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As filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 333-70307
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
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THE SECURITIES ACT OF 1933
LOG ON AMERICA, INC.
(Name of Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
05-0496586
(I.R.S. Employee Identification No.)
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One Cookson Place, 6th Floor
Providence, Rhode Island 02903
(401) 459-6298
(Address and telephone number of principal executive offices
and principal place of business)
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David R. Paolo, President
Log On America, Inc.
One Cookson Place, 6th Floor
Providence, Rhode Island 02903
(401) 459-6298
(Name, address and telephone number of agent for service)
Copies of all communications to:
Gary W. Mair, Esq.
Silverman, Collura & Chernis, P.C.
381 Park Avenue South, Suite 1601
New York, New York 10016
(212) 779-8600
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Approximate date of proposed sale to the public: From time to time or
at one time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended ("Securities Act"), other than securities
offered only in connection with dividend or reinvestment plans, check the
following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration 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. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================== ================= =================== =================== =================
Proposed Maximum Proposed Maximum Amount of
Offering Price Per Aggregate Offering Registration Fee
Title of Each Class of Amount to be Share(2) Price
Securities to be Registered Registered(1)
===================================== ================= =================== =================== =================
<S> <C> <C> <C> <C>
Common Stock 2,293,135 $8.00 $18,345,080 $ 5,099.93
===================================== ================= ================== =================== =================
TOTAL 2,293,135 $18,345,080 $ 5,099.93
===================================== ================= ================== =================== =================
</TABLE>
(1) For the purpose of estimating the number of shares of common stock
to be included in this registration statement, the registrant
included: (i) 1,235,598 shares representing 200% of the number of shares
of common stock issuable upon the conversion of the series A preferred
stock, determined as if the stock was converted in full on April 24,
2000, (without regard to any limitations on conversion) at the
conversion price of $24.615 ; (ii) 594,204 shares, representing 100% of the
number of shares of common stock issuable upon exercise of the warrants
(without regard to any limitations on exercise); and (iii) 463,333 shares
of common stock. Pursuant to rule 416 of the Securities Act, this
registration statement also covers such indeterminable additional shares as
may become issuable as a result of any future stock splits, stock dividends
or similar transactions. The registration statement does not cover an
indeterminate number of shares due to adjustments to the conversion prices.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, based on the average of the high and low prices of Log On America,
Inc., common stock as reported on the Nasdaq National Market on April 24,
2000.
The registrant hereby amends this registration statement on the 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, as amended, or until the registration statement
shall become effective on a date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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LOG ON AMERICA, INC.
Our selling stockholders, or their transferees, pledgees, donees or
successors are selling up to 2,293,135 shares of Log On America, Inc., common
stock. The shares of our common stock consist of: (i) 1,829,802 shares issuable
upon the conversion of series A preferred stock and the exercise of warrants
issued in a private financing; and (ii) 463,333 shares of common stock.
We are not selling any of the shares of our common stock under this
prospectus and we will not receive any of the proceeds from the sales by the
selling stockholders.
The selling stockholders may sell the shares of our common stock they
are offering in a number of different ways and at varying prices. We provide
more information about the selling stockholders and how they may sell their
shares in the section titled, "Plan of Distribution."
- --------------------------------------------------------------------------------
Please see the risk factors beginning on page 8 to read about certain
factors you should consider before buying shares of our common stock.
- --------------------------------------------------------------------------------
Our common stock is listed on the Nasdaq National Market under the
symbol, LOAX. On April 24, 2000, the closing sale price of a share of our common
stock, as reported on the Nasdaq National Market, was $8.00.
The mailing address of our principal executive offices is One Cookson
Place, 6th Floor Providence, Rhode Island 02903, and the telephone number is
(401) 459-6298.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _______, __, 2000
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Where you can find more information about Log On
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference room in Washington, D.C., New York, New York, and Chicago, Illinois.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Our filings are also available at the
Commission's web site, http://www.sec.gov.
The terms of the series A preferred stock and the warrants included in
this registration statement, for which this prospectus forms a part, are complex
and are only briefly summarized in this prospectus. Shareholders may obtain
further information concerning the rights, preferences and terms of the series A
preferred stock and warrants in more detail to in our current reports on Form
8-K and exhibits filed with the Securities Exchange Commission on February 28,
2000 (File No. 000-25761). Our current reports on Form 8-K may also be viewed on
the web site maintained by the Securities and Exchange Commission. A more
detailed description of terms, preferences and rights of the holders of our
series A preferred stock with respect to the outstanding preferred stock and of
the related warrants is qualified in its entirety by reference to the complete
description of these preferences, rights and terms set forth in our current
reports on Form 8-K.
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Prospectus Summary
Because this is a summary, it may not contain all information that may
be important to you. You should read this entire prospectus, including the
information incorporated by reference and the financial data and related notes,
before making an investment decision. When used in this prospectus, the terms
"we," "our" and "us" refer to Log On American, Inc., and not to the selling
stockholders.
Log On America, Inc.
We are a regional data competitive local exchange carrier providing
local dial tone, in-state toll, long distance, and high-speed Internet access
and cable programming solutions over traditional copper wire using xDSL
technology to residential and commercial clients throughout the Northeast. In
1999, we completed the first phase of our growth plan - acquisition phase. As a
result, we established a critical mass of customers throughout the New England
states. Concurrently, through a series of selectively targeted transactions, we
established a partnership with Nortel Networks Inc., a leader in the
communications industry.
We currently offer competitive local exchange carrier, voice telephony
services, digital- competitive local exchange carrier +, high-speed data and
Internet access bundled services to residential and commercial subscribers.
We believe we are the first and only full-service integrated
communications provider targeting the Northeastern United States. We are a
facilities-based company that owns its own switch. Our infrastructure is based
on the latest developments in network operations, engineered to provide
businesses with cutting-edge products and truly exceptional customer service.
Our objective is to become the leading single-source provider of voice,
data, and video services to residential and small to medium sized business
customers in each of our markets. We intend to achieve this goal by offering
individual or bundled service options, superior customer service and competitive
prices over our own enhanced telecommunications network. We plan to utilize
enhanced technology to provide differentiated, bundled service offerings to
growing segments of the voice, high-speed data, and Internet and video
communications market.
Corporate History
Log On America, Inc., a Rhode Island corporation, was formed in 1992 to
provide online Internet and related services. This company is our predecessor.
In 1997, the Rhode Island corporation sold 100% of its assets to System 4, Inc.,
a Delaware corporation and a wholly owned subsidiary of Global Telemedia
International, Inc., a Delaware corporation, and agreed to change its name to
Tekcom Inc. Tekcom remained a Rhode Island corporation with no operations. At
the time of the acquisition, Global Telemedia was engaged in the marketing of
telecommunications services. In consideration of the sale, Global Telemedia
agreed to assume all of the Rhode Island corporation's outstanding liabilities
and to pay the Rhode Island
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corporation's shareholders, on the third anniversary date of the purchase, 20%
of the value of all of the Rhode Island corporation's business as of that date.
After the transfer of assets and liabilities to System 4, Inc., System 4 changed
its name to Log On America, Inc.
Wan Secure, Inc. was organized in Delaware in January 1998 to purchase
100% of the successor to System 4's outstanding capital from Global Telemedia.
As a result, we became a wholly owned subsidiary of Wan Secure. In September
1998, Wan Secure merged with Log On America, Inc., the successor to System 4. As
a result of this merger, Wan Secure was the survivor. Simultaneously with the
merger, Wan Secure, a Delaware corporation, changed its name to Log On America,
Inc.
