<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
IBASIS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3332534
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
</TABLE>
20 SECOND AVENUE
BURLINGTON, MA 01803
(781) 505-7500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
OFER GNEEZY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
IBASIS, INC.
20 Second Avenue
Burlington, MA 01803
(781) 505-7500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
JOHAN V. BRIGHAM, ESQ.
MATTHEW J. CUSHING, ESQ.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
(617) 951-8000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share..... 10,232,974 $4.25 $43,490,139.50 $10,873.00
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c), based on the offering of up to
10,232,974 shares at a purchase price of $4.25 per share, which is the
average of high and low prices reported in the consolidated reporting system
of the Nasdaq National Market on January 11, 2001. It is not known how many
shares will be purchased under this Registration Statement or at what price
such shares will be purchased.
------------------------------
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 SECTION 8(A), MAY
DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 16, 2001
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL AND IS NOT A SOLICITATION OF AN OFFER TO BUY IN ANY STATE IN WHICH AN
OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
<PAGE>
10,232,974 SHARES
IBASIS, INC.
COMMON STOCK
------------------
Selling stockholders identified in this prospectus may sell up to 10,232,974
shares of common stock of iBasis, Inc. iBasis will not receive any of the
proceeds from the sale of shares by the selling stockholders. iBasis' common
stock is listed on the Nasdaq National Market under the symbol "IBAS". On
January 12, 2001 the last sale price of the common stock, as reported on the
Nasdaq National Market, was $4.56 per share. When used herein, the term "selling
stockholder" includes donees, transferees, pledgees and other successors in
interest.
------------------------
INVESTING IN THE COMMON STOCK OF IBASIS INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," BEGINNING ON PAGE 4.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The selling stockholders may sell the shares of common stock described in
this prospectus in public or private transactions, including underwritten
transactions, on or off the National Market System of the Nasdaq Stock Market,
at prevailing market prices, or at privately negotiated prices. The selling
stockholders may sell shares directly to purchasers or through brokers or
dealers or an underwritten offering. Brokers, dealers or underwriters may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders. More information is provided in the section titled
"Plan of Distribution."
The date of this Prospectus is , 2001.
<PAGE>
WHERE YOU CAN GET MORE INFORMATION
iBasis is subject to the reporting requirements of the Securities Exchange
Act of 1934 and files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SEC's public reference facilities at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World
Trade Center, 13th Floor, New York, New York 10048 and at Northwest Atrium
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference facilities. SEC filings are also available
at the SEC's Web site at http://www.sec.gov. iBasis' common stock is listed on
the Nasdaq National Market, and you can read and inspect our filings at the
offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information that we file
with them. Incorporation by reference allows us to disclose important
information to you by referring you to those other documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede this information. iBasis has filed a registration statement on
Form S-3 under the Securities Act of 1933 with the SEC with respect to the
common stock being offered pursuant to this prospectus. This prospectus omits
certain information contained in the Registration Statement on Form S-3, as
permitted by the SEC. Refer to the registration statement on Form S-3, including
the exhibits, for further information about iBasis and the common stock being
offered pursuant to this prospectus. Statements in this prospectus regarding the
provisions of certain documents filed with, or incorporated by reference in, the
registration statement are not necessarily complete and each statement is
qualified in all respects by that reference. Copies of all or any part of the
Registration Statement, including the documents incorporated by reference or the
exhibits, may be obtained upon payment of the prescribed rates at the offices of
the SEC listed above.
Upon request, iBasis will provide without charge to each person to whom a
copy of this prospectus has been delivered a copy of any information that was
incorporated by reference in the prospectus (other than exhibits to documents,
unless the exhibits are specifically incorporated by reference into the
prospectus). iBasis will also provide upon request, without charge to each
person to whom a copy of this prospectus has been delivered, a copy of all
documents filed from time to time by iBasis with the SEC pursuant to the
Securities Exchange Act of 1934. Requests for copies should be directed to John
Quirk, Director of Investor Relations, iBasis, Inc. 20 Second Avenue,
Burlington, MA 01803. Telephone requests may be directed to Mr. Quirk at
(781) 505-7500.
CERTAIN INFORMATION WE ARE INCORPORATING BY REFERENCE
We incorporate by reference the following documents and any future filings
we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 prior to the termination of the offering
described under "Plan of Distribution":
- Our Annual Report on Form 10-K for our fiscal year ended December 31,
1999;
- Our Quarterly Reports on Form 10-Q filed on November 14, 2000, August 11,
2000 and May 15, 2000;
- The financial statements included in our Preliminary Proxy Statement filed
on January 16, 2001; and
- The description of our common stock contained in iBasis' Registration
Statement filed with the SEC under Section 12(g) of the Securities
Exchange Act including any amendment or report filed for the purpose of
updating such description.
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<PAGE>
You may request a copy of these filings at no cost, by writing, telephoning
or e-mailing us at the following address:
IBASIS, INC.
20 Second Avenue
Burlington, MA 01803
(781) 505-7500
Attn.:
e-mail: [email protected]
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided in
this prospectus. No one else is authorized to provide you with different
information. No offer of these securities is being made in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
document.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend
the forward-looking statements to be covered by the safe harbor for
forward-looking statements in these sections. These forward-looking statements
include, without limitation, statements about our market opportunity,
strategies, competition, expected activities, expected profitability and
investments as we pursue our business plan, and the adequacy of our available
cash resources. These forward-looking statements are usually accompanied by
words such as "believe," "anticipate," "plan," "seek," "expect," "intend" and
similar expressions. The forward-looking information is based on various factors
and was derived using numerous assumptions.
