As filed with the Securities and Exchange Commission on September 29, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
URSUS TELECOM CORPORATION
(Exact name of the Registrant as specified in its charter)
Florida 65-398306
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
440 Sawgrass Corporate Parkway, Suite 112, Sunrise, Florida 33325
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 846-7887
Luca M. Giussani Copy to:
Chief Executive Officer John Klusaritz, Esq.
URSUS TELECOM CORPORATION Swidler, Berlin Shereff Friedman LLP
440 Sawgrass Corporate Parkway 3000 K Street NW
Suite 112 Suite 300
Sunrise, Florida 33325 Washington, DC 20007-5116
(954) 846-7887 (202) 424-7500
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Title of Amount to be Proposed Maximum Proposed Amount
shares to be Registered Offering Price Maximum of
Registered Per Share (1) Aggregate Registration
Offering Price Fee
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Common Stock,
$.01 par value 149,053 $4.375 $652,106.88 $172.16
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(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, based on the average of the high and low prices of the common stock
on the Nasdaq National Market on September 25, 2000.
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 PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, dated September 29, 2000
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 2000
149,053 SHARES
URSUS TELECOM CORPORATION
COMMON STOCK
This prospectus relates to the offer and sale of up to 149,053 shares of
common stock $.01 par value per share from time to time by a holder of the
Company's common stock. The selling shareholder identified on page 21 of this
prospectus may offer and sell from time to time an aggregate of up to 149,053
shares of common stock.
We will not receive any proceeds from the sale to the public of the 149,053
shares of Ursus common stock by the selling shareholder.
The common stock is listed on the Nasdaq National Market under the symbol
"UTCC." On September 25, 2000, the last reported sales price as reported by
the Nasdaq National Market was $4.25 per share.
The information in this prospectus is not complete and may be changed. The
selling shareholder may not sell the common stock covered by this prospectus
until the registration statement filed with the SEC is effective. This
prospectus is not an offer to sell the common stock and it is not soliciting
an offer to buy the common stock in any state where the offer or sale is not
permitted.
Investing in the common stock involves a high degree of risk. Consider
carefully the "Risk Factors" beginning on page 5.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is September , 2000
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URSUS TELECOM CORPORATION
TABLE OF CONTENTS
Page
Where You Can Find More Information.................................... 1
Summary of Ursus's Business............................................ 2
Business Risks......................................................... 5
Recent Developments.................................................... 19
Special Note Regarding Forward-Looking Information.................... 21
Use of Proceeds....................................................... 21
Selling Shareholder................................................... 21
Plan of Distribution.................................................. 22
Legal Matters......................................................... 23
Experts............................................................... 23
Reports to Shareholders............................................... 23
Indemnification of Directors and Officers............................. 23
Glossary of Terms..................................................... 25
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other documents with
the SEC. You may read and copy any document we file at the SEC's public
reference room at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our reports, proxy statements and other information
filed with the SEC are also available to the public from our web sites at
www.ursustele.com or www.ursustel.net or at the SEC's web site at www.sec.gov.
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement contains more information than this
prospectus regarding Ursus and its common stock, including certain exhibits
and schedules. You can get a copy of the registration statement from the
sources listed above.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and later information that we
file with the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future filings
made by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the selling shareholders sell all of the
shares:
(1) Annual Report on Form 10-K for the year ended March 31, 2000 (File
No. 333-46197);
(2) Annual Report as Amended on Form 10-K/A for the year ended March 31,
2000 (File No. 333-46197);
(3) Quarterly Report on Form 10-Q for the three months ended June 30,
2000;
(4) Current Report on Form 8-K dated August 19, 1999;
(5) Current Report on Form 8-K dated February 18, 2000;
(6) Current Report on Form 8-K dated June 21, 2000; and
(7) Current Report as Amended on Form 8-K/A dated August 15, 2000.
You may request a copy of these and any future documents filed by Ursus,
at no cost, by writing or telephoning us at the following address:
Ursus Telecom Corporation
440 Sawgrass Corporate Parkway, Suite 112
Sunrise, Florida 33325
Attn: Investor Relations
(954) 846-7887
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THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SEC
(REGISTRATION NO. 333-_____). YOU SHOULD RELY ONLY ON THE INFORMATION
INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT.
WE HAVE AUTHORIZED NO ONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE
SELLING SHAREHOLDERS WILL NOT MAKE AN OFFER OF THEIR SHARES OF URSUS COMMON
STOCK IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
FOR YOUR CONVENIENCE, TECHNICAL TERMS AND ACRONYMS WHEN FIRST USED IN
THIS REGISTRATION STATEMENT ARE BOTH DEFINED WHEN FIRST USED AND DEFINED IN
THE GLOSSARY COMMENCING ON PAGE 23.
SUMMARY OF URSUS'S BUSINESS
We are a provider of international telecommunications services and offer
a broad range of discounted international and enhanced telecommunication
services, including United States originated long distance service,
direct-dial international service, Internet telephony and voice over the
Internet Protocol ("VOIP"), typically to small and medium-sized businesses and
individuals. Our geographic coverage includes Europe, Asia Pacific, Central
and South America, Africa, the Middle East and the United States. We intend
to continue to capitalize on the increased demand for high-quality
international telecommunications services resulting from the globalization of
the world's economies and the worldwide trend toward telecommunications
deregulation.
We have recently expanded our reach into Latin America and Spain through
the acquisition of Latin America Enterprises ('LAE') on June 1, 2000. LAE is a
provider of international long distance telecommunication services, primarily
through the sale of prepaid calling cards in airports, railroad stations and
other highly visible locations in the United States, Latin America and Spain.
The prepaid calling cards are distributed through manned kiosks and vending
machines. LAE supports its marketing efforts through branch offices and
affiliated companies located in 13 countries. LAE operates a switching
facility in Miami, Florida. We anticipate that we will consolidate this
facility into our Sunrise, Florida facility.
We have expanded our high margin retail customer subscriber base by
purchasing a customer base from a US based carrier on June 1, 2000. This
purchase also gave the Company a point of presence in Los Angeles, California,
Nigeria and Gibraltar.
Our primary service is call reorigination; however, we are increasingly
migrating calls to direct access using Internet Protocol ("IP") and other
methods. We also provide service to other carriers and resellers. Our retail
customer base, which includes corporations and individuals, is primarily
located in South Africa, Latin America, the Middle East (Lebanon and Egypt),
Germany and New Zealand. We operate a switched-based digital
telecommunications network out of our primary switching hub located in
Sunrise, Florida.
We have also developed an e-commerce site known as theStream.com. Our
goal for theStream.com is to become a leading communications portal on the
Internet and a one-stop e-commerce shop for global telecommunications
services. The site is running on an IBM RS/6000 server system, which
incorporates a series of high quality and client-friendly service options such
as PC to phone, phone to phone and other sophisticated web-centric
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applications. The site is anticipated to facilitate access to a host of
value-added telecommunications products and services. We have completed the
first two phases of the project and anticipate that a full marketing effort
will begin in the near future. Currently the site is operating without strong
marketing support, and, therefore, we have not generated significant revenues
to date.
We operate through a network of agents and resellers that allow to us
remain adaptable to a changing competitive environment. Some of our agents
use a proprietary agent support system developed and provided by us to provide
marketing, customer support, billing and collections, in local language and
time. We supply each of our agents with near real-time data for customer
management, usage analysis and billing from our local and wide area network.
Through our agent network, we are developing and maintaining close
relationships with vendors of telephone systems such as Siemens, Plessey and
Alcatel in key markets in order to promote our line of telecommunications
services.
In addition, we provide an array of basic and value added services to our
customers, which include:
- long distance international telephone services
- direct dial access for corporate customers
- dedicated access via a leased line for high volume users
- calling cards
- abbreviated or speed dialing
- switched Internet services
- itemized and multicurrency billing
- follow me calling or call forwarding
- enhanced call management and reporting services
- Web Centric PC to phone services
- Web Centric phone to phone services
We believe that our proprietary software system provides an efficient
infrastructure for back room processing, gives us a strategic advantage over
our competitors and will facilitate the rapid and economical consolidation of
acquired competitors, if any. To remain competitive, we plan to do the
following:
- Increase sales to existing customers
- Expand the reach and distribution capabilities of our telephone
service through our e-commerce web site, theStream.com.
- Provide wholesale services to other carriers
- Enter into selected acquisitions
- Expand the business generated by our existing agents
- Expand our primary digital switching platform and network access
"nodes" by using a hybrid network of Internet, Intranet and
circuit-based facilities
- A "node" is a specially configured multiplexer which
provides the interface between the local public switched
telephone network where the node is located and a
switch. The local public switched telephone network can
be accessed by the public through private dedicated
lines, wireless systems and pay phones. A node collects
and concentrates call traffic from its local area and
transfers it to a switch via private line for call
processing. Nodes permit us to extend our network into
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new geographic locations by accessing the local public
switched telephone network without deploying a switch
locally.
- Enhance our capabilities as a "direct access" provider by locating
switching platforms at network centers of major telecommunications providers,
such as MCI WorldCom, Cable and Wireless and other carriers and by deploying
smaller network access nodes in less populated service areas.
- Direct access is a means of accessing a network through
the use of a permanent point-to-point circuit typically
leased from a facilities-based carrier. The advantages
of direct access include (1) simplified premises-to-
anywhere calling, (2) faster call set-up times and (3)
potentially lower access and transmission costs,
provided there is sufficient traffic over the circuit to
generate economies of scale.
- Exploit our market penetration and technological sophistication by
using IP telephony technology, which processes data and/or voice transmission
over the Internet and Intranet.
- IP telephony creates the opportunity to bypass the
switched telephone network by using cost-effective
packet switched networks such as private Intranets
and/or the public Internet for the delivery of fax
and voice communications.
- Use IP telephony technology concurrently with call reorigination.
- Deploy IP telephony technology where feasible in order to create a
hybrid network capable of carrying significant amounts of customer traffic on
a low cost platform with a modest initial capital investment.