In and around February 1998, 100% of the shareholders of Tekcom. Inc.,
formerly the Rhode Island corporation, agreed to surrender and release their
rights and claims to 20% of the value of the Delaware Log On America's business
as of the third anniversary date of the Global Telemedia's purchase. As
consideration for this surrender and release, Tekcom shareholders received an
aggregate of 795,130 shares of the Delaware Log On America's common stock.
Our recent financing
On February 23, 2000, we raised $15,000,000 in the first installment of
an equity financing, which ultimately may raise up to $35,000,000. The first
installment is comprised of the following:
o the sale, for $15,000,000, of 15,000 shares of our initial series A
preferred stock (the "Initial Preferred Stock") and initial related
warrants (the "Initial Warrants") to purchase 594,204 shares of our common
stock to certain of our selling stockholders; and
o if certain conditions are met, certain selling stockholders may purchase,
and under certain circumstances may be required to purchase, and we may
issue, and under certain circumstances we may be required to issue, an
aggregate of up to 20,000 additional shares of series A convertible
preferred stock and additional related common stock purchase warrants.
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Risk Factors
You should carefully consider the following factors and other
information in this prospectus before deciding to invest in shares of our common
stock. This prospectus contains forward-looking statements which can be
identified by the use of words such as "intend," "anticipate," "believe,"
"estimate," "project," or "expect" or other similar statements. These statements
discuss future expectations, contain projections of results of operations or of
financial condition, or state other "forward-looking" information. When
considering these statements, you should keep in mind the risk factors described
below and other cautionary statements in this prospectus. The risk factors
described below and other factors noted throughout this prospectus, including
certain risks and uncertainties, could cause our actual results to differ
materially from those contained in any forward-looking statement.
We have incurred net losses since our inception and anticipate continuing
losses.
To date, we have had limited revenues and have not shown a profit in our
operations. As of April 24, 2000, our accumulated deficit was approximately
$8,675,572. Although we intend to expand our marketing of products and
services, we may not be able to achieve these objectives or, if these objectives
are achieved, we may never be profitable. If profitability is achieved, we may
not be able to sustain it. We cannot predict when, or if, profitability might be
achieved.
We have a short operating history upon which you can judge our prospects.
We commenced our business in 1992 but did not produce significant revenues
until 1996, therefore, we have a limited operating history upon which you can
evaluate our business and prospects. Our historical data is of limited value in
projecting future operating results. You must consider our business in light of
the risks, expenses and problems frequently encountered by companies with
limited operating histories.
We require substantial funds and may need to raise additional capital in the
future.
Based on our currently proposed plans and assumptions, we anticipate that
the net proceeds received or to be received from the sale of the shares of
series A preferred stock will be sufficient to satisfy our contemplated cash
requirements for the twelve month period following the consummation of the sale.
We may then require additional funding. Under the agreement with certain of our
selling stockholders we are not allowed to raise additional equity funding for a
period of six months commencing on February 23, 2000 without their approval.
Additionally, pursuant to the terms of a credit facility with Nortel Networks,
Inc., and other lenders, we may not be able obtain additional debt financing.
Other additional financing or funding may not be available on commercially
reasonable terms, or at all. The inability to obtain additional financing or
funding, when needed, would have a negative effect on us, including possibly
requiring us to curtail or cease operations. If any future financing involves
the sale of our equity securities, the shares of our common stock held by our
shareholders would be substantially diluted. If we incur indebtedness or
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otherwise issue debt securities, we will be subject to risks associated with
indebtedness, including the risk that interest rates may fluctuate and the
possibility that we may not be able to pay principal and interest on the
indebtedness.
Risks relating to the conversion of the preferred stock and the exercise of the
related warrants could result in a substantial number of additional shares being
issued if the market price of our common stock declines.
Each share of the Initial preferred stock, is convertible into a number
of shares of common stock equal to the quotient of $1,000 plus
(.08)(N/365)($1,000) where N is equal to the number of days from the issuance of
such series A stock through and including the date of conversion divided by (ii)
the applicable conversion price, which price is equal to the lower of (i) 90% of
the lowest closing bid price of the common stock during the three consecutive
trading days ending on and including the date of the conversion or (ii) during
the first 182 days after the issuance, $24.62 and 182 days after the issuance of
the series A preferred stock, the lower of 24.62 or 120% of the average
closing bid prices of the common stock during the ten consecutive trading days
immediately preceding the date which is 182 days after the issuance of the
series A preferred stock.
As a result, the lower the price of our common stock at the time a
holder of our series A preferred stock converts, the greater the number of
shares of common stock the holder will receive. To the extent the series A
preferred stock is converted, a significant number of additional shares of
common stock may be sold into the market, which could decrease the price of our
common stock due to the additional supply of shares relative to demand in the
market. In that case, we could be required to issue an increasingly greater
number of shares of our common stock upon future conversions of the series A
preferred stock, sales of which could further depress the price of our common
stock. If the sale of a large amount of shares of our common stock upon
conversion of the series A preferred stock results in a decline in the price of
our common stock, this event could encourage short sales of our common stock.
Short sales could place further downward pressure on the price of our common
stock. The conversion of the series A preferred stock may result in substantial
dilution to the interests of other holders of our common stock. Even though a
selling stockholder may not convert any portion of the series A preferred stock
or their related warrants if doing so will cause it or any of its affiliates to
own more than 4.99% of our total outstanding common stock (excluding for
purposes of such determination shares of common stock deemed beneficially owned
through ownership of unconverted shares of the series A preferred stock or
unexercised related warrants), this restriction does not prevent a selling
stockholder from selling a substantial number of shares in the market. By
periodically selling shares into the market, an individual selling stockholder
could eventually sell more than 4.99% of our outstanding common stock while
never holding more than 4.99% at any specific time.
We may issue additional shares which would reduce your ownership percentage and
dilute the value of your shares.
Certain events over which you have no control over could result in the issuance
of additional shares of our common stock, which would dilute your ownership
percentage in us. We may issue additional shares of common stock or preferred
stock to raise additional capital or finance acquisitions or upon the exercise
or
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conversion of outstanding options and warrants. As of April 20, 2000, there
were outstanding warrants and options to acquire up to approximately 2,923,867
additional shares of common stock at prices ranging from $1.00 to $16.50 per
share. If exercised, these securities will reduce your percentage ownership of
common stock and could dilute the value of your shares. Assuming no exercise of
outstanding warrants, options or conversion of our preferred stock, of the
8,305,177 shares of common stock to be outstanding upon completion of this
offering, [_________] will be immediately tradeable without restriction under
the Securities Act. "Affiliates," as defined in the Securities Act, must always
sell their shares in accordance with the terms, including volume limitations, of
Rule 144 under the Securities Act.
Conversion of series A preferred stock and sales of common stock by our selling
stockholders may depress the price of our common stock and substantially dilute
your stock.
If the selling stockholders were to exercise all of the warrants they
hold and convert all of the shares of series A preferred stock they own, as of
April 24, 2000, they would acquire approximately 1,212,003 shares of our common
stock. If the selling stockholders were to sell these shares of common stock
into the market, such sales could have a negative effect on the market price of
our common stock and will dilute your holdings in our common stock.
Additionally, dilution or the potential for dilution could materially impair our
ability to raise capital through the future sale of equity securities.
Nasdaq listing maintenance requirements.
If the issuance of our preferred stock was in violation of Nasdaq's
listing maintenance requirements, or if we otherwise fail to continue to meet
Nasdaq's listing maintenance requirements, Nasdaq may delist our common stock.
In late January 1999, Nasdaq released its guidance on "future priced
securities" and the necessity of issuers to comply with Nasdaq's listing
maintenance requirements in issuing certain securities. We believe that the
issuances of our series A preferred stock does not violate these criteria, and
that we are in compliance with Nasdaq's listing maintenance criteria. In the
event that Nasdaq were to determine that the issuance of our series A preferred
stock was in violation of the Nasdaq listing maintenance requirements, or if we
are otherwise unable to continue to meet Nasdaq's listing maintenance
requirements, Nasdaq may delist us. Such delisting could have a material adverse
effect on the price of our common stock and on the levels of liquidity currently
available to our shareholders. We may not be able to satisfy these requirements
on an ongoing basis.
