As filed with the Securities and Exchange Commission on April 18, 2000.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FRONTLINE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware One Blue Hill Plaza, 7th Floor 13-3950283
(state or other Pearl River, New York 10965 (IRS employer
jurisdiction of (914) 623-8553 identification
incorporation (Address, including zip code, number)
or organization) and telephone number, including
area code, of registrant's
principal executive offices)
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Stephen J. Cole-Hatchard, Chief Executive Officer
Frontline Communications Corporation
One Blue Hill Plaza, 7th Floor
Pearl River, New York 10965
(914) 623-8553
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Robert J. Mittman, Esq.
Blank Rome Tenzer Greenblatt LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Telephone No. (212) 885-5000
Telecopier No. (212) 885-5001
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of each Class of Securities to be Amount to be Offering Price Per Aggregate Amount of
Registered Registered Share(1) Offering Price(1) Registration Fee
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 237,440(2)(3) $2.50 $593,600.00
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Common Stock, par value $.01 per share,
issuable upon exercise of public warrants 1,840,000(4) $4.80 $8,832,000.00
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Common Stock, par value $.01 per share,
issuable upon exercise of private placement
warrants 18,534(4) $6.07 $112,501.38
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Common Stock, par value $.01 per share,
issuable upon exercise of private placement
warrants 21,662(4) $13.85 $300,018.70
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Common Stock, par value $.01 per share,
issuable upon exercise of underwriter's
warrants 151,300(4) $6.60 $998,580.00
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Common Stock, par value $.01 per share,
issuable upon exercise of underwriter's
warrants 160,000(4) $7.92 $1,267,200.00
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Total $12,103,900.08 $3,195.43
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
on the closing price of the common stock as reported on the American Stock
Exchange on April 13, 2000
(2) Includes up to 95,596 additional shares of common stock as may become
issuable pursuant to certain repricing provisions.
(3) Pursuant to Rule 416 of the Securities Act, there are also being registered
hereunder additional shares as may be issued to the selling shareholders
because of any future stock dividends, stock distributions, stock splits or
similar capital readjustments.
(4) Pursuant to Rule 416 of the Securities Act, there are being registered
additional shares as may become issuable pursuant to the anti-dilution
provisions of the warrants.
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The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
2,428,936 SHARES
FRONTLINE COMMUNICATIONS CORPORATION
COMMON STOCK
This Prospectus covers 1,840,000 shares of common stock, $.01 par value, of
Frontline Communications Corporation, issuable upon exercise of 1,840,000
redeemable common stock purchase warrants included in the units sold in the
Company's 1998 public offering. Each public warrant entitles the registered
holder thereof to purchase until May 13, 2003, one share of Common Stock at an
exercise price of $4.80 per share.
This prospectus also relates to an offering by certain selling stockholders
of an aggregate of up to 141,844 shares of our issued and outstanding common
stock. In addition, this prospectus also relates to the offering by certain of
these selling stockholders and a placement agent of an aggregate of 40,196
shares issuable upon exercise of outstanding private placement warrants and up
to 95,596 additional shares which may be issuable upon repricing rights granted
to these selling stockholders in connection with our December 1999 private
placement. Finally, this prospectus also relates to up to 311,300 shares which
may be issued upon the exercise of underwriter's warrants issued to the
underwriter of our initial public offering. All of the shares of common stock
described in this paragraph are being offered for resale by the selling
stockholders pursuant to this prospectus.
The common stock may be offered from time to time by the selling
stockholders through ordinary brokerage transactions in the over-the-counter
markets, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices and in other ways as described in the
"Plan of Distribution." We will not receive any of the proceeds from the sale of
common stock by the selling stockholders.
If all of the public warrants, private placement warrants and underwriter's
warrants are exercised, of which there can be no assurance, the Company would
receive gross proceeds of up to $11,510,300. Any proceeds received by the
Company from such exercises will be used for working capital and general
corporate purposes.
The common stock is traded on the American Stock Exchange under the symbol
"FNT". On April 3, 2000, the closing sale price of the common stock as reported
by AMEX was $2.50.
An investment in the common stock is speculative and involves a high degree
of risk. See "Risk Factors" beginning on Page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is _______, 2000.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Frontline Communications
Corporation with the Securities and Exchange Commission are incorporated herein
by reference and shall be deemed a part of this prospectus:
(1) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999;
(2) The description of our common stock contained in our Registration
Statement on Form 8-A declared effective May 5, 1998, together with
any amendment or report filed with the SEC for the purpose of updating
the description.
All documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, after the date of this prospectus and before
the termination of the offering of the securities hereby shall be deemed to be
incorporated by reference in this prospectus and to be a part of this prospectus
on the date of filing of the documents. Any statement incorporated in this
prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus or the
registration statement of which it is a part.
This prospectus incorporates documents by reference with respect to
Frontline Communications Corporation that are not presented herein or delivered
herewith. These documents are available without charge to any person, including
any beneficial owner of our securities, to whom this prospectus is delivered,
upon written or oral request to Amy Wagner-Mele, Esq., Frontline Communications
Corporation, One Blue Hill Plaza, 7th Floor, Pearl River, New York 10965,
telephone: (914) 623-8553.
Frontline Communications Corporation is subject to the informational
requirements of the Exchange Act. We file reports, proxy statements and other
information with the SEC. These reports and other information can be read and
copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. Our electronic filings made through
the SEC's electronic data gathering, analysis and retrieval system are publicly
available through the SEC's worldwide web site (http://www.sec.gov).
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PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including our
financial statements and related notes, and especially the risks described under
"Risk Factors."
The Company
Our Business
We are a full service Internet company. We provide Internet- related
services, products and solutions to customers on a national basis. We offer our
customers a single point of contact for a complete business solution to their
Internet needs. Our primary focus is to provide small and medium-sized
businesses with Internet services designed to help these businesses maximize the
potential of the Internet and achieve a competitive advantage in their markets.
We provide our customers with a wide array of Internet access alternatives and
Website development and Internet Website presence services. Our strategy is to
expand our geographic presence, our customer and revenue base and our Web
hosting and broadband capabilities.