We currently operate points of presence located in the US cities of New
York, Los Angeles, and Sunrise, Florida, and in overseas locations in Germany,
the Czech Republic, Argentina, Peru, South Africa, Greece, Gibraltar, Nigeria
and Lebanon. Some of these points of presence are owned by us and others are
leased. The points of presence are scaleable and flexible platforms designed
for interconnection with our network and are built primarily using tier-1 IP
telephony vendor equipment such as Nortel, VocalTec and Cisco. The
scaleability of the points of presence permits us to quickly increase capacity
in increments at relatively low cost, either for a geographic region or a
customer. In addition, the point of presence architecture is flexible and
designed to easily integrate and support new services.
Our interactive communications portal, theStream.com, acts as a single-source,
on-line solution for our users and on-line marketing agents. Through
theStream.com, our users can:
- sign up for any of our services, including PC-to-phone and phone-
to-phone
- view a description of all of our services, including pricing
information
- download our software plug-in for our browser based PC-to-phone
application
- recharge their account, either by entering their credit card
information or authorizing automatic recharging
- send a PC-to-phone call.
- check real-time billing and usage information
- communicate by e-mail with a theStream.com customer service
representative
- view answers to frequently-asked questions through our interactive
communications portal
- view a description of our on-line agent program
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- sign up to serve as an on-line agent
- receive marketing tools to put on their own Web sites
- monitor their daily traffic and results
- view trends
- view commissions by promotions.
TheStream.com is a fully integrated component of our global network,
connected and interfaced on a real-time basis with our switches, routers,
billing systems and other enterprise systems. Our customers are able to
procure telecom and enhanced services in virtually every country throughout
the world, view their account history and review their billing in a real-time
environment.
In summary, we intend to become a significant provider of international
telecommunications services within emerging and deregulating markets. We plan
to maximize our growth and profit potential by (1) leveraging our existing
infrastructure and market penetration, (2) expanding our customer base, (3)
growing our Global IP and wholesale carrier to carrier business and (4)
capitalizing on marketing channels such as the Internet. We believe that we
can gain strategic advantages while capitalizing on the opportunities
presented by deregulation and technological advances in the global
telecommunications industry by using our independent agent network, efficient
back office systems and favorable relationships with U.S. and international
telecommunications carriers.
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FACTORS AFFECTING URSUS'S
BUSINESS, OPERATING RESULTS, AND FINANCIAL CONDITION
IN ADDITION TO OTHER INFORMATION IN THIS REGISTRATION STATEMENT AND
INFORMATION INCORPORATED BY REFERENCE, THE FOLLOWING RISK FACTORS SHOULD BE
CAREFULLY CONSIDERED IN EVALUATING URSUS AND OUR BUSINESS BECAUSE SUCH FACTORS
CURRENTLY MAY HAVE A SIGNIFICANT IMPACT ON OUR BUSINESS, OPERATING RESULTS,
AND FINANCIAL CONDITION. AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS REGISTRATION STATEMENT, ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS.
BUSINESS RISKS
OUR BUSINESS DEPENDS SUBSTANTIALLY UPON INDEPENDENT EXCLUSIVE AND NON
EXCLUSIVE AGENTS AND RESELLERS.
We provide our services through a network of independent exclusive and
non-exclusive agents, which market our services on a commission basis. Our
international market penetration primarily reflects the marketing, sales and
customer service activities of our agents. We enter into exclusive
relationships with some of our agents. The success of our business within the
exclusive territory largely depends on the effectiveness of the local agent in
conducting its business. We also sell our services to a growing number of
resellers, who sell our services on a wholesale basis either using our brand
name or their own.
As of March 31, 2000, we had approximately 205 active agents and 71
resellers operating throughout the world. Of our 276 agents and resellers, 5
were exclusive agents. The use of agents and resellers exposes us to
significant risks. We depend on the continued viability and financial
stability of these customers. For the year ended March 31, 2000 and 1999,
four customers generated approximately 38.8% and 44% of our revenues,
respectively. Our South African agent, which is our largest single agent,
accounted for approximately 13.8% and 22% of our revenues during the years
ended March 31, 2000 and 1999, respectively.
Our continuing success depends in substantial part on our ability to
recruit, maintain and motivate our agents. We are subject to competition in
the recruiting of agents from other organizations that use agents to market
their products and services. We could lose one or more significant agents in
the future. Our business may be harmed if one or more of these agents
suffered financial problems, terminated its relationship with us, or could not
satisfy customers. We could be exposed to lost revenues, bad debt expense,
lost customers, potential liability under contracts the agents commit us to
perform, and damage to our reputation.
Under certain local laws our exclusive arrangements with an agent might
be difficult or expensive to terminate. We have entered into non-compete
agreements with our agents which prohibit their competition with us during
their engagement and for a period of time after termination. However, we
cannot assure you that any particular non-compete agreement will be
enforceable as a practical matter or under the applicable laws of the
jurisdiction in which an agent operates.
INCREASED COMPETITION AND DEREGULATION MAY LEAD TO LOWER PROFITS MARGINS.
Historically, we have derived a significant portion of our revenues by
providing call reorigination services. We believe that our industry has
reached a stage of development where the higher gross profit margins
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associated with our early stages have moved to more moderate gross profit
margins. Deregulation and increased competition may cause the pricing
advantage of call reorigination relative to conventional international long
distance service to diminish and disappear in certain markets. Increased
competition is likely to cause international rates to decrease.
We may respond to the changing competitive environment by making certain
pricing, service or marketing decisions or entering into acquisitions or
strategic alliances. These actions could have a material adverse effect on
our business, financial condition and results of operations. To maintain our
customer base and attract new business we may have to offer direct access or
IP telephony services to certain destinations at prices significantly below
the current prices charged for call reorigination. In some markets, we may
try to maintain our existing call reorigination customers and attract new
customers through the use of direct access "call-through access methods,"
including IP telephony. Call-through access methods provide international
long distance service through conventional long distance on "transparent" call
origination.
Our overall gross profit margins may fluctuate in the future based on (1)
our mix of minutes sold to other carriers and international long distance
services sold directly to end-user customers and (2) our percentage of calls
using direct access and VOIP compared to call reorigination. As a result of
the foregoing factors, we may experience materially adverse circumstances that
could harm our business and reduce our common stock price.
FRAUD LOSS COULD MATERIALLY HARM OUR BUSINESS.
The telecommunications industry has historically been exposed to fraud
losses. We have implemented anti-fraud measures. In order to minimize losses
relating to fraudulent practices, we: (1) enter into employment agreements
with our employees, (2) limit and monitor access to our information systems
and (3) monitor use of our services. A failure to control fraud could
materially harm our business, financial condition and results of operations.
Fraud has historically been a more significant problem for large providers of
telecommunications services than it has for us, because our few employees and
switching facilities are relatively easier to monitor than those of the large
providers. We have recently seen an increase in fraud losses from individuals
who have obtained authorization codes and credit card information illegally.
We anticipate that this will continue to be a problem especially with our
entrance into the Internet e-commerce market. We have been working closely
with our third party credit card processors and our internal MIS staff in an
attempt to limit our exposure. We cannot assure you that we will be
successful in limiting our losses, which could have a material impact on our
results of operations and cash flows.
WE MAY HAVE DIFFICULTY ENHANCING OUR SYSTEMS OR INTEGRATING NEW TECHNOLOGY
INTO IT.
We believe our information systems are sufficient for our current
operations. However, our systems will require enhancements, replacements and
additional investments to continue their effectiveness and enable us to manage
an expanded Network. We may have difficulty enhancing our systems or
integrating new technology into them. If we are unable to implement any
required system enhancement, acquire new systems or integrate new technology
in a timely and cost effective manner, it could have a material adverse effect
on our business, financial condition and results of operations.
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THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
We depend on the efforts of our senior officers and on our ability to
hire and retain qualified management personnel. The loss of any key personnel
could materially and adversely effect our business and our future prospects.
We have entered into employment agreements with certain of our senior
officers. We have obtained key person life insurance, of which we are the
beneficiaries, on the lives of Messrs. Giussani and Chaskin in the amount of
$2 million each. Our future success will depend on our ability to attract and
retain key personnel to help us with the growth and development of our
business.
FOREIGN EXCHANGE RATE RISKS THAT ARE NOT OFFSET COULD HARM OUR BUSINESS.
We bill primarily in United States Dollars and are generally paid by
customers outside of the United States either in United States Dollars or in
local currency at predetermined exchange rates. Substantially all of the
costs to develop and improve our operations have been, and will continue to
be, denominated in United States Dollars. Both increases and decreases in the
United States Dollar create risks for us that could harm our business. For
example, if the United States Dollar appreciates relative to the local
currency, our services will grow more expensive relative to our competitors,
such as the ITOs, that use the local currency. Any depreciation of the value
of the United States Dollar relative to the local currency increases the cost
of our capital expenditures made in the local currency.
Our focus on emerging markets increases the risks that currency
fluctuations pose. Currency speculation and fluctuation could impact our
operations in Latin America, South Africa, the Middle East or our other
emerging markets. We monitor exposure to currency fluctuations, and may, as
appropriate, use certain financial hedging instruments in the future.
However, we cannot assure you that the use of financial hedging instruments
will successfully offset exchange rate risks, or that such currency
fluctuations will not harm our business and financial condition.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL MONEY IF WE NEED IT.
Based on our current business model, we are actively seeking new sources
of equity or other financing to support our increased capital requirements due
to the continued development of theStream.com, the ongoing development and
migration to IP telephony and the expansion of our international airport's and
seaport's points of presence. We anticipate that such funding is required in
the near term and we cannot assure you that sufficient funding will occur in
time to fulfill our current needs and sustain our business model. If there is
any delay in obtaining this additional financing we will implement our
contingency plans, which could include a reduction in personnel and other
administrative expenses. Such contingency plans could affect our future
growth. The amount of our future capital requirements will depend upon many
factors, including performance of our business, the rate and manner in which
it expands, staffing levels and customer growth, as well as other factors not
within our control, including competitive conditions and regulatory or other
government actions. If our plans or assumptions change or prove to be
inaccurate or our future financings proves to be insufficient or unavailable
to fund our growth and operations, then some or all of our development and
expansion plans could be delayed or abandoned.