We are dependent upon the continued growth in the use of the Internet.
Our future operating results are highly dependent upon the increased use
of the Internet by consumers for information, publication, distribution and
commerce. Critical issues concerning the commercial use of the Internet,
including security, reliability, cost, ease of use, access, and quality of
service, remain unresolved and may impact the growth of Internet use. If
widespread commercial use of the Internet does not develop,
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our business, results of operations and financial condition will be negatively
affected.
We depend on the continued development and reliability of Internet
infrastructure.
We depend on the reliability, speed, data capacity, ease of use,
accessibility and security of the Internet as well as its continued development
and acceptance for commercial use. The success of our services and products
depend, in large part, upon the further development of an infrastructure for
providing Internet access and services. The Internet has experienced, and it is
expected to continue to experience, significant growth in the number of users.
The Internet infrastructure may not be able to support the demands placed on it
by this continued growth in use. The Internet could also lose its viability due
to delays in the development or adoption of new standards and protocols to
handle increased levels of Internet activity, or due to increased governmental
regulation. The infrastructure or complementary services necessary to make the
Internet a viable commercial marketplace may not develop, or the Internet may
not become a viable commercial marketplace for services and products such as the
services that we currently offer. If this happens, our business, results of
operations and financial condition will be negatively affected.
We depend on our computer infrastructures and will be adversely affected by any
failure or damage to our systems.
Substantially all of our communications and computer hardware is located
at our offices in Providence, Rhode Island. Our system is vulnerable to damage
from fire, flood, earthquakes, power loss, telecommunications failures,
break-ins and similar events. Moreover, we do not presently have a disaster
recovery plan, carry any business interruption insurance or have any secondary
"off-site" systems or a formal disaster recovery plan. A system failure at our
present location would have a major adverse affect on the performance of our
services.
Our services are susceptible to disruptive problems.
Despite our implementation of network security measures, our servers are
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptive problems. Computer viruses, break-ins or other problems caused by
third parties could lead to interruptions, delays or cessation in service to
users of our services and products. Any of these risks could have a negative
effect on our business, results of operations and financial condition.
We may be held liable for online content provided by third parties.
Materials may be downloaded and distributed to others by the on-line or
Internet services offered by us or the Internet service providers with which we
have a relationship. If this happens, claims may be made against us for
defamation, negligence, copyright or trademark infringement, or some other
reason. These claims or the imposition of liability may have a negative effect
on our business, results of operations and financial condition.
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Internet security concerns could hinder e-commerce and the demand for our
products and services.
A significant barrier to e-commerce and communications over the Internet
has been the need for the secure transmission of confidential information. We
may incur significant costs to protect against the threat of security breaches
or to alleviate problems caused by breaches. Internet usage and the demand for
our services could decline if any well-publicized compromise of security occurs.
Although we are not aware of any attempts by programmers or "hackers" to
penetrate our network security, these actions could occur in the future. A party
who is able to penetrate our network security could misuse our users' personal
information or credit card information and users might sue us or bring claims
against us. Concerns over the security of Internet transactions and the privacy
of users may also inhibit the growth of the Internet generally, particularly as
a means of conducting commercial transactions. Security breaches or the
inadvertent transmission of computer viruses could expose us to a risk of loss
or litigation and possible liability. Our business, results of operations, and
financial condition could be negatively effected if contractual provisions
attempting to limit our liability in these areas are not successful or
enforceable, or if other parties do not accept these contractual provisions as
part of our agreements with them.
We need to manage our growth effectively.
Our growth has placed, and will continue to place, a significant strain on
our managerial, operational and financial resources. We need to:
o improve our financial and management controls, reporting systems and
procedures;
o expand, train and manage our work force for marketing, sales and support,
product development, site design, and network and equipment repair and
maintenance; and
o manage multiple relationships with various customers, strategic partners
and other third parties.
If we do not continually upgrade technology, we may not be able to compete in
our industry.
We will need to continually expand and upgrade our infrastructure and
systems and ensure high levels of service, speedy operation, and reliability. In
addition, we will have to improve our methods for measuring the performance and
commercial success of our different products to better respond to customers'
demands for information on product effectiveness and to better determine which
products and services can be developed most profitably. Our current and planned
personnel, financial and operating procedures and
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controls may not be adequate to support our future operations. If we are unable
to manage our growth effectively, our business will be negatively effected.
If we do not effectively develop our early stage products and technology, our
business may be negatively effected.
The Internet market is characterized by rapidly changing technology,
evolving industry standards, frequently introduced new services, products and
enhancements, as well as changing customer demands. Many of our products and
service applications are in the early stages of development and/or marketing,
including the products and services we will offer as a competitive local
exchange carrier. Many of our competitors have already introduced products that
include one or more of the features incorporated in our products. We expect that
our competitors may attempt to replicate the technology of our products or
employ competing technologies, if our products are commercially successful. Our
risks include unforeseen design or engineering problems with our products and
applications. These or other risks associated with new product and service
development or introduction may occur. If they do occur, they could have an
adverse effect on our financial condition and operating results.
If we do not develop a sufficient sales and marketing force, we may not be able
to generate significant revenues or become profitable.
Currently we have 15 sales and marketing employees and we have not
established distribution channels for our services and products. We may not be
able to develop a sufficient sales force and marketing group. Our inability to
develop a sufficient sales force and marketing group would have a negative
effect on our business, results of operations and financial condition.
Government regulation and legal uncertainties could add additional costs to
doing business on the Internet.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting various types of
information and content over the Internet. Several telecommunications companies
have petitioned the Federal Communications Commission to regulate Internet
service providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on those companies. This
could increase the cost of transmitting data over the Internet. Moreover, it may
take years to determine the extent to which existing laws relating to issues
such as property ownership, libel and personal privacy are applicable to the
Internet. Any new laws or regulations relating to the Internet could adversely
affect our business.
We face significant competition from Internet and telephone service providers
and others.
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The Internet connectivity business is highly competitive, and there are no
substantial barriers to entry. We believe that competition will intensify.
Currently, our primary competitors include such companies as:
o national Internet service providers: Earthlink, PSINet, Inc., UUNET
Technologies, Inc., and GTE;
o regional telecommunications providers: Bell Atlantic, The Internet Access
Company or TIAC, and Winstar Communications, Inc.;
o on-line service providers: America Online, Inc. and Microsoft Corp.; and
o regional telephone companies and long distance companies: MCI Worldcom,
Inc. and AT&T Corp.
Many of our current and potential competitors have substantially greater
human and financial resources, experience, and brand name recognition than we
do, and may have significant competitive advantages through other lines of
business and existing business relationships. Furthermore, additional major
media and other companies with financial and other resources substantially
greater than ours may introduce new Internet products and services that compete
with the services and products we offer. Our future growth and profitability
will depend, in part, upon consumer and commercial acceptance of our voice, data
and Internet technology, and significant penetration of our related products and
services. Our competitors may develop products or services that are superior to
ours or achieve greater market acceptance than our products and services.
Our operations depend on our ability to maintain favorable relationships with
third party suppliers.
We depend on third-party suppliers for our access to the Internet
through leased telecommunications lines, such as Bell Atlantic Corp. and MCI
Worldcom, Inc./UUNET. Although we believe this access is available from several
alternative suppliers, we may not be able to obtain substitute services from
other providers at reasonable or comparable prices or in a timely manner. We are
also dependent upon the regional telephone operating company, Bell Atlantic, to
provide installations of circuits and to maintain those circuits. Substantial
failure by any of these third parties to perform could negatively affect our
business, results of operations, and financial condition.