The broad acceptance of the Internet has created numerous opportunities for
businesses to improve their competitive position in their markets. We believe
the small and medium-sized business market generally offers significant
opportunity for the growth of our business because of the large number of these
businesses throughout the United States and their growing presence on the
Internet. Small and medium-sized businesses are increasingly seeking third-party
service providers to help them create, build and implement their Internet
strategy. The analysis, design and implementation of an effective Internet
solution require a range of skills, expertise and technology that only a limited
number of small and medium-sized businesses possess. In response to these needs
and the growth of the Internet as a vehicle for sales and services, we have
developed a full array of services designed to address all of the Internet
service requirements of our small and medium-sized business customers.
We intend to continue to acquire additional Internet service businesses in
order to grow our access, development and presence services. Since October 1998,
primarily through 11 acquisitions, including regional Internet service providers
and Web development, hosting and related companies, we increased our customer
base from 2,000 to over 16,000 customers and now have the enhanced capability to
provide the access, development and presence services necessary to assist small
and medium-sized business customers. We have expanded our access services
nationally to include approximately 800 points of presence (POPs), nine of which
we own and the rest of which we license, capable of providing Internet access
services to approximately 72% of the U.S. population. We also offer significant
national high-speed access, including Digital Subscriber Line (DSL) through our
alliances with Covad Communications Corp. and Network Access Solutions, Inc. In
addition, as one of our subsidiaries is a licensed competitive local exchange
carrier (CLEC) in New York, New Jersey and Pennsylvania, we anticipate that we
will be able to reduce, on a relative basis, our overall communications costs by
the end of 2000. We intend to expand our network infrastructure and increase our
Internet access subscriber base by continuing to acquire other Internet service
providers with a high concentration of small and medium-sized business
customers.
In addition to growth by acquisition, we have engaged in more traditional
marketing and advertising directed at the small and medium-sized business
market. In the northeast United States, where our sales force is currently
located and where we own nine POPs, we are building brand equity in our
Frontline.net operations, targeted at business generally. Throughout the United
States, we target women-owned businesses with our WOWFactor.com marketing brand
and Website and retail business with our iShopNetworks.com (formerly Channel
iShop.com) marketing brand and Website. We anticipate that our WOWFactor.com and
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iShopNetworks.com marketing efforts will continue nationally, and our
Frontline.net branding will grow geographically, as our POPs and sales force
expand our footprint.
We were formed in February 1997 as a Delaware corporation under the name
Easy Street Online, Inc. We changed our name to Frontline Communications
Corporation in July 1997. Our principal executive offices are located at One
Blue Hill Plaza, Pearl River, New York 10965, and our telephone number is (914)
623-8553. Our Internet Website is located at www.frontline.net. WOWFactor's
Website is located at www.wowfactor.com. iShopNetworks, Inc.'s Website, which we
expect to launch in the second quarter of 2000, will be located at
www.iShopNetworks.com. Information in these Websites is not part of this
prospectus. Unless the context indicates otherwise, the terms "Frontline," "we,"
"our," "the Company" and "us" in this prospectus include the operations of our
wholly-owned subsidiaries, CLEC Communications Corporation and iShop Networks,
Inc.
We have made applications for federal trademark registration and claim
rights in the following trademarks: WOWFactor; WOWFactor Women on the Web;
Frontline.net; Frontline.net Effortless E-Commerce and Internet Access (name and
logo); Effortless E-Commerce & Internet Access; and Frontline Communications
Corp. We have received a notice of allowance from the U.S. Patent and Trademark
Office with respect to the following marks: WOWFactor.com and WOWFactor design.
All other trademarks and service marks used in this prospectus are the property
of their respective owners. The information on our Websites is not a part of
this prospectus.
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The Offering
Common stock offered............. 2,428,936 shares, of which 1,840,000 are
issuable upon exercise of public warrants,
351,496 are issuable upon exercise of
warrants owned by the selling stockholders
and 95,596 are issuable upon exercise of
certain repricing rights given to certain
selling stockholders.
Common stock outstanding......... 5,213,091 shares.
Use of Proceeds.................. Assuming that all of the warrants held by
the selling stockholders are exercised, we
will realize gross proceeds of approximately
$11,510,300 which will be used for working
capital and potential acquisitions. We will
not receive any of the proceeds from the
sale of common stock by the selling
stockholders.
AMEX symbol...................... FNT
Risk Factors..................... You should read the "Risk Factors" section
beginning on page 6 and the other cautionary
statements in this prospectus to ensure that
you understand the risks associated with an
investment in our common stock.
Cautionary Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend
the forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy and our
plans are forward-looking statements. These statements can sometimes be
identified by our use of words such as "may," "anticipate," "expect," "intend,"
"believe," "estimate" or similar expressions. Our expectations in any
forward-looking statements may not turn out to be correct. Our actual results
could be materially different from our expectations. Important factors that
could cause our actual results to be materially different from our expectations
include those discussed under "Risk Factors." We have no obligation to update
these statements to reflect events and circumstances after the date of this
prospectus.
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RISK FACTORS
The shares offered hereby involve a high degree of risk. Each prospective
investor should carefully consider the following risk factors before making an
investment decision.
We have a history of losses and anticipate that we will continue to incur losses
in the future.
Since our inception we have incurred significant losses. For the years
ended December 31, 1998 and 1999, our net losses were $1,744,099 and $6,757,258.
We had an accumulated deficit of $10,600,905 and a working capital deficiency of
$1,640,344 as of December 31, 1999. We expect to incur operating losses as we
incur increased operating costs associated with expanding our customer base,
establishing additional POPs and increasing our e-commerce and Website design
services. We may not be able to achieve profitability or, if achieved, maintain
profitability for any extended period of time.
We expect that our net losses will continue for the next several years, as
our recent acquisitions have resulted in our having net intangible assets of
$4,146,107 at December 31, 1999. These intangible assets are being amortized
over a period of three years and will result in additional losses in each of the
next three years. We intend to engage in additional strategic acquisitions in
the future using a significant portion of the net proceeds of this offering.
Future acquisitions may similarly result in our recording large amounts of
intangible assets and incurring the related net losses as these intangible
assets are amortized.