Forward-looking statements necessarily involve risks and uncertainties, and
our actual results could differ materially from those anticipated in the
forward-looking statements due to a number of factors, including those set forth
below under "Risk Factors" and elsewhere in this prospectus. The factors set
forth below under "Risk Factors" and other cautionary statements made in this
prospectus should be read and understood as being applicable to all related
forward-looking statements wherever they appear in this prospectus. The
forward-looking statements contained in this prospectus represent our judgment
as of the date of this prospectus. iBasis cautions readers not to place undue
reliance on such statements. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
3
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR SHARES OF COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, WHICH WE BELIEVE ARE
ALL THE MATERIAL RISKS TO OUR BUSINESS, INCLUDING THE BUSINESS OF
PRICEINTERACTIVE, INC. OF RESTON, VIRGINIA, WITH WHOM WE ENTERED INTO A MERGER
AGREEMENT ON DECEMBER 12, 2000, TOGETHER WITH THE INFORMATION CONTAINED
ELSEWHERE IN THE PROSPECTUS, BEFORE YOU MAKE A DECISION TO INVEST IN OUR
COMPANY.
RISKS RELATED TO OUR OPERATIONS
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO BASE YOUR INVESTMENT DECISION,
AND YOU MAY INACCURATELY ASSESS OUR PROSPECTS FOR SUCCESS.
We were incorporated in August 1996 and first began to offer commercial
services in May 1997. Due to our limited operating history, it is difficult for
us to predict future results of operations both for our core business and our
enhanced service offerings. Moreover, we cannot be sure that we have accurately
identified all of the risks to our business, especially because we use new, and
in many cases, unproven technologies and provide new services, the technical
implementation of which on a commercial scale, and widespread commercial
acceptance of, is yet unproven. As a result, our past results and rates of
growth may not be meaningful indicators of our future results of operations.
Also, your assessment of the prospects for our success may prove inaccurate.
WE HAVE A HISTORY OF OPERATING LOSSES AND MAY NEVER BECOME PROFITABLE.
We incurred net losses of $21.1 million during fiscal 1999 and
$41.5 million for the nine months ended September 30, 2000. As of September 30,
2000, we had an accumulated deficit of $69.3 million. We expect to continue to
incur operating losses and negative cash flows as we incur significant operating
expenses and make capital investments in our business. Our future profitability
will depend on our being able to deliver calls over our network at a cost to us
that is less than what we are able to charge for our calls, and utilize our
network to deliver new, enhanced services on a profitable basis.
Our costs to deliver calls are dependent on a number of factors, including
the countries to which we direct calls and whether we are able to use the
Internet, rather than another component of our network or more expensive back-up
networks, to deliver calls. The prices that we are able to charge to deliver
calls over our network vary, based primarily on the prices currently prevailing
in the international long distance carrier market to specific countries. While
we are currently able to terminate a substantial number of the calls carried
over our network profitably on an operating basis, we have been unable to
operate our entire network profitably on an operating basis for sustained
periods of time.
Our ability to deliver new capabilities like unified communications and our
Global Spoken Web also depends on a variety of factors. Unified Communications,
for which we use the brand name VoCore, allows our customers to offer end users
voicemail, email, and faxes accessible from a variety of devices, including
telephones and personal computers. VoCore is designed to include a single-number
reach, or "find-me-follow-me" feature, that allows the user to answer calls
directed to one telephone number from any telephone that the user programs in
sequence to receive such calls. The Global Spoken Web initiative is intended to
bring together a network of speech sites, making web content and other
applications such as customer relationship management accessible through speech
recognition technology over the telephone.
We have not yet recognized revenues from VoCore or our Global Spoken Web
initiative and PriceInteractive's SpeechPort service, described in
"iBasis, Inc.--Company Overview," offering to be acquired in the merger has
achieved only relatively small amounts of revenue to date. It may take longer
than we expect to gain acceptance in the market for these services. In addition,
we may be
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unable to make effective use of the technology we employ, scale the service for
wide use, or leverage our network infrastructure adequately to take advantage of
possible economies of scale.
We may not ever generate sufficient revenues, or reduce costs to the extent
necessary, to permit us to achieve profitability. Even if we do become
profitable, we may not sustain or increase profitability on a quarterly or
annual basis in the future.
FLUCTUATIONS IN OUR QUARTERLY RESULTS OF OPERATIONS THAT RESULT FROM VARIOUS
FACTORS INHERENT IN OUR BUSINESS MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL.
Our revenue and results of operations have fluctuated and may continue to
fluctuate significantly from quarter to quarter in the future due to a number of
factors, many of which are not in our control, including, among others:
- the amount of traffic we are able to sell to our customers, and their
decisions on whether to route traffic over our network;
- our ability to generate revenues from the delivery of new value-added
capabilities like VoCore and our Global Spoken Web initiative and
PriceInteractive's SpeechPort offering that are appealing to the market;
- pricing pressure in the international long distance market;
- the percentage of traffic that we are able to carry over the Internet, or
over our dedicated international private circuit lines, rather than over
the more costly traditional public-switched telephone network;
- loss of arbitrage opportunities resulting from declines in international
settlement rates or tariffs;
- our ability to negotiate lower termination fees charged by our local
providers if our pricing deteriorates;
- our continuing ability to negotiate competitive costs to interconnect our
network with those of other carriers;
- capital expenditures required to expand or upgrade our network;
- changes in call volume among the countries to which we complete calls;
- the portion of our total traffic that we carry over more attractive routes
could fall, independent of route-specific price, cost or volume changes;
- technical difficulties or failures of our network systems or third-party
delays in expansion or provisioning system problems; and
- currency fluctuations in countries where we operate.