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WE MAY FACE AN INCREASED RISK OF VIOLATING THE FOREIGN CORRUPT PRACTICES ACT
AS WE FOCUS ON EMERGING MARKETS.
We must comply with the Foreign Corrupt Practices Act ("FCPA"). The FCPA
generally prohibits U.S. companies and their intermediaries from bribing
foreign officials for the purpose of obtaining or keeping business. We may be
exposed to liability under the FCPA as a result of past or future actions
taken without our knowledge by agents, strategic partners or other
intermediaries. Violations of the FCPA may also call into question the
credibility and integrity of our financial reporting systems. Our focus on
certain emerging markets may tend to increase this risk. Liability under the
FCPA could have a material adverse effect on our business, financial condition
and results of operation.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS COULD MATERIALLY IMPACT
OUR STOCK PRICE.
Our quarterly operating results have fluctuated and may continue to
fluctuate due to various factors. These factors include the following:
- the timing of investments
- general economic conditions
- specific economic conditions in the telecommunications industry
- the effects of governmental regulation and regulatory changes
- user demands
- capital expenditures
- costs relating to the expansion of operations
- the introduction of new services by us or our competitors
- the mix of services sold and the mix of channels through which our
services are sold
- changes in prices charged by our competitors
- foreign exchange fluctuations
Variations in our operating results could materially affect the price of
our common stock.
OUR CONTROLLING SHAREHOLDERS CAN ELECT A MAJORITY OF THE MEMBERS OF THE BOARD
OF DIRECTORS AND APPROVE FUNDAMENTAL CORPORATE TRANSACTIONS.
A group of shareholders (the "Controlling Shareholders") beneficially own
an aggregate of 66.3% of the outstanding shares of our common stock and 100%
of our Series A Preferred Stock. The Controlling Shareholders can elect a
majority of the board of directors and approve certain fundamental corporate
transactions including mergers, consolidations and sales of assets. As long
as the Controlling Shareholders hold the shares of Ursus, third parties cannot
gain control of Ursus except through purchases of common stock beneficially
owned or otherwise controlled by the Controlling Shareholders.
Owners of the Series A Preferred Stock have the exclusive right to elect
three (3) of the six (6) members of our board of directors, and one member
less than a numerical majority of any expanded board of directors. The common
stock votes cumulatively for the election of directors. Therefore, the
Controlling Shareholders can elect at least one member of the board of
directors so long as they control at least 33.3% of the outstanding common
stock. A smaller percentage would be required if the size of our board of
directors is expanded. Each of the Controlling Shareholders has advised us
that their current intention is to continue to hold all of the shares of
Series A Preferred Stock and substantially all of the common stock
beneficially owned by them. However, we cannot guarantee that any of the
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Controlling Shareholders will not decide to sell all or a portion of their
holdings at some future date. We also cannot be certain that holders of
common stock, will be allowed to participate in a transfer by any of the
Controlling Shareholders of a controlling interest in the Ursus or will
realize any premium with respect to shares of common stock.
WE INTEND TO PURSUE NEW STREAMS OF REVENUE, WHICH WE HAVE NOT ATTEMPTED TO
GENERATE BEFORE AND WHICH MAY NOT BE PROFITABLE.
We intend to pursue revenue from new Web-based opportunities, such as
banner and other forms of Internet-based advertising, as well as revenue-
sharing opportunities. We have not previously attempted to generate these
types of revenues. We intend to devote significant capital and resources to
create these new revenue streams and we cannot ensure that these investments
will be profitable.
IF WE FAIL TO ESTABLISH AND MAINTAIN REVENUE SHARING AND OTHER RELATIONSHIPS
OUR ABILITY TO INCREASE OUR SALES WOULD SUFFER.
We currently have strategic relationships with a number of Portals and
Internet service providers. We depend on these relationships to:
- distribute our products to potential customers
- increase usage of our services
- build brand awareness
- cooperatively market our products and services
We believe that our success depends, in part, on our ability to develop
and maintain strategic relationships with leading Internet companies and
computer hardware and software companies, as well as key marketing
distribution partners. In cases where our products and services are
integrated into our strategic partners' product and service offerings, our
ability to increase sales depends upon a timely release of these offerings.
If any of our strategic relationships are discontinued or if the release of
these partners' products and services that integrate our products and services
are delayed, sales of our products and services and our ability to maintain or
increase our customer base may be substantially diminished.
WE MAY NOT BE ABLE TO SUCCEED IN THE INTENSELY COMPETITIVE MARKET FOR OUR
SERVICES.
The market for Internet voice, fax and other value-added services is
extremely competitive and will likely become more competitive. IP and
Internet telephony service providers, such as IBASIS, GRIC Communications and
ITXC Corp., route traffic to destinations worldwide and compete directly with
us. Also, Internet telephony service providers that focus on retail
customers, such as Net2Phone and Delta Three, compete directly with us. In
addition, major telecommunications carriers, such as AT&T, Deutsche Telekom,
MCI WorldCom and Qwest Communications, have all entered or announced plans to
enter the Internet telephony market. Many of these companies are larger than
we are and have substantially greater managerial and financial resources than
we do. Intense competition in our markets can be expected to continue to put
downward pressure on prices and adversely affect our profitability. We offer
no assurance that we will be able to compete successfully against our
competitors and we may lose customers or fail to grow our business as a result
of this competition.
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IF THE MARKET FOR INTERNET TELEPHONY, INCLUDING VOIP AND NEW SERVICES,
DOES NOT DEVELOP AS WE HAVE PROJECTED, OR DEVELOPS MORE SLOWLY THAN PROJECTED,
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL BE MATERIALLY
AND ADVERSELY AFFECTED.
Our customers may be reluctant to use our services for a number of
reasons, including:
- perceptions that the quality of voice transmitted over the Internet
is low
- perceptions that Internet telephony is unreliable
- our inability to deliver traffic over the Internet with significant
cost advantages
The growth of our business depends on carriers and other communications
service providers generating an increased volume of international voice and
fax traffic and selecting our network to carry at least some of this traffic.
If the volume of international voice and fax traffic fails to increase, or
decreases, and these third-parties do not employ our network, our ability to
become profitable will be materially and adversely affected.
IF OUR CUSTOMERS DO NOT PERCEIVE OUR SERVICE TO BE EFFECTIVE OR OF HIGH
QUALITY, OUR BRAND AND NAME RECOGNITION WOULD SUFFER.
We believe that establishing and maintaining a brand and name recognition
is critical for attracting and expanding our targeted client base. We also
believe that the importance of reputation and name recognition will increase
as competition in our market increases. Promotion and enhancement of our name
will depend on the effectiveness of our marketing and advertising efforts and
on our success in continuing to provide high-quality products and services,
neither of which can be assured. If our customers do not perceive our service
to be effective or of high quality, our brand and name recognition would
suffer.
POLITICAL, ECONOMIC AND LEGAL RISKS IN EMERGING MARKETS COULD MATERIALLY AND
ADVERSELY EFFECT OUR OPERATIONS.
Historically, we have derived significant amounts of our revenues from
operations in emerging markets. Our business is subject to numerous risks and
uncertainties, including political, economic and legal risk in these markets.
These risks include:
- unexpected changes in regulatory requirements and telecommunication
standards
- tariffs, customs, duties and other trade barriers
- technology export and import restrictions or prohibitions
- delays from customs brokers or government agencies
- seasonal reductions in business activity
- difficulties in staffing and managing foreign operations
- problems in collecting accounts receivable
- foreign exchange controls which restrict or prohibit repatriation
of funds
- potentially adverse tax consequences resulting from operating in
multiple jurisdictions with different tax laws
- the sensitivity of our revenues and cost of long distance services
to changes in the ratios between outgoing and incoming traffic, and
our ability to obtain international transmission facilities
- overall network security
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- regulatory requirements and impediments from airport and port
authorities
POLITICAL RISK
The political systems of many of the emerging market countries in which
we operate or plan to operate are slowly emerging from a legacy of
totalitarian rule. Political conflict and, in some cases, civil unrest and
ethnic strife may continue in some of these countries for a period of time.
Many of the economies of these countries are weak, volatile and reliant on
substantial foreign assistance. Expropriation of private businesses in such
jurisdictions remains a possibility. Expropriation can occur by an outright
taking or by confiscatory taxes or other policies. Our operations could be
materially and adversely impacted by these factors. In addition to the
uncertainty regarding our ability to generate revenue from foreign operations
and expand our international presence, there are certain risks inherent in
doing business on an international basis, including:
- changing regulatory requirements
- increased bad debt and fraud
- legal uncertainty regarding liability, tariffs and other trade
barriers
- political instability
- politically adverse tax consequences
We cannot assure you that one or more of these factors will not
materially adversely affect the growth of our business or our customer base.
LEGAL RISK
Legal systems in emerging market countries frequently have little or no
experience with commercial transactions between private parties. The extent
to which contractual and other obligations will be honored and enforced in
emerging market countries is largely unknown. Accordingly, we cannot assure
you that we can protect and enforce our rights in emerging market countries.
If we cannot protect our rights, it may have a material adverse effect upon
our operations. Additionally, we operate in uncertain regulatory
environments. The laws and regulations applicable to our activities in
emerging market countries are in general, new, in some cases, incomplete, and
subject to arbitrary change. The local laws and regulations may not become
stable in the future and any changes could harm our business, financial
condition or results of operations.
WE FACE COMPETITORS WITH GREATER RESOURCES IN MARKETS WITH LOW BARRIERS TO
ENTRY.
Many current or potential competitors have substantially greater
financial, marketing and other resources than us. If our competitors devote
significant additional resources to targeting our customer base in our
geographic markets, then our business, financial condition and results of
operations could be harmed.
We anticipate that the markets in which we operate or plan to operate
will continue to deregulate. Competitors with greater resources than us could
enter these markets and acquire our customers. We may have to (1) reduce our
prices to maintain our customer base, (2) increase our investments in
telecommunications infrastructure and (3) increase marketing expenditures to
address the increased competition. Competition could increase our operating
costs in these markets and adversely impact our business.