In order to become profitable, we will need to implement our business plan
successfully, including attracting new customers for our Internet services and
increasing the coverage and efficiency of our Pops.
The success of our business plan depends upon our ability to attract and
retain significant numbers of customers, consolidate our POPs and establish and
equip additional POPs on a timely and cost effective basis. At the same time, we
will need to hire and retain skilled management, technical, marketing and other
personnel and continue to expand our product and service offerings. In addition,
there is limited information available concerning the potential performance or
market acceptance of our Internet access or other services. We may not be able
to implement our business plan successfully, and we may also encounter
unanticipated expenses, problems or technical difficulties which could
materially delay the implementation of our business plan.
We have recently expanded our marketing focus and have begun to offer additional
products and services, both of which may place a significant strain on us.
Historically, we marketed our Internet access services to individual
customers, and the majority of our revenues to date has been generated from
individual customers. In electing to expand our target market, we decided to
market our services aggressively to small and medium-sized businesses and
increase our product offerings to provide a variety of e-commerce services to
small and medium-sized businesses, including Website design and development and
Internet Website presence services. As we expanded our marketing focus and
product offerings relatively recently, we have a limited relevant operating
history which you can use to evaluate our performance to date and future
prospects. As a company with a relatively new focus in a rapidly evolving
industry, we may encounter many expenses, delays and problems which we lack the
experience to identify or quantify at this time.
The expansion of our target markets and product offerings will continue to
place significant demands on the time and attention of our senior management and
involve significant financial and other costs, including
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building necessary network infrastructures, marketing and promoting our new
products and services and hiring personnel to provide these new services. We may
not be able to enter new markets and offer new services successfully, and we may
not be able to undertake these activities while maintaining sufficient levels of
customer service to retain our existing customers, either of which would have a
material adverse effect on us, our reputation and our operations.
We are pursuing a strategy of rapid growth through acquisitions, which may
strain our operations and which we may not be able to manage effectively.
We are pursuing aggressive and rapid growth through the acquisition of
other Internet service providers and companies involved in related
Internet-based businesses such as Website design and e-commerce services.
However, we may not be able to successfully consummate any attempted
acquisitions or integrate any acquired businesses into our operations, and
acquired businesses may not perform as we expect. Our rapid growth has in the
past placed, and may continue to place, a significant strain on our business
resources. Implementing our current growth strategy will create significant
demands on the time and attention of our senior management and will involve
significant financial and other costs, including identifying and investigating
acquisition candidates, negotiating acquisition agreements and integrating the
acquired businesses with our existing operations and personnel. Any future
acquisitions will also result in higher capital expenditures and operating
expenses for us.
Our ability to manage our planned future growth through acquisitions will
depend upon several factors, including our success in hiring and retaining
qualified management, technical and marketing personnel; effectively maintaining
high levels of customer service required to retain customers while undertaking
expansion; and expanding our network infrastructure capacity to service a
growing customer base. If we fail to achieve any of these factors, our business,
financial condition, results of operations and the market price of our
securities could be materially adversely affected.
We may need to seek additional financing in the future in order to carry out our
business plan.
Implementing our current business plan will require significant capital.
Based on our current plans and assumptions relating to our business strategy, we
anticipate that our cash on hand, expected revenues and the net proceeds of our
recent offering of series B convertible redeemable preferred stock will satisfy
our capital requirements until approximately February 2001. However, if our
plans change, if our assumptions prove to be inaccurate, or if the net proceeds
of that offering otherwise prove to be insufficient for our needs, we may be
forced either to seek additional financing sooner than we currently anticipate
or to curtail our operations.
In the past, we have relied on the issuance of equity securities and
borrowings to finance our operations. Sources of financing may not be available
to us in the future on commercially reasonable terms or at all. Our business
plan and proposed expansion would be adversely affected if we do not obtain
financing when needed.
The Internet services industry is relatively new and evolving, and any
significant changes in it may adversely affect us.
The Internet services industry is characterized by rapidly changing
technology, frequent introductions of new services and products, evolving
industry standards and a high rate of business failures. Our business is also
subject to fundamental changes in the way Internet services are delivered. We
cannot predict the rate at which the market for our products and services will
grow, how quickly consumer tastes may change or whether new products will result
in market saturation. The evolving nature of the market for Internet services
may adversely affect our ability to attract new customers. Any significant
decline in demand for Internet
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connectivity services either generally or in particular target markets would
have a substantial adverse effect on our business and prospects.
Currently, Internet services are accessed primarily by computers and are
delivered by telephone lines. However, if the Internet becomes widely accessible
by other media, or if customer requirements change the way Internet access is
provided, we may have to acquire or develop new technology or modify our
existing technology to accommodate these developments. Attempting to keep our
services current with recent technological advances may require substantial time
and expense, and we may not be able to adapt our Internet service business to
alternate access devices and conduits. We may not be able to identify new
product and service opportunities as they arise or develop or bring new products
and services to market in a timely manner. To the extent that high-speed
Internet access is increasingly delivered by telephone and cable companies, our
business could be materially adversely affected.
Significant increases in attrition rates of our dial-up access subscribers and
business customers would adversely affect our operating results.
Dial-up access subscribers are permitted to discontinue our services
without penalty for any reason. From December 1997 through December 31, 1999,
the number of our customers increased from 1,500 to approximately 16,000, which
may result in an increase in our dial-up access subscriber attrition rate. A
significant increase in the attrition rate of our dial-up access subscribers,
including as a result of our recent shift in business emphasis, would have a
material adverse effect on our operating results.
In particular, because our current expansion strategy emphasizes marketing
our Internet services to businesses, the loss of our business customers would
have a significant impact on our operations. Customers of businesses we acquire
may also terminate their relationships with these businesses after we acquire
them.
We have limited experience in marketing our services and limited marketing and
customer support resources.
Our success depends to a significant degree on our ability to attract and
retain new customers. We have limited marketing experience and limited
marketing, customer support and other resources. Our business plan will also
require us to expand our customer service and support capabilities in order to
satisfy increasing customer demands. We may not be able to successfully expand
our customer service or support capabilities, and our marketing efforts may not
result in initial or continued acceptance of our Internet services.