Because of these factors, you should not rely on quarter-to-quarter
comparisons of our results of operations as an indication of our future
performance. It is possible that, in future periods, our results of operations
will be significantly lower than the estimates of public market analysts and
investors. Such a discrepancy could cause the price of our common stock to
decline significantly.
WE MAY NEVER GENERATE SUFFICIENT REVENUE TO ATTAIN PROFITABILITY IF
TELECOMMUNICATIONS CARRIERS AND OTHER COMMUNICATIONS SERVICE PROVIDERS ARE
RELUCTANT TO USE OUR SERVICES OR DO NOT USE OUR SERVICES, INCLUDING ANY NEW
SERVICES, IN SUFFICIENT VOLUME.
If the market for Internet telephony and other new services does not develop
as we expect, or develops more slowly than expected, our business, financial
condition and results of operations will be materially and adversely affected.
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<PAGE>
Our customers may be reluctant to use our Internet telephony 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; and
- development of their own capacity on routes served by us.
Our potential customers for our new services, including the service
offerings acquired from PriceInteractive, may be reluctant to use these services
as a result of perceptions that our enhanced services are unnecessary, too
expensive, ineffective, or not appealing to their end-user customers or client
base.
The growth of our core 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.
In addition, we cannot assure investors that communications service
providers and their end-user customers and others will be receptive to, and
subscribe to, unified communications services, or any other enhanced services
that we elect to deploy on our network. Any perceived problems with the
reliability or functionality of any new services that we offer could discourage
communications service providers or others from offering these services to their
customers. In addition, the development of new capabilities, such as VoCore and
Global Spoken Web, may require substantial additional capital expenditures to be
made well in advance of generating any revenue from such services or
demonstrating any market acceptance of such services. If carriers,
communications service providers do not employ our network to offer any new
services to their customers, or if their customers do not subscribe for the
services when offered, our results of operations will be materially adversely
affected.
We cannot assure you that end-users will continue to purchase services from
our customers or that our customers will maintain a demand for our services.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE PRICEINTERACTIVE AND ACHIEVE THE
BENEFITS EXPECTED TO RESULT FROM THE MERGER.
On December 12, 2000, we entered into a merger agreement with
PriceInteractive, Inc. pursuant to which PriceInteractive, Inc. will be merged
with and into a wholly-owned subsidiary of iBasis. We entered into the merger
agreement with the expectation that the merger will result in mutual benefits
including, among other things, benefits relating to expanded and complementary
product offerings, enhanced revenues, increased market opportunity, new
technology and the addition of engineering personnel. Achieving the benefits of
the merger will depend in part on the integration of our technology, operations
and personnel in a timely and efficient manner so as to minimize the risk that
the merger will result in the loss of market opportunity or key employees or the
diversion of the attention of management. Among the challenges involved in this
integration are demonstrating to our customers that the merger will not result
in adverse changes in service standards or business focus and persuading our
personnel that our business cultures are compatible.
In addition, PriceInteractive's principal offices are located in Reston,
Virginia, and our principal offices are located in Burlington, Massachusetts. We
intend to keep most of the operations of PriceInteractive in Reston. We must
successfully integrate PriceInteractive's operations and personnel with our
operations and personnel for the merger to be successful. We cannot assure you
that we will successfully integrate or profitably manage PriceInteractive's
businesses. In addition, we cannot assure
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you that, following the transaction, our businesses will achieve revenues
specific net income or loss levels, efficiencies or synergies that justify the
merger or that the merger will result in increased earnings for the combined
company in any future period. Further, the combined company may experience
slower rates of growth as compared to historical rates of growth of them
independently.
IF WE DO NOT INTEGRATE PRICEINTERACTIVE'S TECHNOLOGIES AND OPERATIONS QUICKLY
AND EFFECTIVELY, SOME OR ALL OF THE POTENTIAL BENEFITS OF THE MERGER MAY NOT
OCCUR.
We must make PriceInteractive's technology, products and services operate
together with our technologies, products and services. If we do not integrate
their operations and technologies quickly and smoothly, serious harm to the
combined company's business, financial condition and prospects may result.
Integrating the two businesses will entail significant diversion of management's
time and attention. We may be required to spend additional time or money on
integration that would otherwise be spent on developing their business and
services or other matters. In addition, the integration may require the partial
or wholesale conversion or redesign of some or all of the technologies, products
and services of either iBasis or PriceInteractive.
THE LOSS OF KEY PRICEINTERACTIVE PERSONNEL COULD MAKE IT DIFFICULT TO COMPLETE
EXISTING PROJECTS AND UNDERTAKE NEW PROJECTS.
The success of the combined company will depend on its ability to identify,
hire and retain employees, and a significant component of the value of the
merger is in the know-how and experience of PriceInteractive employees that we
expect to employ. If key PriceInteractive employees were to leave after the
merger, we may be unable to complete existing PriceInteractive projects or to
undertake new projects, each of which could materially impair our future
earnings and results of operations. We do not have employment agreements that
provide for a fixed term of employment with most of the key employees of
PriceInteractive.