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We offer or intend to offer new services or services that have previously
been provided only by the incumbent telecommunications operators ("ITOs") in
certain geographic areas. The ITO is the dominant carrier and is often
government owned or protected. We may be unable to react to any significant
international long distance rate reductions imposed by ITOs to counter
external competitive threats. We may also be unable to increase our traffic
volume or reduce our operating costs sufficiently to offset any resulting rate
decreases. This may negatively impact our business and profitability.
Our other competition and potential competition includes:
- various independent providers and prepaid phone card distributors
similar to us in size and resources
- major international carriers and their global alliances
- cable television companies
- wireless telephone companies
- Internet access providers
- large-end users which have dedicated circuits or private networks
We cannot assure you that we will be able to compete successfully against new
or existing competitors. See "Increased competition and deregulation may lead
to lower profits."
RAPID CHANGES IN TECHNOLOGY AND CUSTOMER REQUIREMENTS COULD PLACE US AT A
COMPETITIVE DISADVANTAGE.
Rapid and significant technological advancements and introductions of new
technological products and services characterize our industry. As new
technologies develop, we may be placed at a competitive disadvantage.
Competitive pressures may force us to implement new technologies at
substantial cost. In addition, competitors may implement new technologies
before we do or provide enhanced services at more competitive costs. We may
not be able to implement technologies on a timely basis or at an acceptable
cost. One or more of the technologies we currently use or implement in the
future, may not be preferred by customers or may become obsolete. If we
cannot (1) respond to competitive pressures, (2) implement new technologies on
a timely basis, or (3) offer new or enhanced services, then our business,
financial condition and results of operations could be harmed. See "Increased
competition and deregulation may lead to lower profits," and "We face
competitors with greater resources in markets with low barriers to entry."
A NETWORK FAILURE THAT INTERRUPTS OPERATIONS COULD HAVE A MATERIAL ADVERSE
EFFECT ON US.
Our success largely depends upon our ability to deliver high quality,
uninterrupted telecommunication services. We must protect our software and
hardware from loss and damage. A systems or hardware failure that interrupts
our operations could have a material adverse effect on our business. We
currently operate our primary switching facility in Sunrise, Florida.
Physical damage to the switch facility could not be remedied by using other
facilities in a different location. This could have a material adverse effect
on our operations.
Our success also depends on our ability to handle a large number of
simultaneous calls, which our systems may not be able to accommodate. We
expect the volume of simultaneous calls to increase significantly as we expand
our operations. Our network hardware and software may not be able to
accommodate this additional volume. If we fail to maintain an appropriate
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level of operating performance, or if our service is disrupted, our reputation
could be hurt and we could lose customers.
If we expand and call traffic grows as expected, there will be increased
stress on our hardware, circuit capacity and traffic management systems. Our
operations also require us to successfully expand and integrate new and
emerging technologies and equipment. This may also increase the risk of a
systems or hardware failure and result in further strains. We cannot
guarantee that system failures will not occur. We attempt to mitigate
customer inconvenience in the event of a system disruption by routing traffic
to other circuits and switches which may be owned by other carriers. We also
maintain insurance in commercially reasonable amounts. However, significant
or prolonged system failures, or difficulties for customers in accessing and
maintaining connection would result in uninsurable damage. Damage may
include: harm to our reputation, attrition of customers and financial loss.
OUR EXPOSURE TO CREDIT RISK AND BAD DEBTS WILL INCREASE AS WE GROW.
As we expand our business and move into new territories our exposure to
credit risk will increase. Many of the foreign countries that we operate in
do not have established credit bureaus. This makes it more difficult to
determine the creditworthiness of potential customers and agents. Under our
exclusive agency arrangements, the agent is responsible for analyzing the
creditworthiness of the customer and assuming the credit risk. We believe
that this has minimized our direct credit risk in the past, and, therefore,
our bad debt expenses have historically been low. However, as we continue to
place less reliance on these exclusive arrangements, our risk to bad debt
losses will grow. In certain circumstances, we have supported our agency
relationships by bearing some credit losses. We cannot assure you that our
bad debt expense will not rise significantly above current levels. Our
experience indicates that a certain portion of past due receivables will never
be collected and that bad debt is a necessary cost of conducting business in
the telecommunications industry.
OUR ABILITY TO MANAGE AND RESPOND TO GROWTH WILL BE CRITICAL FOR SUCCESS.
We have experienced significant growth in the past. Our ability to
manage and respond to growth will be critical to our success. Interruptions
of or a decline in the quality of our services because of expansion
difficulties or an inability to effectively manage expanding operations could
materially harm our business. We plan to grow by expanding our service
offerings in deregulating markets in Africa, the Middle East, Latin America
and targeted areas of Asia and Europe. We anticipate that future growth will
depend on a number of factors, including (1) the effective and timely
development of customer relationships, (2) the ability to enter new markets
and expand in existing markets, and (3) the recruitment, motivation and
retention of qualified agents and the establishment of strategic alliances or
agreements with carriers and revenue share agreements relating to the
marketing initiative of theStream.com. Our continued growth requires greater
management, operational and financial resources.
As we grow, we may have difficulty accurately forecasting our
telecommunications traffic. Inaccurate forecasts may cause us to:
- make investments in insufficient or excessive transmission
facilities
- incur disproportionate fixed expenses
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- force us to route excessive overflow traffic to other carriers
where the quality of services may not be commensurate with the
transmission quality we provide
We cannot assure you that we can add services or expand our geographic
markets. Existing regulatory barriers to our current or future operations may
not be reduced or eliminated. Even if we add services or expand into new
markets, our administrative, operational, infrastructure and financial
resources and systems may not sustain our growth and success. See "Rapid
changes in technology and customer requirements could place us at a
competitive disadvantage."
EXPANSION BY ACQUISITIONS, STRATEGIC ALLIANCES AND OTHER BUSINESS COMBINATIONS
COULD ADVERSELY IMPACT OUR OPERATING RESULTS.
We may acquire businesses and technologies that complement or augment our
existing businesses, services and technologies. Integrating any newly
acquired businesses or technologies could be expensive and time-consuming. We
may not be able to integrate any acquired business successfully. Moreover, we
may need to raise additional funds through public or private debt or equity
financing to acquire any businesses, which could dilute the value of shares
already issued or result in the incurrence of additional indebtedness. We may
not be able to operate acquired businesses profitably or otherwise implement
our growth strategy successfully. In addition, we may face the following
risks with any business combination:
- the difficulty of identifying appropriate acquisition candidates or
partners
- the difficulty of assimilating the operations of the respective
entities
- the potential disruption of our ongoing business
- possible costs associated with the development and integration of
such operations
- the potential inability to maximize our financial and strategic
position by successfully incorporating licensed or acquired
technology into our service offerings
- the failure to maintain uniform standards, controls, procedures and
policies
- the impairment of relationships with employees, customers and
agents as a result of changes in management
- higher customer attrition with respect to customers obtained
through acquisitions
- diversion of management resources
- difficulty in obtaining any required regulatory approvals and
licensing
- increased foreign exchange risk
- risks associated with entering new markets
Additionally, business combinations may not:
- result in increased sales or an expanded customer base
- give us a presence in new territories
- allow us to effectively penetrate our target markets
We may not be successful in overcoming these risks or any other problems
encountered with business combinations. This could have a material adverse
effect on our operating results.
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TERMINATION OF CARRIER SERVICE AGREEMENTS COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
We obtain most of our transmission capacity under volume-based resale
arrangements with facilities-based and other carriers, including ITOs. Two
carriers provide the majority of our transmission capacity. Under these
arrangements, we are subject to the risk of unanticipated price fluctuations,
service restrictions and cancellations. With the exception of the Bahamas,
Lebanon and Argentina, we have not experienced sudden or unanticipated price
fluctuations, service restrictions or cancellations. We believe that our
relationships with our carriers are generally satisfactory. However, the
deterioration or termination of our arrangements, or our inability to enter
into new arrangements with one or more carriers, could have a material adverse
effect upon our cost structure, service quality, network coverage, results of
operations and financial condition.
WE RELY ON UNPATENTED TECHNOLOGY TO MAINTAIN OUR COMPETITIVE POSITION.
We rely on unpatented proprietary know-how and continuing technological
advancements to maintain our competitive position. A failure to protect our
rights to unpatented trade secrets and know-how could negatively impact our
business. We have entered into confidentiality and invention agreements with
certain of our employees and consultants. However, we cannot assure you that
the agreements will be honored or that we will be able to effectively protect
our rights to our unpatented trade secrets and know-how. We cannot assure you
that our competitors will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to our trade
secrets and know-how.
GOVERNMENT REGULATION, ENFORCEMENT AND INTERPRETATION OF TELECOMMUNICATION
LAWS AND REGULATIONS IS UNPREDICTABLE AND SUBJECT TO CHANGE.
Our business may be harmed if we do not obtain or retain the necessary
governmental approvals for our services and transmission methods. Regulatory
compliance problems could adversely impact our business. Our interstate and
international facilities-based and resale services are regulated by the
Federal Communications Commission ("FCC"). Regulations promulgated by the FCC
could change. In addition, the international telecommunications industry is
subject to international treaties and agreements, and to laws and regulations
that vary from country to country. Enforcement and interpretation of these
laws and regulations can be unpredictable and are often subject to informal
views of government officials and ministries in each country. In some cases,
government officials and ministries may be influenced by ITOs.