We may not have the financial resources, technical expertise or marketing and
support capabilities to withstand intense competition in the Internet services
industry.
The market for Internet services is intensely competitive, and we expect
that competition will intensify in the future. There are no substantial barriers
to entry, and this industry is characterized by rapidly increasing numbers of
new market entrants and new Internet products and services.
Our competitors for Internet access services include many large companies
that have significantly greater market presence and financial, technical,
marketing and other resources than we do. We compete with international,
national and regional commercial Internet service providers; established online
services companies that currently offer Internet access; computer hardware and
software and other technology companies; national long distance carriers;
regional Bell operating companies; and cable operators. New competitors,
including large computer hardware and software, media, cable and
telecommunications companies, have also increased their focus on the Internet
access market. We also compete with smaller
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Internet service providers in the northeast United States that seek to provide
Internet access services to individuals and small businesses.
Our competition in the market for Internet services includes other Internet
service firms, technology integrators and strategic consulting firms. If we
increase our CLEC services to third parties, we will become subject to
competition from other CLECs and local telephone companies. Furthermore,
telecommunications providers with which we currently compete and may compete in
the future may have the ability to bundle Internet access with local and long
distance telecommunications services. This bundling of services may make it
difficult for us to compete effectively with the telecommunications providers
and may result in pricing pressure that could have an adverse effect on our
business, financial condition and results of operations.
Increased competition could result in significant price competition, which
in turn could result in significant price reductions. In addition, increased
competition for new customers could result in increased sales and marketing
expenses and related customer acquisition costs, which could materially
adversely affect our operating results. We may not be able to offset the effects
of any such price reductions or increased expenses through an increase in the
number of our customers or higher revenue from enhanced services. We may not
have the financial resources, technical expertise or marketing and support
capabilities to compete successfully, and the software, services or technologies
developed by others may render our services or technologies obsolete or less
marketable.
Computer viruses or software errors may disrupt operations, subject us to a risk
of loss, or expose us to liability.
Computer viruses may cause our systems to incur delays or other service
interruptions. In addition, the inadvertent transmission of computer viruses or
software errors in new services or products not detected until after their
release could expose us to a material risk of loss or litigation and possible
liability. If a computer virus affecting our systems is highly publicized, our
reputation could be materially damaged and we could lose revenues.
We lack effective methods for protecting our proprietary information.
We have no registered copyrights or patents or patent applications pending.
We do not have any proprietary applications software. We rely on a combination
of copyright and trademark laws, trade secrets, software security measures,
license agreements and nondisclosure agreements to protect our proprietary
information. It may be possible for unauthorized third parties to copy aspects
of, or otherwise obtain and use, our proprietary information. We employ
confidentiality agreements with our employees and non-disclosure agreements with
third-party vendors, but these agreements may not provide meaningful protection
of our proprietary information in the event of any unauthorized use or
disclosure of such information. Inappropriate use of the Internet by third
parties could also potentially jeopardize the security of confidential
information stored in our computer system relating to our customers, which could
subject us to third party liability and cause losses to us or our customers or
deter potential customers from using our services.
Third parties could claim that we infringe upon their intellectual property.
Our products, services and brand names may be found to infringe valid
copyrights, trademarks or other intellectual property rights held by third
parties. Any claims of infringement, with or without merit, could be time
consuming to defend, result in costly litigation, divert management attention,
require us to enter into costly royalty or licensing arrangements, compel us to
modify our technologies or services or prevent us from using important
technologies or services, any of which could damage our business and financial
condition.
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We may not be able to provide Internet access for our dial-up access subscribers
if our telecommunications carriers raise their rates or if they cease doing
business with us.
Our business substantially depends on the capacity, affordability and
security of our telecommunications networks. Only a small number of
telecommunications providers offer the network services we require. There has
been significant consolidation in the telecommunications industry, and further
consolidation could make us dependent on an even smaller number of providers. In
addition, our telecommunications carriers may not be able to provide the
capacity and security we require for our networks. Most of our
telecommunications services are provided pursuant to short-term agreements that
the providers can terminate or elect not to renew.
Any or all of our current telecommunications service providers could decide
not to provide us with service at rates acceptable to us, or at all, which would
prevent us from being able to provide Internet access to our dial-up access
subscribers. Our operating margins are sensitive to variations in prices of the
telecommunications services we purchase. Our business could be harmed if minimum
connection charges increase or become more prevalent. In addition, the
availability and pricing of telecommunications services varies geographically,
and we may not be able to obtain new or substitute telecommunications services
in desired geographic areas on commercially reasonable terms, or at all.
We may lose customers if our service providers do not deliver acceptable service
quality.
We rely on telecommunications companies and other third parties to provide
data communications capacity. These providers may experience disruptions in
service or may have limited capacity, which could disrupt our services. If
third-party service providers deliver unacceptable service or fail to provide
the communications capacity we require, as a result of a natural disaster,
operational disruption or other reasons, the quality of our Internet access
service would suffer, and customers could experience service disruptions and
might become dissatisfied with our Internet access service. We do not have
control over the network reliability and the quality of service of these third
parties and may not be able to provide consistently Internet access for our
dial-up access subscribers. Any accident, incident or system failure that causes
interruptions in our operations could have a material adverse effect on our
ability to provide Internet services to our customers and, in turn, our
business, financial condition and results of operations. In addition, if the
third-party service provider from which we lease the use of nationwide POPs were
to terminate its agreement with us and we were unable to locate an alternative
access provider, we would be unable to offer nationwide Internet access to
customers outside of the northeast United States.
Our operations require us to use significant resources in expanding and
protecting our network infrastructure and computer equipment.
Our operations depend upon the capacity, reliability and security of our
network infrastructure. We will be required to expand our network infrastructure
to accommodate increasing numbers of users and the range of information they may
wish to access as we increase our operations. Expanding our network
infrastructure will continue to demand significant financial, operational and
management resources, and we may not be able to expand our network
infrastructure to meet potential demand on a timely basis, at a commercially
reasonable cost, or at all. Service interruptions could also occur if usage of
our systems exceeds their capacity.