WE EXPECT TO INCUR SUBSTANTIAL TRANSACTION, CONSOLIDATION AND INTEGRATION COSTS
RELATED TO THE MERGER.
Whether or not the merger with PriceInteractive is consummated, we will have
incurred substantial expenses. We estimate that, if the merger is consummated,
the combined company will incur transaction costs of approximately $3.2 million
including investment banking, legal, accounting and printing fees. We expect
that we will also incur significant consolidation and integration expenses that
we cannot accurately estimate at this time. We expect that the combined company
will charge the majority of these consolidation and integration costs and
expenses to operations in fiscal 2001. The amount of the transaction costs is a
preliminary estimate and is subject to change. Actual transaction costs may
substantially exceed our estimates and, when combined with the expenses incurred
in connection with the consolidation and integration of our companies, could
have an adverse effect on the business, financial condition and operating
results of the combined company.
THE ACCOUNTING TREATMENT OF THE MERGER WILL RESULT IN SIGNIFICANT CHARGES TO OUR
OPERATIONS.
We intend to account for the merger with PriceInteractive as a purchase for
financial reporting and accounting purposes, under United States generally
accepted accounting principles, with us acquiring PriceInteractive. After
completion of the merger, the results of operations of PriceInteractive will be
included in the consolidated financial statements of iBasis from the date of the
merger. The purchase price will be allocated to PriceInteractive's assets and
liabilities based on the fair values of the assets acquired and the liabilities
assumed. Any excess of cost over the fair value of the net tangible assets of
PriceInteractive and identifiable intangible assets acquired will be classified
as goodwill and other intangible assets, including in-process research and
development. Goodwill and other intangibles will be amortized by charges to
operations over their estimated useful lives of three to four years and
in-process research and development will be charged to operations at the time of
closing in accordance
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with United States generally accepted accounting principles. We will also record
stock-based compensation relating to the issuance of options to PriceInteractive
employees. The amount of charges for stock-based compensation, in-process
research and development and amortization of goodwill and other intangibles will
be significant and will therefore have a material negative impact on the
combined company's future operating results which could cause our stock price to
decline.
WE MAY FACE QUALITY AND CAPACITY PROBLEMS OVER OUR NETWORK UPON FAILURES BY
THIRD PARTIES.
VENDORS. We rely upon third-party vendors to provide us with the equipment
and software that we use to transfer and translate calls from traditional voice
networks to the Internet, and vice versa. For example, we purchase substantially
all of our Internet telephony equipment from Cisco Systems. PriceInteractive
relies upon third-party venders to provide its business with speech recognition
technology. We cannot assure you that we will be able to continue purchasing
such equipment and software from our vendors, and, following the merger,
PriceInteractive's vendors, on acceptable terms, if at all. If we become unable
to purchase from such vendors the software and equipment needed to maintain and
expand our network as currently configured and to provide services currently
provided by PriceInteractive, we may not be able to maintain or expand our
network to accommodate growth or provide the services currently provided by
PriceInteractive and we may consequently be unable to increase revenues
sufficiently to become profitable. See also "Strategic Relationships," below.
PARTIES THAT MAINTAIN PHONE AND DATA LINES. Our business model depends on
the availability of the Internet and traditional telephone networks to transmit
voice and fax calls, and to provide other enhanced services. Third parties
maintain and, in many cases, own these networks and other components that
comprise the Internet. Some of these third parties are national telephone
companies. They may increase their charges for using these lines at any time and
decrease our profitability. They may also fail to maintain their lines properly
and disrupt our ability to provide service to our customers. Any failure by
these third parties to maintain these lines and networks that leads to a
material disruption of our ability to complete calls or provide other services
could discourage our customers from using our network or enhanced services,
which could have the effect of delaying or preventing our ability to become
profitable.
LOCAL COMMUNICATIONS SERVICE PROVIDERS. We maintain relationships with
local communications service providers in many countries, some of whom own the
equipment that translates voice to data in that country. We rely upon these
third parties both to provide lines over which we complete calls and to increase
their capacity when necessary as the volume of our traffic increases. There is a
risk that these third parties may be slow, or fail, to provide lines, which
would affect our ability to complete calls to those destinations. We cannot
assure you that we will be able to continue our relationships with these local
service providers on acceptable terms, if at all. Because we rely upon entering
into relationships with local service providers to expand into additional
countries, we cannot assure you that we will be able to increase the number of
countries to which we provide service. We also may not be able to enter into
relationships with enough overseas local service providers to handle increases
in the volume of calls that we receive from our customers. Finally, any
technical difficulties that these providers suffer would affect our ability to
transmit calls to the countries that those providers help serve.
STRATEGIC RELATIONSHIPS. We depend in part on our strategic relationships
to expand our distribution channels and develop and market our services. In
particular, we depend in large part on our joint marketing and product
development efforts with Cisco Systems to achieve market acceptance and brand
recognition in certain markets. Our VoCore product relies on technology and
services from companies such as Cisco, OpenWave (formerly Software.com), EMC and
Hewlett-Packard. Cisco or other strategic relationship partners may choose not
to renew existing arrangements on commercially acceptable terms, if at all. In
addition, PriceInteractive also depends in part on its strategic
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relationships with SpeechWorks International, Inc. and MicroStrategy. In
general, if we lose these key strategic relationships, or if we fail to maintain
or develop new relationships in the future, our ability to expand the scope and
capacity of our network and services provided, and to maintain state-of-the-art
technology, would be materially adversely affected. Our Global Spoken Web
initiative will also rely on key strategic relationships, which will be subject
to the same considerations.