We may be presented with the following potential risks and problems:
- In some countries, we may need government approval to provide
international telecommunications service that will compete with
state-authorized carriers
- Our operations may be affected by increased regulatory requirements
in a foreign jurisdiction
- Transit agreements or arrangements may be affected by laws or
regulations in either the transited or terminating foreign
jurisdiction
- Future regulatory, judicial, legislative or political changes could
prohibit us from offering services
- Regulators or third parties could raise material questions about
our compliance with applicable laws or regulations
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We have pursued, and expect to continue to pursue, a strategy of
providing our services to the maximum extent we believe to be permissible
under applicable laws and regulations. To the extent that the interpretation
or enforcement of applicable laws and regulations is uncertain or unclear, our
aggressive strategy may result in our (1) providing services or using
transmission methods that are found to violate local laws or regulations or
(2) failing to obtain required approvals in violation of local laws and
regulations. If we believe we will be subject to enforcement actions by the
FCC or the local authority, we will seek to modify our operations or
discontinue operations to comply with laws and regulations. However, even if
violations are corrected, we may be subject to fines, penalties or other
sanctions. If our interpretation of applicable laws and regulations proves
incorrect, we could lose, or be unable to obtain, regulatory approvals
necessary to provide certain of our services or to use certain of our
transmission methods. We could also have substantial monetary fines and
penalties imposed against us.
WE ALSO FACE THE FOLLOWING SPECIFIC REGULATORY RISKS:
RESTRICTION OF CALL REORIGINATION BY CERTAIN COUNTRIES MAY PREVENT US
FROM PROVIDING SERVICES.
Some countries restrict or prohibit call reorigination. A substantial
number of countries have prohibited certain forms of call reorigination.
These prohibitions have caused us to stop providing call reorigination
services in the Bahamas and may require us to do so in other jurisdictions in
the future. As of December 1, 1999, reports had been filed with the ITU
stating that the laws of 100 countries prohibit call reorigination.
If a foreign jurisdiction expressly prohibits call reorigination using
uncompleted call signaling, and has attempted but failed to enforce its laws
against U.S. service providers, the FCC may require U.S. carriers to stop
providing call reorigination services. In extreme circumstances, the FCC may
revoke the U.S. carrier's authorization. To date, the FCC has ordered
carriers to cease providing call reorigination using uncompleted call
signaling to customers in the Philippines. Except as discussed in this
Registration Statement, we have not been notified by any regulator or
government agency that we are not in compliance with applicable regulations.
THE PROVISION OF CALL ORIGINATION IN SOUTH AFRICA WITHOUT A LICENSE MAY
VIOLATE THE TELECOMMUNICATIONS ACT OF 1996.
For the fiscal year ended March 31, 2000, South Africa comprised our most
significant single market and accounted for approximately 13.8% of our total
revenues. In South Africa, our agent's provision of certain call
reorigination services may be subject to the Telecommunications Act of 1996
(the "SA Telecommunications Act") and the Post Office Act of 1958. The SA
Telecommunications Act permits a party, who is issued a telecommunications
license, to provide services other than public switched services. We believe
that our agent may provide call reorigination services to customers in South
Africa without a license. However, the telecommunications regulator in South
Africa ("SATRA") has ruled that the provision of call reorigination services
to customers in South Africa without a license violates the SA
Telecommunications Act. Several entities, including our agent, filed a
lawsuit to stay and reverse SATRA's ruling on the basis that SATRA lacks the
authority to issue such a ruling and that the SA Telecommunications Act does
not prohibit the provision of call reorigination services. SATRA has agreed
not to prosecute any person in the call reorigination industry unless the
South African courts rule that it may. It is anticipated that final
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adjudication of this lawsuit could take up to four or five years. If our
agent is found to be providing telecommunications service without a required
license, it could be subject to (1) fines, (2) termination of its call
reorigination service to customers in South Africa and (3) possible denial of
license applications to provide services. We cannot guarantee that the courts
in South Africa will not rule that call reorigination is illegal, or that the
South African legislature will not promulgate an explicit prohibition on call
reorigination. Any adverse legal action could harm our business.
THE FCC MAY LIMIT REFILING.
The FCC is currently considering a 1995 request (the "1995 Request") to
limit or prohibit the practice where a carrier routes traffic originating from
Country A and destined for Country B through its facilities in Country C. The
FCC has permitted third country calling where all countries involved consent
to the routing arrangements. This is called "transiting." Under certain
arrangements referred to as "refiling," the carrier in Country B does not
consent to receiving traffic from Country A and does not realize the traffic
it receives from Country C is originating from Country A. While our revenues
attributable to refiling arrangements are minimal, refiling may constitute
more of our operations in the future. The FCC has not stated whether refiling
arrangements are inconsistent with U.S. or International Telecommunications
Union ("ITU") regulations. If the FCC determines that refiling violates U.S.
and/or international law, it could negatively impact our future operations.
WE COULD FACE PENALTIES IF WE VIOLATE THE FCC'S INTERNATIONAL SETTLEMENTS
POLICY.
We are required to conduct our facilities-based international business in
compliance with the FCC's international settlements policy (the "ISP"). The
ISP establishes the permissible arrangements for facilities-based carriers
that are based in the U.S. and their foreign counterparts for the termination
of traffic over each respective network. Although not yet effective, the FCC
recently adopted new rules that remove the ISP for arrangements between U.S.
carriers and non-dominant foreign carriers (i.e., foreign carriers that lack
market power). In addition, the FCC removed the ISP for arrangements with any
carrier (dominant or non-dominant) to certain competitive routes, where
settlement rates are at least 25 percent below the FCC's applicable benchmark
settlement rates. These routes currently include Canada, the United Kingdom,
Sweden, Germany, Hong Kong, the Netherlands, Denmark and Norway. Certain
confidential filing requirements still apply to dominant carrier arrangements.
Several of our arrangements with foreign carriers are subject to the ISP. The
FCC could take the view that one or more of these arrangements do not comply
with the existing ISP rules. A traffic arrangement that does not comply with
the ISP may need FCC approval. If the FCC, on its own initiative or in
response to a challenge filed by a third party, determines that our foreign
carrier arrangements do not comply with FCC rules, it may (1) issue a cease
and desist order, (2) impose fines or (3) in extreme circumstances, revoke or
suspend our FCC authorizations. This could have a material adverse effect on
our business, financial condition and results of operations.
WE COULD FACE PENALTIES IF WE VIOLATE THE FCC'S TARIFF REQUIREMENTS FOR
INTERNATIONAL LONG DISTANCE SERVICES.
We are required to file with the FCC a tariff containing the rates, terms
and conditions for our international telecommunications services. We are also
required to file with the FCC any agreements with customers that have rates,
terms, or conditions that are different from our tariff. The FCC or a third
party could bring an action against us if we (1) charge rates other than those
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set forth our tariff or a customer agreement filed with the FCC, (2) violate
our tariff or filed customer agreement or (3) fail to file with the FCC
carrier-to-carrier agreements. Any actions could result in fines, judgments
or penalties and could have a material adverse impact on our business,
financial condition and results of operation.
RECENT AND POTENTIAL FCC ACTIONS MAY HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS.
Regulatory action that has been and may be taken in the future by the FCC
may enhance the intense competition faced by Ursus. The FCC has established
lower ceilings for the rates that U.S. carriers will pay foreign carriers for
the termination of international services. The FCC also recently changed its
rules to implement a World Trade Organization agreement, which in part allows
U.S. carriers to accept certain exclusive arrangements with certain foreign
carriers. The implementation of these changes could have a material adverse
effect on our business, financial condition and results of operations.
WE COULD FACE PENALTIES IF WE VIOLATE U.S. DOMESTIC LONG DISTANCE SERVICE
REGULATIONS.
Our ability to provide domestic long distance service in the United
States is regulated by the FCC and state Public Service Commissions ("PSCs").
The FCC and PSCs regulate interstate and intrastate rates, respectively,
ownership of transmission facilities, and the terms and conditions under which
our domestic U.S. services are provided. In general, neither the FCC nor the
relevant state PSCs exercise direct oversight over prices charged for our
services or our profit levels. However, either or both may do so in the
future. Federal and state law and regulations require that we file tariffs
listing the rates, terms and conditions of services provided. Accordingly,
the following three factors could have a material adverse effect on our
business financial condition and results of operation:
- any failure to maintain proper federal and state tariffs or
certifications
- any failure to file required reports
- any difficulties or delays in obtaining required authorizations
The FCC also imposes some requirements for marketing of telephone
services and for obtaining customer authorization for changes in the
customer's primary long distance carrier. If these requirements are not met,
we may be subject to fines and penalties.
POSSIBLE FCC REGULATIONS MAY PUT US AT A COST DISADVANTAGE.
Long distance carriers, such as Ursus, may have to purchase access
services from local exchange carriers ("LECs") to originate and terminate
calls in connection with their services. Access charges represent a
significant portion of our cost of U.S. domestic long distance services.
Generally, access charges are regulated by the FCC for interstate services and
by PSCs for intrastate services. The FCC is reviewing its regulation of LEC
access charges to better account for increasing levels of local competition.
If these proposed rate structures are adopted, we could be placed at a
significant cost disadvantage compared to larger competitors.
The FCC has also adopted certain measures to implement the 1996
Telecommunications Act that will impose new regulatory requirements. One
requirement is the contribution of some portion of telecommunications revenues
to a universal service fund designated to fund affordable telephone service
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for consumers, schools, libraries and rural healthcare providers. These
contributions became payable beginning in 1998 for all interexchange carriers
but not for providers of solely international services. We are a provider of
international services and are therefore, generally not subject to the
contribution requirements. However, some of our business is subject to the
contribution requirements at a rate of approximately $10,000 per month.
The FCC issued an order on October 9, 1997, concluding that interexchange
carriers must compensate payphone owners at a rate of $.284 per call for all
calls using their payphones. On January 28, 1999, the U.S. Court of Appeals
for the D.C. Circuit agreed with the ruling, but reduced the rate to $.24 per
call. As this ruling applies only to domestic payphones, our costs are not
significant. However, this cost could increase as our customer base expands.
FCC APPROVAL FOR TRANSFERS OF CONTROL COULD DELAY OR PREVENT CHARGES OF
CONTROL.
The FCC and certain state agencies must approve assignments and transfers
of control. An assignment is a transaction in which an authorization is moved
from one entity to another. A transfer of control is a transaction in which
the authorization remains held by the same entity, but there is a change in
the entities that control the authorized carrier. The approval requirements
may delay, prevent or deter a change in control or an acquisition of another
company. The FCC also imposes certain restrictions on U.S.-licensed
telecommunications companies that are affiliated with foreign
telecommunications carriers. The FCC could restrict our ability to provide
service on certain international routes if we (1) become controlled by or
under common control with a foreign telecommunications carrier or (2) obtain a
greater than 25% interest in or control over a foreign telecommunications
carrier.