The success of our operations also depends on our ability to protect our
computer equipment against damage from fire, power failures, telecommunications
outages, natural disasters and similar events. Our network infrastructure is
vulnerable to break-ins, vandalism, security breaches and similar disruptions
from unauthorized tampering with our computer systems. These or other problems
caused by third parties could lead
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to material delays or interruptions in service to consumers, which would affect
our reputation and business operations.
We rely on strategic relationships with third parties.
We depend on agreements and arrangements with a variety of third party
partners, including providers of high-speed access capability and other CLECs.
The loss of any of our existing strategic relationships or any inability to
create new strategic partnerships in the future would cause disruptions to our
business, reduce any competitive advantages that these relationships may provide
over our competitors and adversely affect our ability to expand our operations.
In addition, some of the third parties with which we seek to enter into
relationships may view us as a competitor and refuse to do business with us.
The legal and regulatory environment that pertains to the Internet is uncertain
and may change.
Uncertainty and new regulations relating to the dissemination of
information over the Internet could increase our costs of doing business, slow
the growth of the Internet or subject us to liability, any of which could
adversely affect our business and prospects. There are currently few laws and
regulations directly governing access to or commerce on the Internet. The legal
and regulatory environment that pertains to the Internet is uncertain and may
change.
We may become subject to burdensome government regulation which could
increase our costs of doing business and/or subject us to liability.
New and existing laws may be interpreted to cover issues which include:
o content;
o user privacy;
o pricing controls;
o consumer protection;
o libel and defamation;
o copyright and trademark protection;
o characteristics and quality of services;
o sales and other taxes; and
o other claims based on the nature and control of Internet materials.
In addition, changes in the regulatory environment relating to the Internet
access industry, including regulatory changes which affect telecommunication
costs or our proposed CLEC services, could increase the likelihood or scope of
competition from local and regional telephone companies or others.
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<PAGE>
We may experience reduced revenue, loss of clients and harm to our reputation in
the event of unexpected network interruptions caused by system failures.
Our servers and software must accommodate a high volume of traffic. We have
experienced minor system interruptions in the past and we believe that system
interruptions may occur from time to time in the future. Any substantial
increase in demands on our services will require us to spend capital and
resources to expand and adapt our network infrastructure. If we are unable to
add additional software and hardware to accommodate increased demand, we could
experience unanticipated system disruptions and slower response times. Our
business interruption insurance may not adequately compensate us for any losses
that may occur due to any failures in our system or interruptions in our
services.
If we are unable to attract and retain qualified management and other personnel,
our business and operations could suffer.
Our success depends on the personal efforts of our key personnel. The loss
of the services of these individuals could have a material adverse effect on our
business and prospects. As we pursue our strategy to grow through acquisitions
our need for qualified personnel may increase further. In addition, employees of
businesses we acquire in the future may terminate their relationships with these
businesses after we acquire them. Our success also depends on our ability to
hire and retain additional qualified management, marketing, technical, financial
and other personnel. Competition for qualified personnel is intense, and we may
not be able to hire or retain additional qualified personnel.
The market price of our common stock may be highly volatile.
The market price of our common stock may be highly volatile, as has
recently been the case with the securities of other companies, particularly
Internet companies. Factors such as our operating results, announcements by us
or our competitors, introduction of new products or technologies by us or our
competitors and various factors affecting the securities markets generally may
have a significant impact on the market price of our common stock. Since the
conversion price of the series B convertible redeemable preferred stock that was
the subject of our recent public offering is less than the market price of the
common stock at the time of that offering, it will increase our net loss
applicable to common shareholders by approximately $6,148,000 in the first
quarter of 2000, which could affect the market price of our common stock.
Additionally, in recent years the stock markets have experienced a high level of
price and volume volatility, and market prices for the securities of many
companies have experienced wide price fluctuations which have not necessarily
been related to the operating performance of such companies.
Our common stock could be delisted from its trading market if we fail to
maintain certain requirements.
Our common stock is currently listed on the American Stock Exchange. In
order to continue to be listed on the American Stock Exchange, we will be
required to continue to achieve specified maintenance criteria. If we become
unable to maintain the continued listing requirements at any time on the
American Stock Exchange, our securities could be delisted, we might not qualify
for inclusion on the Nasdaq SmallCap Market, and trading in the delisted
securities, if any, would thereafter be conducted in the non-Nasdaq
overthe-counter market. As a result, investors in our securities could find it
more difficult to dispose of or obtain accurate quotations as to the market
value of our securities.
If we fail to keep our common or preferred stock on Nasdaq or the American
Stock Exchange and the trading price were to fall below $5.00 per share, trading
of the stock would become subject to the Securities
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<PAGE>
and Exchange Commission's penny stock rules. The penny stock rules require
additional disclosure by broker-dealers in connection with any trades involving
penny stock. If any of our securities were deemed to be a penny stock, the
additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from effecting transactions in our securities, which
could severely limit the ability of purchasers in this offering to sell our
securities in the secondary market.
We have a significant number of outstanding options, warrants and convertible
securities which could depress the market price of our common stock and could
interfere with our ability to raise capital in the future.
As of April 3, 2000, we had outstanding options and warrants to purchase
4,214,343 shares of our common stock at exercise prices ranging from $2.00 to
$13.85 per share. We have also granted repricing rights to purchase up to an
aggregate of 141,200 additional shares of our common stock. We have outstanding
857,900 shares of preferred stock outstanding convertible into shares of our
Common Stock at an initial price of $4.41 per share (equivalent to a conversion
rate of 3.4 shares of common stock for each share of preferred stock). To the
extent that the outstanding options, warrants or repricing rights are exercised,
or the preferred stock is converted, dilution to the percentage of ownership of
our stockholders will occur. Any sales in the public market of the shares
underlying such options, warrants, repricing rights and convertible preferred
stock may adversely affect prevailing market prices for our common stock.
Moreover, the terms upon which we will be able to obtain additional equity
capital may be adversely affected, since the holders of outstanding options and
warrants can be expected to exercise them at a time when we would in all
likelihood be able to obtain any needed capital on terms more favorable to us
than those provided in the outstanding options and warrants.
We or certain of our suppliers may experience problems with the Year 2000.