THE MARKET DEMAND FOR VOCORE AS WELL AS VOICE SITES AND SERVICES ASSOCIATED WITH
OUR GLOBAL SPOKEN WEB INITIATIVE AND SPEECH RECOGNITION TECHNOLOGY GENERALLY MAY
NOT DEVELOP AS ANTICIPATED, WHICH WOULD SUBSTANTIALLY IMPEDE OUR ABILITY TO
GENERATE REVENUES.
Our future financial performance depends in part on growth in demand for
VoCore and new services such as voice application and speech recognition
services and products. If the market for these services and products does not
develop or if we are unable to capture a significant portion of that market,
either directly or through our partners, our revenues and our results of
operations will be adversely affected. The markets for unified communications
and voice application services and products is, including PriceInteractive's
products and services, relatively new and evolving. The adoption of such
services and products could be hindered by the perceived cost, quality and
reliability of these new technologies, as well as the reluctance among
businesses that have invested substantially in legacy equipment that provide
traditional email, voicemail and/or touch-tone-based, interactive voice response
and other systems.
The continued development of the market for our enhanced services and
products will depend upon the:
- widespread adoption of voice-driven applications by businesses for use in
conducting transactions and managing relationships with their customers;
- widespread adoption of solutions to unify a variety of communications
modes through one solution;
- consumer acceptance of such applications; and
- continuing improvements in hardware and software technology that may
reduce the cost and improve the performance of voice solutions.
The market for speech-activated services is new and potential industry
standards, such as VoiceXML, have not yet matured. If multiple standards are
adopted, we may need to support them, which would require additional time and
resources, and could negatively impact revenue and margins.
Even if the demand for VoCore and new voice application services and
products does grow, if we fail to meet subscriber expectations, the market
ability of the VoCore offering and any other product could be materially
reduced.
THE QUALITY OF SPEECH APPLICATIONS OVER AN IP NETWORK HAS NOT YET BEEN FULLY
PROVEN AND FAILURES BY VOICE SITE PROVIDERS TO ADOPT THESE APPLICATIONS MAY HAVE
A MATERIAL NEGATIVE IMPACT ON OUR FUTURE RESULTS OF OPERATIONS.
Speech applications, such as our Global Spoken Web and PriceInteractive's
SpeechPort, have not been extensively tested on IP infrastructures. If
performance and accuracy of speech services are negatively affected by a
particular IP infrastructure, the commercial acceptance of these applications by
voice site providers on that infrastructure will be low. Failure by voice site
providers to adopt these applications may have a material negative impact on our
results of operations which could cause our stock price to decline. As an
international company, iBasis is dependent upon the further development of
text-to-speech and speech recognition applications in multiple languages.
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OUR CUSTOMERS MAY REQUIRE A LONGER SALES AND IMPLEMENTATION CYCLE, WHICH COULD
NEGATIVELY AFFECT OUR REVENUE PLANS.
If actual sales and development cycles for our enhanced offerings or
offerings of PriceInteractive acquired in the merger are substantially longer
than anticipated, revenue targets would not be met. The failure or lack of
effective third-party technologies and services could limit our ability to
generate revenues. Some of our intended enhanced services offerings and the
service offerings acquired in the merger from PriceInteractive are dependent on
technology developed by third parties. These technologies include:
- email servers that process both email messages and voice mail messages;
- software that converts text to speech;
- speech recognition software;
- billing system software; and
- network operations center servers, routers and other equipment.
We will continue to incorporate third-party technologies in future unified
communications and speech application services and products. We have limited
control over whether or when these third-party technologies will be enhanced. In
addition, our competitors may acquire interests in these third parties or their
technologies, which may render the technology unavailable to us. If a third
party fails or refuses to timely develop, license or support technology
necessary to our services or products, market acceptance of our services or
products could be adversely affected. Moreover, if these third-party
technologies fail or otherwise prove to be not viable, it may have a significant
impact on our ability to provide our services and/or to generate revenues. In
addition, we rely and will continue to rely on services supplied by third
parties such as telecommunications, Internet access and electrical power for
services hosted in our network operations center. If these third-party services
fail to meet industry standards for quality and reliability, market acceptance
of our services could be adversely affected.
WE MAY NOT BE ABLE TO SUCCEED IN THE INTENSELY COMPETITIVE MARKET FOR OUR
VARIOUS SERVICES.
The market for Internet voice, fax and other enhanced services is extremely
competitive and will likely become more competitive. Internet protocol and
Internet telephony service providers, such as GRIC Communications and ITXC
Corp., route traffic to destinations worldwide and compete directly with us.
Also, Internet telephony service providers, such as Net2Phone, that presently
focus on retail customers, may in the future enter our market and compete with
us. Such retail-oriented carriers also provide PC-to-PC services at very low
prices or for free. Perceived competition with this market segment could drive
our prices down. 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. In particular, AT&T
invested over $2 billion in Net2Phone in April.
We also face competition from other companies who offer unified
communications and speech recognition applications. We directly compete at the
wholesale level with a number of other unified communications providers such as
deltathree.com, Orchestrate, Tornado Development, and uReach. Some of the
competition (e.g. deltathree.com and Tornado Development) sell unified
communications directly to end users in addition to selling at the wholesale
level. Furthermore, voice portal companies such as TellMe and BeVocal may in the
future develop business models that compete directly with our Global Spoken Web
business. 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 impose downward pressure on prices
and adversely affect our profitability. We
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cannot assure you 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.