The loss of the services of our chief executive officer, David R Paolo, could
hurt our chances for success.
We are dependent on the continued employment and performance of our
executive officers and key employees, particularly of our CEO, David R. Paolo.
The loss of Mr. Paolo, or his incapacity to perform his
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duties, would have a materially negative effect upon our activities and
prospects. The loss of the services of any of our key employees or officers
could adversely affect on our business.
Our management has substantial control over us and investors in this offering
may have no effective voice in our management.
Our directors and executive officers will own approximately 35.45% of
the then outstanding shares of our common stock as of April 24, 2000.
Accordingly, these shareholders will possess substantial control over our
operations. This control may allow them to amend corporate filings, elect a
majority of our board of directors, and substantially control all matters
requiring approval by our shareholders, including approval of significant
corporate transactions. Management will also have the ability to delay or
prevent a change in our control and to discourage a potential acquirer for us or
our securities. If you purchase our common stock, you may have no effective
voice in our management.
Unless we maintain a public market for our securities, you may not be able to
sell your shares.
Failure to maintain an active trading market on the Nasdaq National Market
by us could negatively affect the price of our securities, as well as affect
your ability to sell your shares.
Shares released from lock-up after April 22, 2000.
Certain of our shareholders and warrant holders, agreed to not directly or
indirectly, offer, sell, pledge, grant any option to purchase, or otherwise sell
or dispose of any of our shares for a period of twelve months after April 22,
1999. On April 22, 2000, all of our shares under lock-up shall be released.
If our shareholders' subject to the lock-up sell their shares into the market,
such sales could have a negative effect on the market price of our common stock
and will dilute your holdings in our common stock. Additionally, dilution or the
potential for dilution could materially impair our ability to raise capital
through the future sale of equity securities.
We may not be able to provide services if the systems that we rely upon are not
Year 2000 Complaint.
In 1999, we conformed our Year 2000 compliance by obtaining
representations by third-party venders of their products' Year 2000 compliance,
as well as specific testing of our products. We have not incurred significant
costs for these purposes and we do not believe that we will incur significant
lost for these purposes in the foreseeable future. We are continuing to monitor
business systems owned or operated by us or by third parties, the failure of
which would directly and adversely affect our ability to provide our services or
otherwise affect revenues, safety or reliability for such a period of time as to
lead to unrecoverable consequences, to ensure that these systems will not fail
or make miscalculations as a result of the Year 2000 date change. Although we
have not experienced significant disruptions as a result of the Year 2000 date
change and we believe that most of our in-house and licensed information
technology,
15
<PAGE>
ultimately was not affected by the Year 2000 date change, we cannot be certain
that the production systems of many of our strategic business partners have not
been adversely affected by the Year 2000 date change.
Disclosure Regarding Forward-Looking Statements
The discussion in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. In some cases you can identify
these statements by forward-looking words such as "anticipate," "estimate,"
"project," "intend," and similar expressions which we have used to identify
these statements as forward- looking statements. These statements appear
throughout this prospectus and are statements regarding our intent, belief, or
current expectations, primarily with respect to the operations of Log On
American, Inc., or related industry developments. You are cautioned that any
such forward-looking statements do not guarantee future performance and involve
risks and uncertainties, and that actual results could differ materially from
those discussed here, including "Risk Factors," and in the documents
incorporated by reference in this prospectus.
Dividend Policy
We have not paid any cash dividends since its inception and does not anticipate
paying cash dividends in the foreseeable future.
Selling Stockholders
The shares of our common stock offered by this prospectus are the shares
issuable upon conversion of the Initial Preferred Stock and upon exercise of the
Initial Warrants to purchase 594,204 shares of our common stock issued to HFTP
Investments, L.L.C., Marshall Capital Management, Inc., Fisher Capital Ltd. and
Wingate Capital Ltd., and certain shares issued to Cyberstours, Inc., Prime
Investors, LLC, and Casale Caliri & Jaroma, LLC.
The following table sets forth the number of shares of our common stock
owned by each of our selling stockholders as of the date of this prospectus. The
second column lists, for HFTP Investments, L.L.C., Marshall Capital Management,
Inc., Fisher Capital Ltd. And Wingate Capital Ltd., the number of shares of
common stock, based on its ownership of the Initial Preferred Stock, which would
have been issuable to the selling stockholder on April 24, 2000 upon conversion
of all of the Initial Preferred Stock and exercise of all of the Initial
Warrants held by such selling stockholder on that date, without regard to any
limitation on conversion or exercise, and the shares of our common stock owned
by Cybertours Inc., Prime Investors, LLC and Casale Caliri & Jaroma, LLC. Our
calculation of the number of shares of common stock into which a selling
stockholder may convert the Initial Preferred Stock in the second column assumes
a conversion price for the shares of Initial Preferred Stock of $24.615.
Because the conversion of the Initial Preferred Stock is based on a formula that
depends on the market price of our common stock, the numbers listed in the
second column may fluctuate from time to time and the number of shares that will
be actually issued may be more
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<PAGE>
or less than the 1,829,802 shares being offered by this prospectus on behalf of
HFTP Investments, L.L.C., Marshall Capital Management, Inc., Fisher Capital Ltd.
And Wingate Capital Ltd. The Initial Warrants are exercisable at a price of
$17.23, subject to adjustment as provided in the warrant agreement. The third
column lists, for each selling stockholder, each selling stockholder's portion,
based on its ownership of the Initial Preferred Stock, Initial Warrants, and the
463,333 shares of common stock owned by Cybertours, Inc, Prime Investors, LLC
and Casale Caliri & Jaroma, LLC , which in the aggregate consists of 2,293,135
shares of common stock being offered by this prospectus.
We determined the number of shares of common stock to be offered for
resale by this prospectus in connection with the Initial Preferred Stock and
related warrants by agreement with HFTP Investments, L.L.C., Marshall Capital
Management, Inc., Fisher Capital Ltd. And Wingate Capital Ltd. For purposes of
estimating the number of shares of common stock to be registered for resale by
this prospectus, we included:(i) 1,235,598 shares, representing 200% of the
number of shares of common stock issuable upon conversion of the Initial
Preferred Stock (without regard to any limitation on conversion) determined as
if the Initial Preferred Stock was converted in full on April 24, 2000 at the
conversion price of $24.615; (ii) 594,204 shares, representing 100% of the
number of shares of common stock issuable upon exercise of the Initial Warrants,
without regard to any limitations on exercise; and (iii) 463,333 shares of our
common stock owned by Cybertours, Inc, Prime Investors, LLC and Casale Caliri &
Jaroma, LLC. The fourth and fifth columns assume the sale of all of the shares
offered by each selling stockholder.
Under the terms of the series A preferred stock and the related warrants,
no selling stockholder can exercise the series A preferred stock or the related
warrants, to the extent such conversion or exercise would cause such selling
stockholder's beneficial ownership of our common stock to exceed 4.99% of the
outstanding shares of our common stock, excluding for purposes of such
determination shares of common stock deemed to be beneficially owed through
ownership of unconverted shares of series A preferred stock or unexercised
related warrants. The amounts in the second column do not reflect this
limitation.
None of the selling stockholders has had any position with, held any
office of, or had any other material relationship with us.
The information is based on information provided by or on behalf of the
selling stockholders, the selling stockholders may offer all, some or none of
their shares of our common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Percentage calculations are based upon
8,305,177 shares of our common stock outstanding as of April 20, 2000. We
believe, based on information supplied by the selling stockholders, that each of
them has sole voting and investment power with respect to all shares of our
common stock shown on the table below as beneficially
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<PAGE>
owned by them. Beneficial ownership after the offering assumes that each of the
selling stockholders' shall sell all of the shares of our common stock that they
may sell using this prospectus.