We depend on third party telecommunications and hardware suppliers and upon
our access to and the uninterrupted operation of the Internet. We have not
experienced any business interruptions or supplier delays from Year 2000
problems to date and have not discovered any Year 2000 problems in internal
computer systems material to our operations. However, our business would be
materially adversely effected if any interruptions in service result from an
inability of third party systems or our internal computer systems to recognize
the year 2000.
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USE OF PROCEEDS
Assuming that all of the warrants held by selling stockholders are
exercised, we will realize proceeds of approximately $11,510,300. We have agreed
to pay certain expenses in connection with this offering, currently expected to
be approximately $15,000. Proceeds will be used for working capital and
potential acquisitions. We will not receive any of the proceeds from the sale of
common stock by the selling stockholders.
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 25,000,000 shares of common stock, par value
$.01 per share, and 2,000,000 shares of preferred stock, par value $.01 per
share. As of April 3, 2000, there were 5,213,091 shares of common stock
outstanding and 875,900 shares of preferred stock outstanding designated as
series B convertible redeemable preferred stock.
Common Stock
The holders of our common stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
common stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of our company, the holders of common
stock are entitled to share in all assets remaining which are available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock.
Holders of shares of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
common stock. All of the outstanding shares of common stock are, and the shares
of common stock issuable upon exercise of warrants held by selling stockholders
will be, fully paid and nonassessable.
Preferred Stock
We are authorized to issue 2,000,000 shares of preferred stock from time to
time in one or more series, in all cases ranking senior to the common stock with
respect to payment of dividends and in the event of the liquidation, dissolution
or winding-up of our company. There are currently 875,900 shares of preferred
stock outstanding, designated as series B convertible redeemable preferred
stock. The Board has the power, without stockholder approval, to issue shares of
one or more series of preferred stock, at any time, for such consideration and
with such relative rights, privileges, preferences and other terms as the Board
may determine, including terms relating to dividend rates, redemption rates,
liquidation preferences and voting, sinking fund and conversion or other rights.
The rights and terms relating to any new series of preferred stock could
adversely affect the voting power or other rights of the holders of the common
stock or could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of our company.
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<PAGE>
Series B Convertible Redeemable Preferred Stock
General
In January 2000, our Board of Directors approved the issuance of series B
convertible redeemable preferred stock and the filing of a Certificate of
Designation with the Secretary of State of the State of Delaware for a new
series of preferred stock, $.01 par value, consisting of up to 1,250,000 shares.
This description is only a summary of the terms of the series B convertible
redeemable preferred stock that is qualified in its entirety by the rights,
preferences and limitations set forth in the Certificate of Designation. If you
wish to review further information regarding the preferred stock, see the
rights, preferences and limitations set forth in the Certificate of Designation,
a copy of which is attached as an exhibit to the registration statement relating
to the sale of our series B convertible redeemable preferred stock.
Ranking
The preferred stock ranks senior to our common stock in right of payment of
dividends and distributions upon liquidation, dissolution or winding up of our
company. The preferred stock also ranks senior to any other class of preferred
stock established in the future, unless the holders of a majority of the
outstanding shares of this preferred stock vote in favor of the establishment of
a class of preferred stock that ranks senior or equal to this preferred stock.
Dividends
Holders of shares of preferred stock will be entitled to receive annual
cumulative dividends of $.60 per share, out of legally available funds, payable
semi-annually on June 30 and December 31 of each year, commencing June 30, 2000.
The dividends will be payable either in cash or in shares of common stock, in
our sole discretion (except that dividends payable upon a redemption of the
preferred stock will be payable only in cash). Dividends will accrue and are
cumulative from the date of first issuance of the preferred stock and will be
payable to holders of record as they appear on our stock books on the record
dates to be fixed by the Board of Directors. The number of shares of common
stock to be issued as a dividend will be based on the average closing sales
price of the common stock on the five trading days immediately preceding the
record date for each dividend. No fractional shares of common stock will be
issued. Instead, we will pay the cash equivalent of any fractional share. We
anticipate that payments of dividends on our preferred stock will be made by
issuing additional shares of common stock for the foreseeable future.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of our company,
holders of shares of preferred stock will be entitled to receive, out of legally
available assets, a liquidation preference of $15.00 per share, plus an amount
equal to any accrued and unpaid dividends up to the payment date, before any
payment or distribution will be made to the holders of common stock or any other
capital stock that ranks junior to the preferred stock. Holders of shares of the
preferred stock will not be entitled to receive any liquidation preference on
their shares until the liquidation preference of any senior capital stock has
been paid in full.
Optional Redemption
If at any time after the date of issuance of preferred stock, the closing
sales price of the common stock has been $8.80 or more for any 15 consecutive
trading days, we may, at our option, by giving notice to the
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holders of preferred stock at any time during the five business days after the
last trading day in the 15 day trading period, redeem all of the preferred stock
for $15.00 plus the amount of accrued and unpaid dividends.
We will also have the option, at any time more than 180 days after the date
of issuance of the preferred stock, to redeem all of the preferred stock for
cash. The redemption price will depend on the date of the redemption, as
follows:
If the date of the redemption is more than 180 days after the date of
issuance of the preferred stock, we may redeem all of the preferred stock for
$22.50, plus the amount of accrued and unpaid dividends.
If the date of the redemption is more than 12 months after the date of
issuance of the preferred stock, we may redeem all of the preferred stock for
$18.75, plus the amount of accrued and unpaid dividends.
If the date of the redemption is more than 24 months after the date of
issuance of the preferred stock, we may redeem all of the preferred stock for
$17.25, plus the amount of accrued and unpaid dividends.
If the date of the redemption is more than 36 months after the date of
issuance of the preferred stock, we may redeem all of the preferred stock for
$16.50, plus the amount of accrued and unpaid dividends.
Conversion
The preferred stock is convertible into shares of common stock at any time
up to the day before the date fixed for redemption. Shares of common stock are
issuable upon conversion of a share of preferred stock at an initial price of
$4.41 (equivalent to a conversion rate of 3.4 shares of common stock for each
share of preferred stock). The conversion rate is subject to adjustment for
stock splits, reverse stock splits and other similar capitalization changes.