WE ARE SUBJECT TO DOWNWARD PRICING PRESSURES ON OUR WHOLESALE INTERNATIONAL
INTERNET TELEPHONY SERVICES AND A CONTINUING NEED TO RENEGOTIATE OVERSEAS RATES
WHICH COULD DELAY OR PREVENT OUR PROFITABILITY.
As a result of numerous factors, including increased competition and global
deregulation of telecommunications services, prices for international long
distance calls have been decreasing. This downward trend of prices to end-users
has caused us to lower the prices we charge communications service providers for
call completion on our network. If this downward pricing pressure continues, we
cannot assure you that we will be able to offer Internet telephony services at
costs lower than, or competitive with, the traditional voice network services
with which we compete. Moreover, in order for us to lower our prices, we have to
renegotiate rates with our overseas local service providers who complete calls
for us. We may not be able to renegotiate these terms favorably enough, or fast
enough, to allow us to continue to offer services in a particular country on a
cost-effective basis. The continued downward pressure on prices and our failure
to renegotiate favorable terms in a particular country would have a material
adverse effect on our ability to operate our network and Internet telephony
business profitably.
WE MAY FACE PRICING PRESSURES FROM FREE RETAIL UNIFIED COMMUNICATION/UNIFIED
MESSAGING OFFERINGS.
Some unified communication or unified messaging services providers have a
free retail offering. In particular, Onebox, a service of OpenWave, offers
services similar to VoCore with limited functionality for no charge. Free retail
unified communications could become a prevalent model putting significant
pricing pressure on fee-based offerings at the wholesale level. This could have
an adverse affect on iBasis' ability to generate revenue and margins on VoCore
services.
A VARIETY OF RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.
Because we provide many of our services internationally, we are subject to
additional risks related to operating in foreign countries. In particular, in
order to provide services and operate facilities in some countries, we have
established subsidiaries or other legal entities. Associated risks include:
- unexpected changes in tariffs, trade barriers and regulatory requirements
relating to Internet access or Internet telephony, or enhanced services;
- economic weakness, including inflation, or political instability in
particular foreign economies and markets;
- difficulty in collecting accounts receivable; compliance with tax,
employment immigration and labor laws for employees living and traveling
abroad;
- foreign taxes including withholding of payroll taxes; and
- foreign currency fluctuations, which could result in increased operating
expenses and reduced revenues; and other obligations incident to doing
business or operating a subsidiary in another country
In addition, we are subject to a variety of risks associated with the
provision of unified communications and international voice site business
management, any of which could negatively affect our business. These risks
include providing easy telephone access to the iBasis network and relying on
third party vendors to create and refine different language models for each
particular language or dialect. These language models are required to create
versions of our products that allow end users to
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speak the local language or dialect and be understood and authenticated. If
vendors fail to develop localized versions of our products, our ability to
address international market opportunities and to grow our business will be
limited.
These and other risks associated with our international operations may
materially adversely affect our ability to attain or maintain profitable
operations.
A significant portion of our revenue was generated by delivering calls to
Asian Middle Eastern and Latin American countries. Many countries in these
geographic regions have experienced political and economic instability over the
past decade. Repeated political or economic instability in countries to which we
deliver substantial volumes of traffic could lead to difficulties in completing
calls through our regional service providers or decreased call volume to such
countries.
IF WE ARE NOT ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE IN A
COST-EFFECTIVE WAY, THE RELATIVE QUALITY OF OUR SERVICES COULD SUFFER.
The technology upon which our services, and the services acquired from
PriceInteractive in the merger, depend is changing rapidly. Significant
technological changes could render the hardware and software which we use
obsolete, and competitors may begin to offer new services that we are unable to
offer. We must adapt to our rapidly changing market by continually improving the
responsiveness, reliability, services and features of our network and by
developing new features and applications to meet customer needs. If we are
unable to respond successfully to these developments or do not respond in a
cost-effective way, we may not be able to offer competitive services.
WE MAY NOT BE ABLE TO EXPAND AND UPGRADE OUR NETWORK ADEQUATELY AND
COST-EFFECTIVELY TO ACCOMMODATE ANY FUTURE GROWTH.
Our Internet telephony business requires that we handle a large number of
international calls simultaneously. As we expand our operations, we expect to
handle significantly more calls. We will need to expand and upgrade our hardware
and software to accommodate such increased traffic. If we do not expand and
upgrade quickly enough, we will not have sufficient capacity to handle the
traffic and growth in our operating performance would suffer. Even with such
expansion, we may be unable to manage new deployments or utilize them in a
cost-effective manner. In addition to lost growth opportunities, any such
failure could adversely affect customer confidence in the iBasis Network and
could result in us losing business outright.
IF WE FAIL TO MANAGE OUR GROWTH, WE COULD LOSE CUSTOMERS.
We have grown rapidly to date and expect to continue to grow rapidly. In
order to increase the number of our customers and the size of our operations, we
will need to improve our administrative, accounting, operating systems and
controls, as well as integrate those of PriceInteractive following the merger.
We may need to redesign several internal systems. Our attention to these matters
may distract us from other aspects of our business. Moreover, failure to
implement new systems and controls, or to integrate those of PriceInteractive,
may hamper our ability to provide services to customers and may impair the
quality of our services which could result in the loss of customers.