Promethean Investment Group, LLC, a New York limited liability company
serves as investment advisor to HFTP Investment, L.L.C. and may be deemed to
share beneficial ownership of the shares beneficially owned by HFTP by reason of
shared power to vote and to dispose of the shares beneficially owned by HFTP.
Promethean disclaims beneficial ownership of the shares beneficially owned by
HFTP. Mr. James F. O'Brien, Jr. indirectly controls Promethean. Mr. O'Brien
disclaims beneficial ownership of the shares beneficially owned by Promethean
and HFTP. HFTP is not a registered broker-dealer. HFPT, however, is under common
control with, and therefore an affiliate of, a registered broker-dealer.
Marshall Capital Management, Inc., located at Madison Avenue, 7th Floor,
New York, New York 10010, is a wholly-owned subsidiary of Credit Suisse Group,
a Swiss financial services company whose shares are traded publicly on the
Zurich Stock Exchange. Marshall Capital Management, Inc. is an affiliate of
Credit Suisse First Boston Corporation, a registered U.S. broker-dealer.
Citadel Limited Partnership is the trading manager of each of Fisher
Capital Ltd. and Wingate Capital Ltd. (collectively, the "Citadel entities") and
consequently has voting control and investment discretion over securities held
by the Citadel Entities. Kenneth C. Griffin indirectly controls Citadel Limited
Partnership. The ownership information for each of the Citadel Entities does not
include ownership information for the other Citadel Entities. Citadel Limited
Partnership, Kenneth C. Griffin and each of the Citadel Entities disclaims
ownership of the shares held by the other Citadel Entities. Neither Fisher nor
Wingate is a registered broker-dealer. Each of Fisher and Wingate, however, is
under common control with, and therefore an affiliate of, a registered
broker-dealer.
<TABLE>
<CAPTION>
Beneficial
Ownership of
Securities Securities
Prior to Securities Owned
Offering() Offered After Offering()
------------ ------- ----------------
Name of Selling Common Common Common
Stockholder Stock Stock Stock Percent
- ----------- ----- ----- ----- -------
<S> <C> <C> <C> <C>
HFTP
Investment L.L.C. 303,001 457,451 -0- -0-
Marshall
Capital Management, Inc. 606,002 914,901 -0- -0-
Fisher Capital Ltd. 187,861 283,620 -0- -0-
Wingate Capital Ltd. 115,140 173,831 -0- -0-
Cybertours Inc. 433,333 433,333 -0- -0-
Prime Investors, LLC 10,000 10,000 -0- -0-
Casale Caliri & Jaroma, LLC 20,000 20,000 -0- -0-
</TABLE>
18
<PAGE>
Description of Securities
The following section does not purport to be complete and is qualified in
all respects by reference to the detailed provisions of our certificate of
incorporation and by-laws, as amended, copies of which have been filed with our
registration statement of which this prospectus forms a part.
Our authorized capital stock consists of: (i) 125,000,000 shares of common
stock, $.01 par value; and (ii) 15,000,000 shares of a new class of preferred
stock, 35,000 shares of which are designated as series A convertible preferred.
As of April 20, 2000, 8,305,177 shares of common stock were issued and
outstanding, and 15,000 shares of the series A preferred stock were issued and
outstanding. As of this date, there were 118 record holders of our common
stock, and four record holders of our preferred stock.
Common Stock.
Shares of our common stock are entitled to one vote per share, either in
person or by proxy, on all matters that may be voted upon by the owners of our
shares at meetings of our shareholders. There is no provision for cumulative
voting with respect to the election of directors by the holders of common stock.
Therefore, the holders of more than 50% of our shares of outstanding common
stock can, if they choose to do so, elect all of our directors. In this event,
the holders of the remaining shares of common stock will not be able to elect
any directors.
The holders of common stock:
o have equal rights to dividends from funds legally available therefore,
when and if declared by our board of directors;
o are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution or
winding up of our affairs; and
o do not have preemptive rights, conversion rights, or redemption of sinking
fund provisions.
The outstanding shares of our common stock are duly authorized, validly
issued, fully paid and nonassessable.
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<PAGE>
Series A Preferred Stock.
Under our certificate of incorporation, as amended, our board of directors
is authorized, subject to certain limitations prescribed by law, without further
stockholder approval, from time to time to issue up to an aggregate of
15,000,000 shares of preferred stock. The preferred stock may be issued in one
or more series. Each series may have different rights, preferences and
designations and qualifications, limitations and restrictions that may be
established by our board of directors without approval from the shareholders.
The terms of the series A preferred stock included in this registration
statement, for which this prospectus forms a part, are complex and are only
briefly summarized in this prospectus. To obtain further information concerning
the rights, preferences and terms of the series A preferred stock, please refer
to the full description contained in our current reports on Form 8-K and
exhibits filed with the Securities Exchange Commission on February 28, 2000
(File No. 000-25761).
Pursuant to the terms of the Securities Purchase Agreement, dated as of
February 23, 2000, by and among us and certain of the selling stockholders, we
issued series A preferred stock in the aggregate principal amount of
$15,000,000.
Variable conversion rate.
Each share of series A preferred stock, including the Initial Preferred
Stock is convertible into a number of shares of common stock equal to the
quotient of a $1,000 plus (.08)(N/365)($1,000) where N is equal to the number of
days from the issuance of the applicable series A preferred stock through and
including the date of conversion divided by (ii) the applicable conversion
price, which price is equal to the lower of (i) 90% of the lowest closing bid
price of the common stock during the three consecutive trading days ending on
and including the date of the conversion (the "Floating Conversion Price") or
(ii) (x) except for the Initial Preferred Stock, during the first 182 days after
the issuance of the applicable series A preferred stock, 150% of the average
weighted average price, not to exceed $24.13, of the common stock for the five
consecutive trading days prior to the date of issuance of the series A preferred
stock, and in the case of the Initial Preferred Stock, during the first 182 days
after the issuance, $24.62 and (y) anytime after the first 182 days after the
issuance of the series A preferred stock, the lower of the amount in the
immediately preceding clause (x) or 120% of the average closing bid prices of
the common stock during the ten consecutive trading days immediately preceding
the date which is 182 days after the issuance of the applicable series A
preferred stock (clause (x) and (y) collectively, the "Fixed Conversion Price").
Both the series A preferred stock and their related warrants contain
anti-dilution protection which adjusts the conversion rate of the series A
preferred stock and the exercise price of the warrants in the event Log On
America is deemed to have issued common stock at a price less than the
conversion rate then in effect (in the case of the series A preferred stock) or
the exercise price (in the case of the warrants), subject to certain exceptions.
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<PAGE>
Limitations on conversion and exercise.
Except in certain circumstances, the holders of the series A preferred may
not convert the series A preferred stock for 182 days after the issuance date
except at the then applicable Fixed Conversion Price. A holder may also not
convert the series A preferred stock to the extent such conversion would cause
such holder, together with such holder's affiliates, to beneficially own in
excess of 4.99% of the outstanding common stock (other than shares deemed
beneficially owned through ownership of unconverted shares of the series A
preferred stock or unexercised warrants).
Reduction of conversion price.
After November 30, 2000, if a registration statement for the common stock
underlying the series A preferred stock is not timely declared effective or its
effectiveness lapses, the conversion rate for such series A preferred stock will
be permanently reduced. After June 30, 2000, (i) if we fails to deliver shares
of common stock upon the conversion of the series A preferred stock or (ii) if
we materially breach any representation, warranty, covenant or other term of
the agreements it entered into in connection with the private financing in
connection with the series A preferred stock, the conversion rate will be
permanently reduced. Additionally, if the common stock is suspended from trading
on the Nasdaq National Market, the conversion rate will be permanently reduced.