Also, the conversion rate is subject to adjustment for the issuance of rights or
warrants to holders of common stock entitling them to purchase common stock at a
price below the then-current market price, and for extraordinary dividends to
holders of stock junior or equal to the preferred stock. There are no other
provisions protecting against dilution of preferred stock resulting from the
sale of common stock at a price below the conversion rate or the then current
market price of our securities. No fractional shares of common stock will be
issued. Instead, we will pay the cash equivalent of any fractional shares.
Voting Rights
Generally, the holders of preferred stock will not be entitled to voting
rights unless required by law or except as to matters affecting their rights as
preferred stockholders, including the issuance of stock ranking on a parity with
or senior to the preferred stock upon liquidation or dissolution of our company.
If dividends on the preferred stock are in arrears and unpaid for six or
more dividend periods (whether or not consecutive), then the Board of Directors
will be increased by two members, who will be elected by the holders of the
then-outstanding shares of preferred stock. These voting rights will continue
until all dividends in arrears on the preferred stock are paid in full, or the
preferred stock is redeemed. In any case, the voting rights will terminate if at
any time there are fewer than 25,000 shares of preferred stock outstanding.
After the voting rights are terminated, the terms of the directors elected by
the preferred stockholders will terminate and the size of the Board of Directors
will be reduced by two members.
In connection with any vote where holders of preferred stock have the right
to vote, each outstanding share of preferred stock will be entitled to one vote.
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Public Warrants
There are currently outstanding public warrants to purchase 1,840,000
shares of our common stock at a price of $4.80 per share at any time until May
13, 2003.
We may redeem the public warrants at any time, upon notice of not less than
30 days, at a price of $.10 per public warrant, provided that the closing bid
quotation of our common stock on all 20 trading days ending on the third day
prior to the day on which we give notice has been at least $7.20. The public
warrant holders shall have the right to exercise their public warrants until the
close of business on the date fixed for redemption.
Transfer Agent and Warrant Agent
The transfer agent and registrar for our common stock and series B
convertible redeemable preferred stock and the warrant agent for our public
warrants is American Stock Transfer and Trust Company, 40 Wall Street, New York,
New York 10005.
SELLING STOCKHOLDERS
An aggregate of 141,844 shares of our common stock may be offered and sold
pursuant to this prospectus, comprised of 135,870 shares owned by certain
selling stockholders who purchased such shares in our December 1999 private
placement and 5,974 shares owned by a consultant. An aggregate of 40,196 shares
of common stock issuable upon the exercise of private placement warrants may be
offered and sold pursuant to this prospectus by certain of these selling
stockholders and a placement agent who received private placement warrants in
connection with the 1999 private placement. In addition, up to 311,300 shares of
our common stock issuable upon exercise of underwriter's warrants may be offered
by selling stockholders.
Of the private placement warrants, 21,662 entitle the holders thereof to
purchase one share of our common stock at an exercise price of $13.85 per share
until March 2002 and 18,534 entitle the holders to purchase one share of our
common stock at an exercise price of $6.07 per share until December 2002. Of the
underwriter's warrants, 151,300 entitle the holders to purchase one share of our
common stock at an exercise price of $6.60 per share until May 2003 and 160,000
entitle the holders to purchase one share of our common stock at an exercise
price of $7.92 per share until May 2003.
The following table sets forth certain information as of the date of this
Prospectus relating to the selling stockholders. None of the selling
stockholders has ever held any position or office with us or had any material
relationship with us, except that Werbel-Roth Securities, Inc. was the
underwriter of our initial public offering.
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<TABLE>
<CAPTION>
Shares Beneficially Owned
After Offering
--------------
Shares Beneficially Owned Shares Being
Name of Beneficial Owner Prior to Offering Offered Number Percent
- ---------------------------------- ----------------- ------------- ------ -------
<S> <C> <C> <C> <C>
Canadian Advantage Limited Partnership 115,819 84,024 40,460 *
Aberdeen Avenue LLC 94,438 84,023 19,080 *
Merchant Bancorp of America 13,615 8,019 5,596 *
Werbel-Roth Securities, Inc. 111,300 111,300 -- --
Howard Roth 90,000 90,000 -- --
Lawrence Feirstein 20,000 20,000 -- --
Myron Sayer 10,000 10,000 -- --
Comprehensive Capital Corporation 80,000 80,000 -- --
Martin Janis 5,974 5,974 -- --
</TABLE>
- ----------
* Less than one percent.
This table does not give effect to any shares of Common Stock that may be
issuable upon exercise of certain repricing rights granted to Canadian Advantage
Limited Partnership and Aberdeen Avenue LLC and which are offered hereby.
PLAN OF DISTRIBUTION
Sales of the shares may be made from time to time by the selling
stockholders. Such sales may be made on the American Stock Exchange and the
Nasdaq SmallCap Market, in another over-the-counter market, or on another
national securities exchange, any of which may involve crosses and block
transactions, in privately negotiated transactions or otherwise or in a
combination of such transactions at prices and on terms then prevailing or at
prices related to the then current market price, or at privately negotiated
prices. In addition, any shares covered by this prospectus which qualify for
sale pursuant to Section 4(1) of the Securities Act of 1933 or Rule 144
promulgated thereunder may be sold under such provisions rather than pursuant to
this prospectus. Without limiting the generality of the foregoing, the shares
may be sold in one or more of the following types of transactions:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange;
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<PAGE>
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the
selling stockholders may arrange for other brokers or dealers to
participate in the resale.
Brokers or dealers may receive compensation in the form of commissions,
discounts or concessions from selling stockholders in amounts to be negotiated
in connection with the sale. Such brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales and any such commission, discount or concession may be deemed to
be underwriting discounts or commissions under the Securities Act of 1933.
Compensation to be received by broker-dealers retained by the selling
stockholders in excess of usual and customary commissions, will, to the extent
required, be set forth in a supplement to this prospectus. Any dealer or broker
participating in any distribution of the shares may be required to deliver a
copy of this prospectus, including a supplement, to any person who purchases any
of the shares from or through such dealer or broker.