OUR REVENUE WOULD DECLINE SIGNIFICANTLY IF WE LOSE ONE OR MORE OF OUR MOST
SIGNIFICANT CUSTOMERS.
We generate much of our revenue from a limited number of customers.
Customers may discontinue their use of our services at any time, and without
notice. Therefore, in any given quarter, we would lose a significant amount of
revenue if we lost one or more of our major customers.
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WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE DIFFICULTY ATTRACTING AND RETAINING
THE SKILLED EMPLOYEES WE NEED TO EXECUTE OUR GROWTH PLANS.
WE DEPEND HEAVILY ON OUR KEY MANAGEMENT. Our future success will depend, in
large part, on the continued service of our key management and technical
personnel, including Ofer Gneezy, our President and Chief Executive Officer,
Gordon VanderBrug, our Executive Vice President, Michael Hughes, our Chief
Financial Officer, and Charles Giambalvo, our Senior Vice President of Worldwide
Sales. If any of these individuals or others at the Company are unable or
unwilling to continue in their present positions, our business, financial
condition and results of operations would suffer. We do not carry key person
life insurance on our personnel. While each of the individuals named above has
entered into an employment agreement with us, these agreements do not ensure
their continued employment with us.
WE WILL NEED TO ATTRACT SKILLED PERSONNEL TO EXECUTE OUR GROWTH PLANS. Our
future success will depend, in large part, on our ability to attract, retain and
motivate highly skilled employees, particularly engineering and technical
personnel. Competition for such employees in our industry is intense. We have
from time to time in the past experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining employees with
appropriate qualifications. We may not be able to retain our employees or
attract, assimilate or retain other highly qualified employees in the future. If
we do not succeed in attracting and retaining skilled personnel, we may not be
able to grow at a sufficient rate to attain profitable operations.
A FAILURE TO OBTAIN NECESSARY ADDITIONAL CAPITAL IN THE FUTURE ON ACCEPTABLE
TERMS COULD PREVENT US FROM EXECUTING OUR BUSINESS PLAN.
We may need additional capital in the future to fund our operations, finance
investments in equipment and corporate infrastructure, expand our network,
increase the range of services we offer and respond to competitive pressures and
perceived opportunities. Cash flow from operations, and cash on hand may not be
sufficient to cover our operating expenses and capital investment needs. We
cannot assure you that additional financing will be available on terms
acceptable to us, if at all. A failure to obtain additional funding could
prevent us from making expenditures that are needed to allow us to grow or
maintain our operations.
If we raise additional funds by selling equity securities, the relative
equity ownership of our existing investors could be diluted or the new investors
could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs. The failure to obtain additional financing when required could result in
us being unable to grow as required to attain profitable operations.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR COMPETITIVE POSITION
WOULD BE ADVERSELY AFFECTED.
We rely on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
partners and others to protect our intellectual property. Unauthorized third
parties may copy our services or reverse engineer or obtain and use information
that we regard as proprietary. End-user license provisions protecting against
unauthorized use, copying, transfer and disclosure of any licensed program may
be unenforceable under the laws of certain jurisdictions and foreign countries.
While we do not have any patents pending, following the acquisition of
PriceInteractive, we will own rights to certain patents, patent applications,
and other additional intellectual property. In addition, we may seek to patent
certain software or equipment in the future. We do not know if any of our future
patent applications will be issued with the scope of the claims we seek, if at
all. In addition, the laws of some foreign countries do not protect proprietary
rights to the same extent as do the laws of the United States. Our means of
protecting our proprietary rights in the
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United States or abroad may not be adequate and third parties may infringe or
misappropriate our copyrights, trademarks and similar proprietary rights. If we
fail to protect our intellectual property and proprietary rights, our business,
financial condition and results of operations would suffer.
We believe that we do not infringe upon the proprietary rights of any third
party, and no third party has asserted a material patent infringement claim
against us. It is possible, however, that such a claim might be asserted
successfully against us in the future. Our ability to provide our services
depends on our freedom to operate. That is, we must ensure that we do not
infringe upon the proprietary rights of others or have licensed all such rights.
Neither we nor PriceInteractive have requested or obtained an opinion from
counsel as to whether our services infringe upon the intellectual property
rights of any third parties. A party making an infringement claim could secure a
substantial monetary award or obtain injunctive relief that could effectively
block our ability to provide services in the United States or abroad.
We and PriceInteractive have received letters and other notices claiming
that certain of our and PriceInteractive's products and services may infringe
patents or other intellectual property of other parties. To date, none of these
has resulted in a material restriction on any use of our intellectual property
or has had a material adverse impact on our business. We may be unaware of
intellectual property rights of others that may, or may be claimed, to cover our
technology or that of PriceInteractive. Current or future claims could result in
costly litigation and divert the attention of management and key personnel from
other business issues. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement also might require us to enter into costly
royalty or license agreements to the extent necessary for the conduct of our
business. However, we may be unable to obtain royalty or license agreements on
terms acceptable to us or at all. We also may be subject to significant damages
or an injunction against use of our proprietary or licenses systems. A
successful claim of patent or other intellectual property infringement against
us could materially adversely affect our business and profitability.