In each case, the Floating Conversion Price will be reduced by 25%, and the
Fixed Conversion Price will be reduced to the lesser of (x) the then effective
Fixed Conversion Price or (y) the product of 0.68 multiplied by the lowest Fixed
Conversion Price during the period when the event or condition which gives rise
to the reduction of the Fixed Conversion Price first occurs until the date such
event or condition is cured.
Conversion option by Log On.
On the date which is 30 days after the registration statement, for which
this prospectus forms a part, has been declared effective by the Securities and
Exchange Commission, we may require the holders of the Initial Preferred Stock
to convert 25% of all issued Initial Preferred Stock at the conversion rate then
in effect. In order to exercise this election, the closing bid price of the
common stock must be at least $20.51 for each of the 10 consecutive trading days
immediately prior to the date of the conversion pursuant to this election.
Additionally, on the date which is 90 days after a registration statement, for
which this prospectus forms a part, has been declared effective by the
Securities and Exchange Commission, we may require the holders to convert an
additional 25% of all issued Initial Preferred Stock at the conversion rate then
in effect. In order to exercise this election, the closing bid price of the
common stock must be at least $24.62 for each of the 10 consecutive trading days
immediately prior to the date of the conversion pursuant to this election.
Three years after the issuance date, any outstanding shares of series A
preferred stock are required to be (i) converted into common stock at a
conversion price of 95% of the average closing bid prices of the common stock
for 15 consecutive trading days immediately preceding the third anniversary date
of issuance or (ii) redeemed at an amount equal to $1,000 plus
(.08)(N/365)($1,000) per share, where N equals the
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<PAGE>
number of days from the issuance through and including the date of redemption,
at the option of us, subject to certain conditions and limitations.
Redemption option by the holders of series A preferred.
The holders of the series A preferred stock may redeem the series A preferred
stock on or prior to November 30, 2000 (i) if a registration statement for the
common stock underlying the series A preferred stock is not timely declared
effective or its effectiveness lapses or (ii) if Log On fails to obtain
shareholder approval of the private financing regarding the series A preferred
stock by May 31, 2000. The holders also may redeem the series A preferred stock
on or prior to June 30, 2001 (i) if Log On fails to deliver shares of common
stock upon the conversion of the series A preferred stock or (ii) if Log On
materially breaches any representation, warranty, covenant or other term of the
agreements it entered into in connection with the private financing. The
redemption price per share shall be the greater of (i) 125% of the sum equal to
$1,000 plus (.08)(N/365)($1,000) where N is equal to the number of days from the
issuance of such series A preferred stock through and including the date of the
redemption or (ii) the product of (x) the applicable conversion rate and (y) the
closing bid price of the common stock for the trading day immediately preceding
the day of the happening of the event that gives the holders the option to
redeem.
The holders also may redeem the series A preferred stock upon a change of
control of Log On at a redemption price equal to the greater of (i) 125% of the
sum equal to $1,000 plus (.08)(N/365)($1,000) where N is equal to the number of
days from the issuance of such series A preferred stock through and including
the date of the redemption or (ii) the product of (x) the applicable conversion
rate and (y) the average closing bid price of the common stock during the five
trading days immediately preceding the date the holders give notice of their
election to redeem upon change of control.
Redemption option by Log On.
Log On at its option may require the redemption of some or all of the series A
preferred stock within 182 days after the issuance of the series A preferred
stock at a price per share equal to 110% of the sum equal to $1,000 plus
(.08)(N/365)($1,000), where N equals the number of days from issuance of such
preferred stock through and including the date of redemption. In order to
exercise the above-described redemption option, Log On must notify the holders
at least 10 days before the date of the redemption of its intent to redeem and
there must be an effective registration statement registering the shares of
common stock issuable upon the conversion of the series A preferred stock and
the exercisable related warrants. In the event of a qualified public offering of
Log On common stock or the sale of Log On common stock pursuant to Rule 144A, as
promulgated under the Securities Act of 1933, until August 21, 2000, Log On at
its option may require the redemption of some or all of the series A preferred
stock at a price per share equal to the greater of (i) 120 % of the sum of
$1,000 plus (.08)(n/365)($1,000) where N is equal to the number of days from the
issuance of such series A preferred stock through and including the date of the
redemption, (ii) the product of the then effective conversion rate multiplied by
the closing bid price of the common stock immediately preceding the date of
redemption, and (iii) the product of the then effective conversion rate
multiplied by the price per share sold in the qualified public offering or the
Rule 144A offering. The qualified public offering or Rule 144A offering must be
at least at a price of $20.00 per share and must result
22
<PAGE>
in gross proceeds to Log On in excess of $25,000,000.
Liquidation preference.
The series A preferred stock bears no dividend. The series A preferred
stock has a liquidation preference per share in an amount equal to the sum of
$1,000 plus (.08)(N/365)($1,000) where N is equal to the number of days from the
issuance of such series A preferred stock through and including the date of the
liquidation event.
Voting rights.
The series A preferred stock does not have any voting rights except as
required by law, provided however, Log On America may not without obtaining
approval of the two-thirds of the series A preferred stock (i) change the rights
and priorities of the series A preferred stock; (ii) change its certificate of
incorporation or by-laws or enter into any agreement which adversely effects the
rights and priorities of the series A preferred stock, (iii) redeem any capital
stock (other than the series A preferred stock) or pay any dividend on its
capital stock, or (iv) issue any capital stock which is senior or equal to rank
in respect to distribution and payment upon liquidation, dissolution or winding
up of Log On.
Warrants to purchase common stock.
Under the terms of the Securities Purchase Agreement described above, we
also issued to certain of our selling stockholders Initial Warrants to purchase
an aggregate of 594,204, shares of our common stock at an exercise price of
approximately $17.23 per share. All other future warrants to be issued upon the
purchase of additional series A preferred stock by certain of our selling
stockholders will be exercisable for common stock at 105% of the average
weighted average price, not to exceed $24.13, of the common stock for five
consecutive trading days immediately prior to the date of issuance of such
additional warrants. The Initial Warrants are exercisable through February 23,
2005. Any additional warrants will be exercisable for a period of 5 years after
issuance. A holder of a warrant may not exercise any portion of the warrant to
the extent such exercise would cause such holder together with such holder's
affiliates, to beneficially own in excess of (other than shares deemed
beneficially owned through ownership of unconverted shares of the series A
preferred stock or unexercised warrants) 4.99% of the outstanding shares of our
common stock.
Additional Information about our preferred shares and warrants.
Selling stockholders may be required to purchase additional preferred shares and
warrants.
In the event that the average closing bid prices of the common stock for
15 consecutive trading days
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<PAGE>
ending on and including July 17, 2000 is at least $25.00 a share and does not
fall below $23.00 from July 3, 2000 through July 17, 2000, then on July 17,
2000, certain of our selling stockholders will be required to purchase an
aggregate of 10,000 additional shares of series A preferred stock and related
warrants for common stock at a purchase price of $1,000 per share of series A
preferred stock. Until the date which is 90 days after a registration statement
for the common stock underlying the initial preferred shares has been declared
effective, certain of our selling stockholders may purchase up to an aggregate
of 10,000 additional shares of series A preferred stock and related warrants for
common stock at a purchase price of $1,000 per share of series A preferred
stock, provided the purchase of 5,000 of the 10,000 additional shares of series
A preferred stock may be purchased only if the closing bid price for the common
stock is at least $20.00 on each of the five consecutive trading days ending on
and including the date the selling stockholders elect to purchase such 5,000
shares of series A preferred stock. In the event the selling stockholders
purchase additional shares of series A preferred stock as discussed in this
paragraph, the selling stockholders shall receive for each share of series A
preferred stock purchased, warrants to purchase shares of common stock equal to
the quotient of (i) $650 divided by (ii) the average weighted average price (not
to exceed $24.13) of the common stock for five consecutive trading days
immediately prior to the date of issuance of such additional series A preferred
stock.