During such time as they may be engaged in a distribution of the shares the
selling stockholders are required to comply with Regulation M promulgated under
the Securities Exchange Act of 1934. With certain exceptions, Regulation M
precludes any selling stockholder, any affiliated purchasers and any
broker-dealer or other person who participates in such distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution
is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that
security. All of the foregoing may affect the marketability of the common stock.
It is possible that a significant number of shares may be sold and,
accordingly, such sales or the possibility thereof may have a depressive effect
on the market price of our common stock.
LEGAL MATTERS
Blank Rome Tenzer Greenblatt LLP, New York, New York, will pass upon the
validity of the common stock.
EXPERTS
Our financial statements as of December 31, 1999 and for the two years then
ended incorporated by reference in this prospectus have been included in
reliance upon the report of BDO Seidman, LLP, independent accountants, given
upon the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Frontline Communications Corporation has filed with the SEC, a Registration
Statement with respect to the securities offered by this prospectus. This
prospectus, filed as part of such Registration Statement, does not contain all
of the information set forth in, or annexed as exhibits to, the Registration
Statement, portions of which have been omitted in accordance with the rules and
regulations of the SEC. For further information with respect to Frontline
Communications Corporation and this offering, reference is made to the
Registration Statement, including exhibits filed therewith, which may be read
and copied at the SEC at Room 1024, Judiciary Plaza,
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<PAGE>
450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, 13th Floor, New York, New York 10048. You can obtain copies of these
materials at prescribed rates from the Public Reference Room of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
electronic filings made through the SEC's electronic data gathering, analysis
and retrieval system are publicly available through the SEC's worldwide web site
(http://www.sec.gov).
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus does
not offer to sell or buy any shares in any jurisdiction where it is unlawful.
The information in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Page
Incorporation of Certain Documents by Reference ............................
Prospectus Summary .........................................................
Risk Factors ...............................................................
Use of Proceeds ............................................................
Description of Capital Stock ...............................................
Selling Stockholders .......................................................
Plan of Distribution .......................................................
Legal Matters ..............................................................
Experts ....................................................................
Where You Can Find Additional Information ..................................
----------
================================================================================
================================================================================
2,428,936 Shares
FRONTLINE COMMUNICATIONS CORPORATION
Common Stock
----------
PROSPECTUS
----------
___________, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration $3,195.43
Printing and engraving costs *
Legal fees and expenses *
Accounting fees and expenses *
Miscellaneous *
Total *
- ----------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
the provisions entitling the Registrant's directors and officers to
indemnification from judgments, fines, amounts paid in settlement, and
reasonable expenses (including attorney's fees) as the result of an action or
proceeding in which they may be involved by reason of having been a director or
officer of the Registrant. In its Certificate of Incorporation, the Registrant
has included a provision that limits, to the fullest extent now or hereafter
permitted by the DGCL, the personal liability of its directors to the Registrant
or its stockholders for monetary damages arising from a breach of their
fiduciary duties as directors. Under the DGCL as currently in effect, this
provision limits a director's liability except where such director (i) breaches
his duty of loyalty to the Registrant or its stockholders, (ii) fails to act in
good faith or engages in intentional misconduct or a knowing violation of law,
(iii) authorizes payment of an unlawful dividend or stock purchase or redemption
as provided in Section 174 of the DGCL, or (iv) obtains an improper personal
benefit. This provision does not prevent the Registrant or its stockholders from
seeking equitable remedies, such as injunctive relief or rescission. If
equitable remedies are found not to be available to stockholders in any
particular case, stockholders may not have any effective remedy against actions
taken by directors that constitute negligence or gross negligence.
The Certificate of Incorporation also includes provisions to the effect
that (subject to certain exceptions) the Registrant shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request shall advance expenses to, any director or officer to the
extent that such indemnification and advancement of expenses is permitted under
such law, as may from time to time be in effect. In addition, the By-Laws
require the Registrant to indemnify, to the full extent permitted by law, any
director, officer, employee or agent of the Registrant for acts which such
person reasonably believes are not in violation of the Registrant's corporate
purposes as set forth in the Certificate of Incorporation. At present, the
<PAGE>
DGCL provides that, in order to be entitled to indemnification, an individual
must have acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the Registrant's best interests.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any charter provision, by-law, contract, arrangement,
statute 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 of 1933 and is, therefore, unenforceable.
Item 16. Exhibits
5 Opinion of Blank Rome Tenzer Greenblatt LLP *
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Blank Rome Tenzer Greenblatt LLP (included in Exhibit 5) *
24 Power of Attorney (included in the signature page of this registration
statement).
- ----------
* To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act; and
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease 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 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
<PAGE>
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 and Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
(2) That, for purposes 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.
(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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) That, 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 foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, in the City of Pearl
River, State of New York, on April 14, 2000.
FRONTLINE COMMUNICATIONS CORPORATION
By: /s/ Stephen J. Cole-Hatchard
------------------------------------------
Stephen J. Cole-Hatchard,
Chief Executive Officer
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Stephen J. Cole-Hatchard, as his true and lawful
attorney-in-fact and agent, with full power of substitution for him and in his
name, place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments (including post-effective amendments and amendments
thereto) to this Registration Statement on Form S-3 of Frontline Communications
Corporation and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Stephen J. Cole-Hatchard Chief Executive Officer, President and April 14, 2000
- --------------------------- Director (Principal Executive Officer)
Stephen J. Cole-Hatchard
/s/ Nicko Feinberg Chief Information Officer, Executive Vice April 14, 2000
- --------------------------- President of Technology and Director
Nicko Feinberg
/s/ Michael Olbermann Executive Vice President of Operations and April 14, 2000
- --------------------------- Director
Michael Olbermann
/s/ Vasan Thatham Chief Financial Officer and Executive Vice April 14, 2000
- --------------------------- President (Principal Accounting Officer)
Vasan Thatham
/s/ William A. Barron Director April 14, 2000
- ---------------------------
William A. Barron
/s/ Ronald C. Signore Director April 14, 2000
- ---------------------------
Ronald C. Signore
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated February 25, 2000, relating to the consolidated financial statements of
Frontline Communications Corporation (the "Company") appearing in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
We also consent to the reference to us under the caption "Experts" in the
prospectus.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
New York, New York
April 14, 2000