ACTIONS BY BATELCO BLOCK OUR ABILITY TO SERVICE BAHAMIAN CUSTOMERS.
We entered into an operating agreement with the Bahamas Telephone Company
("Batelco") to provide international telecommunications services to customers
in the Bahamas. In the past, Batelco has taken several actions designed to
block our ability to offer services to customers in the Bahamas. We believe
Batelco's actions violate the terms of our operating agreement and are
inconsistent with U.S. policy. For the fiscal year ended March 31, 2000 and
1999, we derived approximately 2.9% of our revenues from services we provided
in the Bahamas.
RISKS ASSOCIATED WITH THE YEAR 2000.
As a result of completing our Year 2000 readiness project prior to
December 31, 2000 we were able to avoid any significant problems that may have
resulted due to the impact of the Year 2000. These problems, which were
widely reported in the media, could have caused malfunctions in certain
software and databases that use date sensitive processing relating to the Year
2000 and beyond. To date we are not aware of the occurrence of any
significant Year 2000 problem.
We did not incur any significant costs in completing our Year 2000
readiness project. No significant costs are expected as we continue to
monitor our systems for any undiscovered Year 2000 problems.
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RISKS RELATED TO THE INTERNET AND INTERNET TELEPHONY INDUSTRY
IF THE INTERNET DOES NOT CONTINUE TO GROW AS A MEDIUM FOR VOICE AND FAX
COMMUNICATIONS, OUR BUSINESS WILL SUFFER.
The technology that allows voice and fax communications over the
Internet, and the delivery of other value-added services, is still in its
early stages of development. Historically, the sound quality of calls placed
over the Internet was poor. As the Internet telephony industry has grown,
sound quality has improved, but the technology requires further refinement.
Additionally, as a result of the Internet's capacity constraints, callers
could experience delays, errors in transmissions or other interruptions in
service. Transmitting telephone calls over the Internet must also be accepted
as an alternative to traditional voice and fax service by communications
service providers. Because the Internet telephony market is new and evolving,
predicting the size of this market and its growth rate is difficult. If our
market fails to develop, then we will be unable to grow our customer base and
our results of operations will be adversely affected.
IF THE INTERNET INFRASTRUCTURE IS NOT ADEQUATELY MAINTAINED, WE MAY BE UNABLE
TO MAINTAIN THE QUALITY OF OUR SERVICES AND PROVIDE THEM IN A TIMELY AND
CONSISTENT MANNER.
Our future success will depend upon the maintenance of the Internet
infrastructure, including a reliable network backbone with the necessary
speed, data capacity and security for providing reliability and timely
Internet access and services. To the extent that the Internet continues to
experience increased numbers of users, frequency of use or bandwidth
requirements, the Internet may become congested and be unable to support the
demands placed on it and its performance. The reliability of the Internet may
also decline thereby and impair our ability to complete calls using the
Internet at consistently high quality. The Internet has experienced a variety
of outages and other delays as a result of failures of portions of its
infrastructure or otherwise. Any future outages or delays could adversely
affect our ability to complete calls. Moreover, critical issues concerning
the commercial use of the Internet, including security, cost, ease of use and
access, intellectual property ownership and other legal liability issues,
remain unresolved and could materially and adversely affect both the growth of
Internet usage generally and our business in particular.
WE CANNOT BE CERTAIN THAT OUR ABILITY TO PROVIDE OUR COMMUNICATIONS SERVICES
USING THE INTERNET WILL NOT BE ADVERSELY AFFECTED BY COMPUTER VANDALISM.
Recently, computer vandals have caused certain leading Internet sites to
shut down temporarily and have materially affected the performance of the
Internet during key business hours by bombarding targeted sites with numerous
false requests for data. While we do not operate any websites like those
recently affected, we do rely on the Internet to deliver our international
communications services. If the overall performance of the Internet is
seriously harmed by such website attacks or other acts of computer vandalism
and fraud, our ability to deliver our communication services over the Internet
could be adversely impacted and we may have to increase the amount of traffic
we have to carry over alternative networks, including the more costly public-
switched telephone network. In addition, traditional business interruption
insurance may not cover losses we could incur because of any such disruption
of the Internet. While some insurers are beginning to offer insurance
products purporting to cover these losses, we do not maintain any such
insurance at this time.
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INTERNATIONAL GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD LIMIT OUR
ABILITY TO PROVIDE OUR SERVICES OR MAKE THEM MORE EXPENSIVE.
The regulatory treatment of Internet telephony outside of the United
States varies widely from country to country. A number of countries currently
prohibit or limit competition in the provision of traditional voice telephony
services. Some countries prohibit, limit or regulate how companies provide
Internet telephony. Some countries have indicated they will evaluate proposed
Internet telephony service on a case-by-case basis and determine whether to
regulate it as a voice service or as another telecommunications service, and
in doing so potentially impose settlement rates on Internet telephony
providers. Finally, many countries have not yet addressed Internet telephony
in their legislation or regulations. Increased regulation of the Internet
and/or Internet telephony providers, or the prohibition of Internet telephony
in one or more countries, could limit our ability to provide our services or
make them more expensive.
In addition, as we make our services available in foreign countries, such
countries may claim that we are required to qualify to do business in that
particular country, that we are otherwise subject to regulation, including
requirements to obtain authorization, or that we are prohibited in all cases
from conducting our business in that foreign country. Our failure to qualify
as a foreign corporation in a jurisdiction in which we are required to do so
or to comply with foreign laws and regulations could seriously restrict our
ability to provide services in such jurisdiction, or limit our ability to
enforce contracts in that jurisdiction. We cannot assure you that our agents
are currently in compliance with any such requirements or that they will be
able to continue to comply with any such requirements. The failure of our
agents to comply with applicable laws and regulations could prevent us from
being able to conduct business with them. Additionally, it is possible that
laws may be applied by the United States and/or other countries to transport
services provided over the Internet, including laws governing:
- sales and other taxes
- user privacy
- pricing controls
- characteristics and quality of products and services
- consumer protection
- cross-border commerce, including laws that would impose tariffs,
duties and other import restrictions
- copyright, trademark and patent infringement
- claims based on the nature and content of Internet materials,
including defamation, negligence and the failure to meet necessary
obligations
If foreign governments or other bodies begin to regulate or prohibit
Internet telephony, this regulation could have a material adverse effect on
our ability to attain or maintain profitability.
THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO DOMESTIC GOVERNMENTAL REGULATION
AND LEGAL UNCERTAINTIES WHICH COULD PREVENT US FROM EXECUTING OUR BUSINESS
PLAN.
While the FCC has tentatively decided that information service providers,
including Internet telephony providers, are not telecommunications carriers
for regulatory purposes, various companies have challenged that decision.
Congress is not completely satisfied with the conclusions of the FCC and the
FCC could impose greater or lesser regulation on our industry. The FCC is
currently considering, for example, whether to impose surcharges or other
regulations upon certain providers of Internet telephony, primarily those
which provide Internet telephony services to end-users located within the
United States.
Aspects of our operations may be, or become, subject to state or federal
regulations governing universal service funding, disclosure of confidential
communications, copyright and excise taxes. We cannot assure you that
government agencies will not increasingly regulate Internet-related services.
Increased regulation of the Internet may slow its growth. This regulation may
also negatively impact the cost of doing business over the Internet and
materially adversely affect our ability to attain or maintain profitability.
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RECENT DEVELOPMENTS
On February 10, 2000, as part of the Private Placement, Ursus entered
into a purchase agreement to sell 615,115 shares of our common stock for $7
million to an institutional group of investors. The net proceeds to us after
deducting expenses was approximately $6.6 million. We also granted the
investors 279,998 five year warrants to buy common stock at $15.3956 per
share. Ursus has provided the investors with certain anti-dilution
protections for a maximum of 30 months with respect to the shares sold and
warrants issued. However, except for the warrants, the anti-dilution
protection period will end on the completion of a firm commitment underwritten
primary public offering of stock during calendar year 2000. Under the terms
of the anti-dilution clause, the investors would receive a share price
adjustment in the event of a subsequent issuance of common stock at a price
which is less than the price they paid. Existing employee stock options,
warrants and certain other future issuances as defined in the purchase
agreement would be excluded from the anti-dilution adjustment.
In connection with the Private Placement, Ursus entered into a
registration rights agreement with the investors, which provides for the
registration of the common stock and the common stock underlying the warrants
with the SEC. The registration statement became effective on April 14, 2000.
On June 1, 2000, we acquired the retail customer base and certain assets
of a United States based carrier for 298,105 shares of the our Common Stock
which had a fair value of approximately $1.9 Million on the date of the
acquisition. We are amortizing the customer base over the estimated run-off
period of the customers, not to exceed five years.
We have also acquired a switch and other equipment from the seller for
approximately $95,000 in cash and 33,000 shares of the Ursus' common stock
valued at $271,920 based on the closing price of our common stock on June 1,
2000. These assets are being depreciated over their remaining estimated
useful lives in accordance with the Ursus' depreciation policy.
In connection with the transaction Ursus will pay contingent
consideration on the excess of the average billed amounts to the acquired
customer base during the months of September, October, and November 2000 over
the June billed amount, if any. We have the option to pay the contingent
consideration in either cash or stock by December 31, 2000.
On June 13, 2000, pursuant to a Stock Purchase Agreement and Merger
Agreement (collectively, the "Agreements") dated as of June 1, 2000, the
Company, through a subsidiary, acquired Latin American Enterprises ("LAE") and
purchased all the issued and outstanding common stock of various affiliated
companies. LAE is a provider of international long distance
telecommunication services, primarily through the sale of prepaid calling
cards in airports and other highly visible locations in the United States,
Latin America and Spain. The prepaid calling cards are distributed through
manned kiosks and vending machines. LAE supports its marketing efforts
through branch offices and affiliated companies located in 13 countries. LAE
operates a switching facility in Miami, Florida. Pursuant to the Agreements,
the shareholders of LAE and the affiliated companies received aggregate
consideration of 450,000 shares of Ursus's common stock together with $65,000
in cash and warrants to purchase an additional 200,000 shares of our common
stock at a price of $15.50 per share. Based upon the closing price of the our
common stock on June 1, 2000 and the fair market value of the other
consideration given, the aggregate consideration is valued at approximately
$4.0 million.