Other matters we have agreed to.
We are required to reserve for issuance upon the conversion of the series
A preferred stock and the exercise of the related warrants its common stock in
an amount equal to 200% of common stock issuable upon the conversion of the
series A preferred stock and 100% of common stock issuable upon the exercise of
the related warrants. All shares of common stock are junior in rank to the
Series A preferred stock, and until all the shares of series A preferred stock
have been converted, Log On may not redeem or declare a dividend on any of its
other capital stock.
Until August 23, 2000, we may not engage in equity financing without two-third
consent of the series A preferred stock, and until February 23, 2001, certain
selling stockholders have the right of first refusal for any equity financing,
subject to certain limitations.
Use of Proceeds
We will not receive any of the proceeds from the sale of our common stock
by the selling stockholders.
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<PAGE>
Plan of Distribution
The shares of our common stock offered by this prospectus may be sold from
time to time by the selling stockholders, to purchasers directly by them in one
or more transactions at a fixed price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection with such sales.
Each of the selling stockholders, may from time to time offer shares of
our common stock beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the selling stockholder and the purchasers of
the shares for whom they may act as agent. Each of the selling stockholders will
be responsible for payment of commissions, concessions and discounts of
underwriters, dealers or agents. The aggregate proceeds to the selling
stockholders, from the sale of the shares of our common stock offered by them
will be the purchase price of such shares less discounts and commissions, if
any. Each of the selling stockholders reserves the right to accept and, together
with their agents, from time to time to reject, in whole or in part, any
proposed purchase of shares to be made directly or through agents. We will not
receive any of the proceeds from this offering. Alternatively, the selling
stockholders may sell all or a portion of the shares of our common stock
beneficially owned by them and offered from time to time on any exchange on
which the securities are listed on terms to be determined at the times of such
sales. The selling stockholders may also make private sales directly or through
a broker or brokers.
From time to time, the selling stockholders may transfer, pledge, donate
or assign shares of our common stock to lenders or others, and each of such
persons will be deemed to be a "selling stockholder" for purposes of this
prospectus. The number of shares beneficially owned by a selling stockholder who
transfers, pledges, donates or assigns shares of our common stock will decrease
as and when they take such actions. The plan of distribution for shares sold
under this prospectus will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be selling stockholders
under this prospectus and may sell their shares in the same manner as the
selling stockholders.
A selling stockholder may enter into hedging transactions with
broker-dealers, and the broker-dealers may engage in short sales of the shares
of our common stock in the course of hedging the positions they assume with such
selling stockholder, including in connection with distribution of the shares of
our common stock by such broker-dealers. In addition, a selling stockholder may,
from time to time, sell short the shares of our common stock, and in such
instances, this prospectus may be delivered in connection with such short sales
and the shares offered may be used to cover such short sales. The selling
stockholders may also enter into option swap or other derivative or similar
transactions with broker-dealers that involve the delivery of the shares of our
common stock to the broker-dealers, who may then resell or otherwise transfer
such shares. The selling stockholders may also loan or pledge the shares to a
broker-dealer and the broker-dealer may sell the shares as loaned or upon a
default may sell or otherwise transfer the pledge shares.
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<PAGE>
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of the shares of our common stock offered by
this prospectus may be deemed to be underwriters within the meaning of the
Securities Act, and any discounts, commissions or concessions received by them
and any provided pursuant to the sale of shares by them might be deemed to be
underwriting discounts and commissions under the Securities Act.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. There is no
assurance that any selling stockholder will sell any or all of the shares of our
common stock described in this prospectus, and any selling stockholder may
transfer, devise or gift such securities by other means not described in this
prospectus.
If necessary, the specific shares of our common stock to be sold in this
prospectus, the names of the selling stockholders, the respective purchase
prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part. We entered into a registration rights agreement
in connection with the private placement of the shares of series A preferred
stock and the related warrants which required us to register the underlying
shares of our common stock under applicable federal and state securities laws
under certain circumstances and at certain times. The registration rights
agreement provides for cross-indemnification of the selling stockholders and us
and respective directors, officers and controlling persons, against certain
liabilities in connection with the offer and sale of the shares of our common
stock included in this prospectus, including liabilities under the Securities
Act, and to contribute to payments the parties may be required to make in
respect thereof.
We will pay substantially all of the expenses incurred by the selling
stockholders and us incident to the offering and sale of the shares of our
common stock underlying the series A preferred stock and warrants, excluding any
underwriting discounts or commissions.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Continental Stock
Transfer and Trust Co., 2 Broadway, New York, New York 10004.
Legal Matters
The legality of the common stock offered in this prospectus has been
passed upon for us by Silverman, Collura & Chernis, P.C., 381 Park Avenue South,
Suite 1601, New York, New York 10016.
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<PAGE>
Experts
The consolidated financial statements of Log On America, Inc. appearing in
Log On America, Inc.'s Annual Report (Form 10-KSB) at December 31, 1999 and for
the year then ended, incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, and at December 31, 1998, and for the year then ended, by Tauber &
Balser, P.C., independent auditors, as set forth in their respective reports
incorporated by reference and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such reports
given on the authority of such firms as experts in accounting and auditing.
Documents Incorporated by Reference
The Commission 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 Commission will automatically update and supercede this information. We
incorporate by reference the documents listed below and any future filings made
with the Commission under Sections 13(a), 14, or 15(d) of the Securities
Exchange Act of 1934, until the selling stockholders, sell all of their shares
included in this prospectus.
1. The description of our common stock included in our registration statement
on Form 8-A, filed with the Commission on April 13, 1999, and all
amendments or reports filed for the purpose of updating such description
(File No. 000-25761);
2. Our quarterly report on Form 10-QSB, filed with the Commission on June 4,
1999, for the fiscal quarter ended March 31, 1999 (File No. 000-25761);
3. Our quarterly report on Form 10-QSB, filed with the Commission on August
12, 1999 for the fiscal quarter ended June 30, 1999 (File No. 000-25761);
4. Our quarterly report on Form 10-QSB, filed with the Commission on November
11, 1999, for the fiscal quarter ended September 30, 1999 (File No.
000-25761);
5. Our annual report on Form 10-KSB, filed with the Commission on March 30,
2000, for the fiscal year ended December 31, 1999 (File No. 000-25761);
6. Our current report on Form 8-K filed with the SEC on June 17, 1999, for
the event of June 14, 1999 (File No. 000-25761);
7. Our current report on Form 8-K filed with the SEC on August 12, 1999, for
the event of August 3, 1999 (File No. 000-25761);
27
<PAGE>
8. Our current report on Form 8-K filed with the SEC on December 16, 1999,
for the event of December 10, 1999 (File No. 000-25761);
9. Our current report on Form 8-K filed with the SEC on February 28, 2000,
for the event of February 23, 2000 (File No. 000-25761)
10. Our registration statement on Form SB-2, filed with the SEC on April 23,
1999, and all amendments or reports filed for the purpose of updating such
description (Registration No. 333-70307); and
11. All other reports filed by us with the Commission since December 31, 1999,
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
All documents filed by the us pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 after the date of this registration
statement and prior to the filing of a post-effective amendment to this
registration statement, which indicates that all securities offered hereunder
have been sold, or which deregisters all securities then remaining unsold under
this registration statement, shall be deemed to be incorporated by reference in
this registration statement and to be a part hereof from the date of filing of
such documents.
