to indemnify and to
advance expenses to a director or officer provided in the Bylaws shall be in the
nature of a contract between the registrant and each such director or officer,
and no amendment or repeal of any such provision of the Bylaws shall alter, to
the detriment of such director or officer, the right of such person to the
advancement of expenses or indemnification related to a claim based on an act or
failure to act which took place prior to such amendment, repeal or
II-1
<PAGE>
termination. Delaware law also permits indemnification in connection with a
proceeding brought by or in the right of the registrant to procure a judgment in
its favor. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Securities Act and
is therefore unenforceable. The registrant has directors and officers liability
insurance.
ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
4.1(1) Amended and Restated Certificate of Incorporation of
the Company
4.2(1) Amended and Restated Bylaws of the Company
5 Opinion of Pepper Hamilton LLP.
10.1* Agreement and Plan of Merger among Digital Video Art,
Michael Bruno and WorldGate
Communications, Inc.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Pepper Hamilton LLP (included in
Exhibit 5).
24* Power of Attorney (See page II-4 of this Registration
Statement)
(1) Incorporated by reference to the exhibits to the Registration Statement on
Form S-1 (No. 333-71997) filed in connection with WorldGate's initial public
offering.
* Previously filed with the Registration Statement.
ITEM 17. UNDERTAKINGS
(a) 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:
(i) To include any prospectus required by Section
10(a)(3) the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increases or decreases in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any additional or changed 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; provided, however, that paragraphs (a)(1)(i); and
(a)(1)(ii) do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, 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.
II-2
<PAGE>
(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.
(b) We hereby undertake that, for purposes of determining any liability
under the Securities Act, each filing of our annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each filing an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at the time shall be deemed to be
initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 15 above, 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 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 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Trevose, Pennsylvania, on November 27, 2000.
WORLDGATE COMMUNICATIONS, INC.
By: /s/ HAL M. KRISBERGH
------------------------------------
Hal M. Krisbergh
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Date: November 27, 2000 /s/ Hal M. Krisbergh
-------------------------------------------------
Hal M. Krisbergh
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
Date: November 27, 2000 /s/ James V. Agnello
-------------------------------------------------
James V. Agnello
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 27, 2000 /s/ David E. Wachob
-------------------------------------------------
David E. Wachob
Director, Vice President and General Manager
Date: November 27, 2000 /s/ Randall J. Gort *
-------------------------------------------------
Thomas Baxter
Director
Date: November 27, 2000 /s/ Randall J. Gort *
-------------------------------------------------
Alan Gerry
Director
Date: November 27, 2000 /s/ Randall J. Gort *
-------------------------------------------------
Marcia J. Hooper
Director
Date: November , 2000
--- -------------------------------------------------
Clarence L. Irving, Jr.
Director
Date: November 27, 2000 /s/ Randall J. Gort *
-------------------------------------------------
Ronald A. Walter
Director
* By: /s/ Randall J. Gort
-----------------------------
Randall J. Gort
Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1(1) Amended and Restated Certificate of Incorporation of
the Company
4.2(1) Amended and Restated Bylaws of the Company
5 Opinion of Pepper Hamilton LLP.
10.1* Agreement and Plan of Merger among Digital Video Art,
Michael Bruno and WorldGate
Communications, Inc.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Pepper Hamilton LLP (included in
Exhibit 5).
24* Power of Attorney (See page II-4 of the Registration
Statement)
(1) Incorporated by reference to the exhibits to the Registration Statement on
Form S-1 (No. 333-71997) filed in connection with WorldGate's initial public
offering.
* Previously filed with the Registration Statement.
II-5