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EMPLOYEES
As of August31, 2000 we had 122 full-time employees in the United States.
None of our employees are covered by a collective bargaining agreement. We
believe that our relationship with our employees is satisfactory.
TRADEMARKS
We have traditionally relied upon the common law protection of our trade
name afforded under various local laws, including the United States. However,
we intend to file for trademark protection of the Ursus name in the United
States. It is possible that prior registration and/or uses of the mark or a
confusingly similar mark may exist in one or more of such countries, in which
case the we may be precluded from registering and/or using the Ursus mark
and/or logo in such countries.
ITEM 2. PROPERTIES.
------ ----------
We currently occupy approximately 11,990 square feet of office space in
Sunrise, Florida, which serves as our principal executive office and 6,000
square feet of office space in Clearwater, Florida, which we assumed upon our
acquisition of Access. With our acquisition of LAE we have assumed 5497 square
feet of office and warehouse space in Miami. The leases have total annual
rental obligations of approximately $380,000. The lease in Sunrise expires on
April 30, 2003. The lease in Clearwater expires March 31, 2001. The lease in
Miami expires in May, 2004. We believe that our office space is adequate for
our current purposes.
ITEM 3. LEGAL PROCEEDINGS.
------ -----------------
Access is involved as plaintiff and defendant in a legal action, as
described below, which is incident to its business. Our management does not
believe that this action will have a material impact on our financial
condition.
In February 1998, Access filed an action against Edwin Alley, d/b/a Phone
Anywhere ("Alley") in the United States District Court for the Middle District
of Florida claiming that Alley, a former sales agent for Access, breached his
sales agreement with Access, wrongfully diverted customers and business to
Access's competitors, misappropriated Access's trade secrets, breached
fiduciary duties and other duties owed to Access and engaged in unfair
competition. Access sought compensatory damages, injunctive relief and a
declaratory judgment. Alley denied the material allegations in Access's
complaint and asserted a counterclaim in which he claimed breach of contract
by and unjust enrichment of Access on account of Access's solicitation of
customers located by Alley and to which Alley claimed contractual rights.
Subsequent to the filing of the federal court action, Alley commenced a
parallel proceeding in the Circuit Court of the Sixth Judicial Circuit,
Pinellas County, Florida. In that action Alley asserted essentially the same
claims and sought the same relief as in his federal counterclaim. Access, as
defendant, counterclaimed in the Pinellas County proceeding, asserting the
same claims as in its federal complaint. The Pinellas County proceeding was
stayed pending resolution of the federal action. Shortly before trial in the
federal action, the District Court determined that it
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lacked jurisdiction to hear the action and dismissed the federal court
proceeding. The stay was thereupon lifted in the Pinellas County proceeding
and the parties have advised the court of their intention to file cross-
motions for summary judgment against one another.
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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS MADE
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED
("THE "ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). WORDS SUCH AS "MAY," "WILL," "CONTINUE,"
"PROJECT," "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS,"
"ESTIMATES," AND SIMILAR EXPRESSIONS IDENTIFY SUCH FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO
KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES. THESE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES COULD CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE,
ACHIEVEMENTS AND PROSPECTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR
FORECASTED. YOU SHOULD NOT RELY ON THESE FORWARD-LOOKING STATEMENTS, WHICH
REFLECT ONLY OUR OPINION AS OF THE DATE OF THIS REGISTRATION STATEMENT. WE DO
NOT ASSUME ANY OBLIGATION TO REVISE FORWARD-LOOKING STATEMENTS. YOU SHOULD
ALSO CAREFULLY REVIEW THE RISK FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS
WE FILE FROM TIME TO TIME WITH THE SEC, PARTICULARLY OUR ANNUAL REPORT ON FORM
10-K, THE QUARTERLY REPORTS ON FORM 10-Q AND CURRENT REPORTS ON FORM 8-K.
USE OF PROCEEDS
We will not receive any proceeds from the sale to the public of the
149,053 shares of Ursus common stock by the selling shareholder.
SELLING SHAREHOLDER
We issued 331,105 shares of common stock to the selling shareholder,
listed in the table below. We are registering the 149,053 shares of common
stock to permit the selling shareholder to resell the common stock when they
deem appropriate and to permit the selling shareholders' pledgees, donees,
transferees or other successors-in-interest that receive their common stock or
warrants from a selling shareholder as a gift, partnership distribution or
other non-sale related transfer after the date of this prospectus to resell
the common stock when they deem appropriate.
The 331,105 shares of common stock were issued to Justice Holding
Corporation in connection with an Asset Purchase Agreement dated June 1, 2000.
Of the 331,105 shares of common stock, 298,105 shares represented the
consideration for the customer base and 33,000 shares were issued in exchange
for certain switch equipment. We have agreed to register 50% of the customer
base consideration or a total of 149,053 shares. After the completion of this
offering, the selling shareholder will retain 182,052 shares of common stock,
which amounts to 2.196% of Ursus' common stock.
The selling shareholder is in no way associated with us. The following
table sets forth the name of the selling shareholder, the number of shares of
our common stock owned by the selling shareholder as of September 15, 2000,
the number of shares that may be offered under this Prospectus. The number of
shares in the column "Number of Shares Offered by this Prospectus" represent
all of the shares that the selling shareholder may offer under this
prospectus. We currently have no agreements with the selling shareholder
regarding the sale of any of the shares. The shares offered by this
prospectus may be offered from time to time by the selling shareholder named
below.
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Number of Shares Number of Shares
Name of Selling Shareholder (1) Currently Owned Offered by this Prospectus
------------------------------- --------------- ---------------------------
Justice Holding Corporation 331,105 149,053
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(1) To the best of our knowledge, the selling shareholder named in the table
above has sole voting and investment power with respect to all shares shown as
beneficially owned by such selling shareholder.
PLAN OF DISTRIBUTION
The common stock will be offered and sold by the present or any
subsequent shareholder from time to time in the over-the-counter market, in
negotiated transactions, or by a combination of these methods, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at
prices related to such market prices or at negotiated prices. A selling
shareholder may elect to engage a broker or dealer to effect sales in one or
more of the following transactions: (a) block trades in which the broker or
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,
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus, (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers, (d) pro
rata distributions as part of the liquidation and winding up of the affairs of
the shareholder, (e) privately negotiated transactions and (f) exchange
distributions and/or secondary distributions in accordance with the rules of
the Nasdaq. In effecting sales, brokers and dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers
or dealers may receive commissions or discounts from shareholders in amounts
to be negotiated (and, if such broker-dealer acts as agent for the purchaser
of such shares, from such purchaser). Broker-dealers may agree with the
selling shareholders to sell a specified number of such shares at a stipulated
price per share, and, to the extent such broker-dealer is unable to do so
acting as agent for a selling shareholder, to purchase as principal any unsold
shares at the price required to fulfill the broker-dealer commitment to such
selling shareholder.
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 sales to and through other broker-dealers, including
transactions of the nature described above) in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at
prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such shares commissions as described above. The selling
shareholder may also pledge such shares to banks, brokers or other financial
institutions as security for margin loans or other financial accommodations
that may be extended to such selling shareholders, and any such bank, broker
or other institution may similarly offer, sell and effect transactions in such
shares.
The selling shareholder may from time to time deliver all or a portion of
the shares to cover a short sale or sales upon the exercise, settlement, or
closing of a call equivalent position or a put equivalent position.The selling
shareholder may sell all or any portion of the shares in reliance upon Rule
144 under the Securities Act. Shares not sold pursuant to the Registration
Statement of which this prospectus is a part may be subject to certain
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restrictions under the Securities Act and could be sold, if at all, only
pursuant to Rule 144 or another exemption from the registration requirements
of the Securities Act. In general, under Rule 144, a person (or persons whose
shares are aggregated) who has satisfied a one-year holding period may, under
certain circumstances, sell within any three-month period a number of shares
which does not exceed the greater of one percent of our outstanding shares of
common stock or the average weekly reported trading volume of our common stock
during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares by a person who is not an
affiliate of Ursus and who has satisfied a two-year holding period without any
volume limitation. Therefore, both during and after the effectiveness of the
Registration Statement, sales of the shares may be made by the selling
shareholder pursuant to Rule 144.
The selling shareholder and any broker-dealers or agents that participate
with the selling shareholder in sales of shares of common stock may be deemed
to be "underwriters" within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-
dealers or agents and any profit on the resale of the shares of common stock
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Ursus will pay all expenses incident to the sale of the common stock to
the public other than underwriting discounts and selling commissions.
LEGAL MATTERS
Swidler Berlin Shereff Friedman LLP, located in Washington, D.C. has
passed upon certain legal matters regarding the common stock for Ursus.
EXPERTS
The consolidated financial statements of Ursus Telecom Corporation
appearing in Ursus Telecom Corporation's Annual Report (Form 10-K) for the
year ended March31, 2000 have been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS
We plan to furnish our shareholders with annual reports containing
audited financial statements and a report thereon by independent certified
public accountants and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 the Act and is
therefore unenforceable.
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The Registrant's Articles of Incorporation indemnifies, to the fullest
extent permitted by the Law of the State of Florida, the directors of the
Registrant.