Any statement contained in a document or incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this registration statement. All
information in this registration statement is qualified in its entirety by the
information and financial statements (including the preferred stock thereto)
appearing in the documents incorporated herein by reference, except to the
extent set forth in the immediately preceding statement.
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the Commission this indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable. In the event that a claim for indemnification against these
liabilities, other than our payment of expense incurred or paid by one of our
directors, officers, or controlling persons in the successful defense of any
action, suit or proceeding, is asserted by that director, officer or controlling
person in connection with the
28
<PAGE>
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question whether this indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of these issues.
29
<PAGE>
================================================================================
================================================================================
No dealer, salesman or any other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted. The
information contained in this prospectus is current only as of this date
TABLE OF CONTENTS
Page
Summary....................................................................2
Offering...................................................................4
Use of Proceeds............................................................6
Risk Factors...............................................................8
Where you can find more
information about Log On..................................................12
Description of Securities.................................................19
Resales by Selling Stockholders...........................................13
Plan of Distribution......................................................24
Transfer Agent............................................................28
Legal Matters.............................................................28
Experts...................................................................28
Disclosure of Commission Position.........................................28
--------------------
================================================================================
================================================================================
2,293,135 SHARES OF
COMMON STOCK
LOG ON AMERICA, INC.
---------------
PROSPECTUS
---------------
, , 2000
--------- ---
================================================================================
30
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 5,099.93
Printing $ 2,500*
Legal Fees and Expenses $ 30,000*
Accounting Fees and Expenses $ 4,000*
Miscellaneous Expenses (including travel
and promotional expenses) $ 1,000*
TOTAL $ 42,599.93*
*Estimated
The Selling Stockholders will not pay any portion of the foregoing
expenses of issuance and distribution.
Item 15. Indemnification of Directors and Officers.
Our certificate of incorporation, as amended, and bylaws, as amended,
limit the liability of directors and officers to the maximum extent permitted by
Delaware law. We will indemnify any person who was or is a party, or is
threatened to be made a party to, an action, suit or proceeding, whether civil,
criminal, administrative or investigative, if that person is or was a director,
officer, employee or agent of us or serves or served any other enterprise at our
request.
In addition, our certificate of incorporation provides that a director
shall not be personally liable to us or our stockholders for monetary damages
for breach of the director's fiduciary duty. The certificate does not eliminate
or limit the liability of a director for any of the following reasons:
<PAGE>
o breach of the directors' duty of loyalty to us or our stockholders;
o acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law;
o the unlawful payment of a dividend or unlawful stock purchase or redemption;
and
o any transaction from which the director derives an improper personal
benefit.
We have purchased directors' and officers' insurance in the amount of
$5,000,000. This insurance insures directors against any liability arising out
of the director's status as our director, regardless of whether we have the
power to indemnify the director against the liability under applicable law.
We have been advised that it is the position of the Commission that
insofar as the indemnification provisions referenced above may be invoked to
disclaim liability for damages arising under the Securities Act, these
provisions are against public policy as expressed in the Securities Act and are,
therefore, unenforceable.
There is no litigation pending, and neither the registrant nor any of its
directors know of any threatened litigation, which might result in a claim for
indemnification by any director or officer.
Item 16. Exhibits and Financial Statement Schedule
(a) The following exhibits unless noted otherwise were filed with the
initial filing of this Form S-3:
Exhibit
Number Description
- ------ -----------
3.1 Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock, as filed with the Delaware Secretary of
State on February 23, 2000.
4.1 Specimen certificate representing registrant's common stock
(incorporated by reference to our registration statement on Form SB-2
(Registration No. 333-70307).
4.2 Form of warrant to HFTP Investments (incorporated by reference to our
Form 8-K, dated February 23, 2000 (File No. 000-25761).
4.3 Form of warrant to L.L.C., Marshall Capital Management, Inc.
(incorporated by reference to our Form 8-K, dated February 23, 2000
(File No. 000-25761).
4.4 Form of warrant to Fisher Capital Ltd. (incorporated by reference to
our Form 8-K, dated February 23, 2000 (File No. 000-25761).
4.5 Form of warrant to Wingate Capital Ltd. (incorporated by reference to
our Form 8-K, dated February 23, 2000 (File No. 000-25761).
II-2
<PAGE>
4.6 Registration Rights Agreement, dated as of February 23, 2000, by and
among the registrant and certain buyers (incorporated by reference to
our Form 8-K, dated February ___ 23, 2000 (File No. 000-25761).
4.7 Securities Purchase Agreement, dated as of February 28, 2000, by and
among the registrant and certain buyers (incorporated by reference to
our Form 8-K, dated February 23, 2000 (File No. 000-25761).
5.1* Opinion of Silverman, Collura & Chernis, P.C.
23.1* Consent of Ernst & Young LLP
23.2* Consent of Tauber & Balser, P.C.
23.3 Consent of Silverman, Collura & Chernis, P.C.
24.1 Power of Attorney, see signature page.
* Filed herewith with this Form S-3
II-3
<PAGE>
Exhibit No. Description
----------- -----------
b. Financial Statement Schedules.
All schedules are omitted from this registration statement because they
are not required or the required information is included in the consolidated
financial statement or the notes thereto.
Item 17. Undertakings.
(a) Rule 415 Offerings.
The undersigned issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
Registration Statement; and
(iii) Includes any additional or changed material
information on the plan of distribution.
provided, however, the paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) Request for acceleration of effective date.
(1) Insofar as indemnification for liabilities arising under
the Securities Act, may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the issuer of expenses incurred or paid by a director,
II-4
<PAGE>
officer or controlling person of the issuer in the successful defense of any
action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such court.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing this Form S-3 Amendment No. 1 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Providence, State of Rhode Island, on
April 27, 2000.
LOG ON AMERICA, INC.
By: s\ David R. Paolo
-------------------------
David R. Paolo, President
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.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David R. Paolo his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to the registration
statement on Form S-3, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, 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 and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
SIGNATURES TITLES DATE
- ---------- ------ ----
\s\ David R. Paolo
- ------------------------
David R. Paolo President, CEO, and Chairman April 27, 2000
\s\ Raymond E. Paolo
- ------------------------ Executive Vice President,
Raymond E. Paolo Secretary, Director April 27, 2000
\s\ Kenneth M. Cornell
- ------------------------
Kenneth M. Cornell Chief Financial Officer, Director April 27, 2000
\s\ Charles F. Cleary
- ------------------------
Charles F. Cleary Chief Operating Officer, Director April 27, 2000
<PAGE>
\s\ Stephen Gilbert
- ------------------------
Stephen Gilbert Executive Vice President, Director April 27, 2000
\s\ Shastri Divakaruni
- ------------------------
Shastri Divakaruni Director April 27, 2000
\s\ David M. Robert
- ------------------------
David M. Robert Director April 27, 2000
\s\ Robert Annunziata
- ------------------------
Robert Annunziata Director April 27, 2000
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement Amendment No. 1 to (Form S-3 No. 333-70307) and related
Prospectus of Log On America, Inc. for the registration of 2,293,135 shares of
its common stock and to the incorporation by reference therein of our report
dated March 4, 2000, with respect to the financial statements of Log On America,
Inc. included in its Annual Report (Form 10-KSB) for the year ended December 31,
1999, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Providence, Rhode Island
April 24, 2000
<PAGE>
Tauber & Balser, P.C.
3340 Peachtree Road, Suite 250
Atlanta, Georgia 30326
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference of our report dated February 12,
1999 included in the April 25, 2000 Form S-3 Amendment No. 1 of Log On America,
Inc.
Tauber & Balser, P.C.
Atlanta, Georgia
April 24, 2000