Every person (and the heirs, executors and administrators of such person)
who is or was a director, officer, employee or agent of the Corporation or of
any other company, including another corporation, partnership, joint venture,
trust or other enterprise on which such person serves or served at the request
of the Corporation shall be indemnified by the Corporation against all
judgments, payments in settlement (whether or not approved by court), fines,
penalties and other reasonable costs and expenses (including attorneys' fees
and costs) imposed upon or incurred by such person in connection with or
resulting from any action, suit, proceeding, investigation or claim, civil,
criminal, administrative, legislative or other (including any criminal action,
suit or proceeding in which such person enters a plea of guilty or nolo
contendere or its equivalent), or any appeal relating thereto which is brought
or threatened either by or in the right of the Corporation or such other
company (herein called a "Derivative Action") or by any other person,
governmental authority or instrumentality (herein called a "Third-Party
Action") and in which such person is made a party or is otherwise involved by
reason of his being or having been such director, officer, employee or agent
or by reason of any action or omission or alleged action or omission by such
person in his capacity as such director, officer, employee or agent if either
(i)such person is wholly successful, on the merits or otherwise, in defending
such derivative or third-party action or (ii)in the judgment of a court of
competent jurisdiction or, in the absence of such a determination, in the
judgment of a majority of a quorum of the Board of Directors (which quorum
shall not include any director who is a party to or is otherwise involved in
such action), or, in the absence of such a disinterested quorum, in the
opinion of independent legal counsel (iii)in the case of a Derivative Action,
such person acted without negligence or misconduct in the performance of his
duty to the Corporation or such other company or (iv)in the case of a
Third-Party Action, such person acted in good faith in what he reasonably
believed to be the best interests of the Corporation or such other company,
and in addition, in any criminal action, had no reasonable cause to believe
that his action was unlawful; provided that, in the case of a Derivative
Action, such indemnification shall not be made in respect of any payment to
the Corporation or such other company or any shareholder thereof in
satisfaction of judgment or in settlement unless either (x) a court of
competent jurisdiction has approved such settlement, if any, and the
reimbursement of such payment or (y) if the court in which such action has
been instituted lacks jurisdiction to grant such approval or such action is
settled before the institution of judicial proceedings, in the opinion of
independent legal counsel the applicable standard of conduct specified
hereinbefore has been met, such action was without substantial merit, such
settlement was in the best interests of the Corporation or such other company
and the reimbursement of such payment is permissible under applicable law. In
case such person is successful on the merits or otherwise in defending part of
such action, or in the judgment of such a court or such quorum of the Board of
Directors or in the opinion of such counsel has met the applicable standard of
conduct specified in the preceding sentence with respect to part of such
action, he (she) shall be indemnified by the Corporation against the
judgments, settlements, payments, fines, penalties, and other costs and
expenses attributable to such part of such action.
The foregoing rights of indemnification shall be in addition to any
rights which any such director, officer, employee or agent may otherwise be
entitled any agreement or vote of shareholders or at law or in equity or
otherwise.
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In any case in which, in the judgment of a majority of such a
disinterested quorum of the Board of Directors, any such director, officer or
employee will be entitled to indemnification under the foregoing provisions of
this Article, such amounts as they deem necessary to cover the reasonable
costs and expenses incurred by such person in connection with the action,
suit, proceeding, investigation or claim prior to final disposition thereof
may be advanced to such person upon receipt of an undertaking by or on behalf
of such person to repay such amounts if it is ultimately determined that he
(she) is not so entitled to indemnification.
The amendment or repeal of, or adoption of any provision inconsistent
with, this indemnification provision will require the affirmative vote of the
holders of at least 66 2/3% of the common stock and all series of voting
Preferred Stock, voting together as a single class. Any amendment or repeal
of, or adoption of any provision inconsistent with, this indemnification
provision will not adversely affect any right or protection existing hereunder
prior to such amendment, repeal, or adoption.
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GLOSSARY OF TERMS
ACCOUNTING OR SETTLEMENT RATE-The per minute rate negotiated between
carriers in different countries for termination of international long distance
traffic in, and return traffic to, the carriers' respective countries.
CALL REORIGINATION (ALSO KNOWN AS "CALLBACK")-A form of dial up access
that allows a user to access a telecommunications company's network by placing
a telephone call, hanging up, and waiting for an automated call reorigination.
The call reorigination then provides the user with a dial tone which enables
the user to initiate and complete a call.
CALL-THROUGH-The provision of international long distance service through
conventional long distance or "transparent" call reorigination.
DIRECT ACCESS-A means of accessing a network through the use of a
permanent point-to-point circuit typically leased from a facilities-based
carrier. The advantages of direct access include simplified
premises-to-anywhere calling, faster call set-up times and potentially lower
access and transmission costs (provided there is sufficient traffic over the
circuit to generate economies of scale).
DIAL UP ACCESS-A form of service whereby access to a network is obtained
by dialing an international toll-free number or a local access number.
FACILITIES-BASED CARRIER-A carrier which transmits a significant portion
of its traffic over owned transmission facilities.
FCPA-Foreign Corrupt Practices Act.
INTERNET PROTOCOL (IP)-A class of product that uses data and/or voice
transmission over the Internet/Intranet.
ISP-INTERNATIONAL SETTLEMENTS POLICY - The ISP establishes the
permissible arrangements between facilities-based carriers based in the U.S.
and their foreign counterparts for terminating each other's traffic over their
respective networks.
ITO (INCUMBENT TELECOMMUNICATIONS OPERATOR)-The dominant carrier or
carriers in each country, often, but not always, government-owned or protected
(alternatively referred to as the Postal, Telephone and Telegraph Company, or
PTT).
ITU-INTERNATIONAL TELECOMMUNICATIONS UNION - International
Telecommunications Association headquartered in Geneva, Switzerland.
LEC (LOCAL EXCHANGE CARRIER)-Companies from which Ursus and other long
distance providers must purchase "access services" to originate and terminate
calls in the U.S.
LOCAL EXCHANGE-A geographic area determined by the appropriate regulatory
authority in which calls generally are transmitted without toll charges to the
calling or called party.
NODE-A specially configured multiplexer which provides the interface
between the local PSTN where the node is located and a switch. A node
collects and concentrates call traffic from its local area and transfers it to
a switch via private line for call processing. Nodes permit a carrier to
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extend its network into new geographic locations by accessing the local PSTN
without requiring the deployment of a switch.
OPERATING AGREEMENTS-An agreement that provides for the exchange of
international long distance traffic between correspondent international long
distance providers that own facilities in different countries. These
agreements provide for the termination of traffic in, and return traffic from,
the international long distance providers' respective countries at a
negotiated "accounting rate." Under a traditional operating agreement, the
international long distance provider that originates more traffic compensates
the corresponding long distance provider in the other country by paying an
amount determined by multiplying the net traffic imbalance by the latter's
share of the accounting rate.
PSCs - Public Service Commissions.
PRIVATE LINE - A dedicated telecommunications connection between end user
locations.
PUBLIC SWITCHED TELEPHONE NETWORK-A telephone network which is accessible
by the public through private lines, wireless systems and pay phones.
REFILE - Traffic originating from one country (original country) and
destined to another country (receiving country) is routed through a third
country without the knowledge of the receiving country. The receiving country
has only identified the third country and assumes the traffic originated from
the third country only.
RESALE - Resale by a provider of telecommunications services of services
sold to it by other providers or carriers on a wholesale basis.
SEC-The Securities and Exchange Commission.
SWITCHING - A process which uses interconnecting circuits to form a
transmission path.
TRANSIT-Traffic originating from one country and destined to another
country is routed through a third country with the full knowledge and consent
of all countries and carriers concerned.
TRANSPARENT CALL REORIGINATION - Technical innovations have enabled
telecommunications carriers to offer a "transparent" form of call
reorigination where the call is automatically and swiftly processed by a
programmed switch without the usual "hang up" and "callback."
WEB CENTRIC - The process by which software programs run in the Internet
browser as opposed to running on the individual's local personal computers.
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149,053 SHARES
URSUS TELECOM CORPORATION
COMMON STOCK
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PROSPECTUS
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September 29, 2000
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by it in connection with
the offering described in this Registration Statement will be approximately as
follows:
Legal fees and expenses $5,000.00
Accounting fees and expenses 5,000.00
SEC registration fee 172.16
Miscellaneous 1,000.00
-----------
Total $11,172.16
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Filed herewith in Ursus Telecom Corporation's Form S-3 Registration
Statement, as filed with the Securities and Exchange Commission on September
29, 2000, and incorporated herein by reference.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT INDEX
Exhibit
Number
3.1 - Articles of Incorporation of the Company
3.2 - Form of Amended and Restated Articles of Incorporation of the
Company
3.3 - Bylaws of the Company
3.4 - Form of Amended and Restated Bylaws of Company
4.1 - Specimen of Certificate for Common Stock
5.1* - Opinion of Swidler Berlin Shereff Friedman, LLP
10.1* - Asset Purchase Agreement dated June 1, 2000 by and between
Ursus Telecom Corporation and Justice Telecom Corporation
dated as of June 1, 2000
23.1* - Consent of Ernst & Young LLP
23.2 - Consent of Swidler Berlin Shereff Friedman, LLP. (Included
in Exhibit 5.1)
24.1* - Power of Attorney.
-----------------
Previously filed as an exhibit to the Company's Registration Statement
on Form S-1 (File No. 333-46197) and incorporated herein by reference.
* Filed herewith.
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Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offer or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(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) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the 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 Act and will be governed by the final adjudication
of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sunrise, State of Florida, on this
29th day of September, 2000.
URSUS TELECOM CORPORATION
By: /s/ Luca M. Giussani
-----------------------------
Luca M. Giussani
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Luca M. Giussani, as his attorney-in-
fact, with full power of substitution and resubstitution, for him in any and
all capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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:
SIGNATURE TITLE DATE
/s/ Luca M. Giussani Chief Executive Officer, September 29, 2000
------------------------- and Director
Luca M. Giussani (principal executive officer)
/s/ Jeffrey R. Chaskin President, Chief Operating September 29, 2000
------------------------- Officer and Director
Jeffrey R. Chaskin
/s/ Johannes S. Seefried Chief Financial Officer, September 26, 2000
-------------------------- and Director
Johannes S. Seefried
/s/ Kenneth L. Garrett
-------------------------- Director September 28, 2000
Kenneth L. Garrett
/s/ Steven L. Relis Chief Accounting Officer September 29, 2000
--------------------------
Steven L. Relis