We and PriceInteractive rely on a variety of technology, primarily software,
that is licensed from third parties. Continued use of this technology by us or
PriceInteractive require that we purchase new or additional licenses from third
parties. There can be no assurances that we can obtain those third-party
licenses needed for our business or that the third party technology licenses
that we do have will continue to be available to us on commercially reasonable
terms or at all. The loss or inability to maintain or obtain upgrades to any of
these technology licenses could result in delays or breakdowns in our ability to
continue developing and providing our services or to enhance and upgrade our
services.
WE MAY UNDERTAKE ADDITIONAL STRATEGIC ACQUISITIONS IN THE FUTURE AND ANY
DIFFICULTIES FROM INTEGRATING SUCH ACQUISITIONS COULD DAMAGE OUR ABILITY TO
ATTAIN OR MAINTAIN PROFITABILITY.
We may acquire additional 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 may result in dilution for
stockholders and the incurrence of indebtedness. We may not be able to operate
acquired businesses profitably or otherwise implement our growth strategy
successfully.
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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 AND OTHER ENHANCED SERVICES, OUR BUSINESS WILL SUFFER.
The technology that allows voice and fax communications over the Internet,
and the delivery of other enhanced services and capabilities like VoCore, the
Global Spoken Web initiative and PriceInteractive's services, are still in the
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, and other uses of the Internet
for our enhanced services, must also be accepted by customers as an alternative
to traditional services. Because the Internet telephony market and markets for
our enhanced services are new and evolving, predicting the size of these markets
and their 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 bandwith requirements, the Internet may
become congested and be unable to support the demands placed on it and its
performance or reliability may decline thereby impairing our ability to complete
calls and provide other services 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 and
provide other services. 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. Finally, important opportunities to grow traffic on
the iBasis network will not be realized if the underlying infrastructure of the
Internet does not continue to be expanded to more locations worldwide.
WE CANNOT BE CERTAIN THAT OUR ABILITY TO PROVIDE OUR SERVICES USING THE INTERNET
WILL NOT BE ADVERSELY AFFECTED BY COMPUTER VANDALISM.
If the overall performance of the Internet is seriously downgraded by
website attacks or other acts of computer vandalism or virus infection, our
ability to deliver our communication services over the Internet could be
adversely impacted, which could cause us to 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 products
purporting to cover these losses, we do not have any of this insurance at this
time.
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 and our enhanced services
offerings outside of the United States varies widely by country. As discussed
more fully in the section entitled Government Regulation, a number of countries
currently prohibit or limit competition in the provision of traditional voice
telephony services. In some of those countries, licensed telephony carriers as
well as foreign
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regulators have questioned our legal authority and/or the legal authority of our
partners to offer our services. We may face similar questions in additional
countries. If we are forced to suspend or discontinue certain operations as a
result of foreign regulatory or legal challenges, this could substantially
affect our ability to achieve profitability.
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 subsidies or other costs on Internet telephony providers. In
addition, 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 or related
services, including our enhanced offerings, in one or more countries, could
limit our ability to provide our services or make them more expensive. Finally,
international organizations such as the International Telecomunications Union
and the European Commission are continuing to examine whether Internet telephony
should continue to be subject to light regulation. Adverse recommendations by
these bodies could also limit our ability to provide services profitably.
In addition, as we make our services available in foreign countries, and as
we work to enable sales by our customers to end-users 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. We currently have
subsidiaries in Argentina, Australia, Brazil, Hong Kong, Japan, Mexico, Peru,
the United Kingdom and Singapore, and a branch in the United Arab Emirates. We
are authorized to provide services in Belgium, Canada, France, Germany, Italy,
Netherlands, Peru, Singapore, Spain, Switzerland, and the United Kingdom, and
the United States.
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 contacts in that jurisdiction. Our customers also
currently are, or in the future may become, subject to these same requirements.
We cannot assure you that our customers 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 customers to comply with applicable laws and
regulations could prevent us from being able to conduct business with them, and
would result in a loss of revenue for us. Additionally, it is possible that
countries may apply laws to transport services provided over the Internet,
including laws governing:
- sales and other taxes, including payroll withholding applications;
- 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; and
- 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 or our other services, this regulation could have a material
adverse effect on our ability to attain or maintain profitability.
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THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO DOMESTIC GOVERNMENTAL REGULATION
AND LEGAL UNCERTAINTIES THAT COULD PREVENT US FROM EXECUTING OUR BUSINESS PLAN.
While the Federal Communications Commission has tentatively decided that
information service providers, including Internet telephony providers, are not
telecommunications carriers for regulatory purposes, various companies have
challenged that decision. Some Congressional elements are dissatisfied with the
conclusions of the FCC and the FCC could impose greater or lesser regulation on
our industry. Such regulation could mean imposition of surcharges related to
such things as access or universal service. We cannot assure you that state
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.
We are not licensed to offer traditional telecommunications services in any
U.S. state and we have not filed tariffs for any service at the Federal
Communications Commission or at any state regulatory commission. Nonetheless, as
more fully discussed in the section of this prospectus entitled "Government
Regulation", aspects of our operations may currently be, or become, subject to
state or federal regulations governing licensing, universal service funding,
disclosure of confidential communications or other information, excise taxes,
transactions restricted by U.S. embargo and other reporting or compliance
requirements. This regulation may also negatively impact the cost of doing
business and materially adversely affect our ability to attain or maintain
profitability.
RISKS RELATED TO THE OFFERING
THE MARKET PRICE OF OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS FOR REASONS OVER WHICH WE HAVE LITTLE CONTROL.
The stock market has, from time to time, experienced, and is likely to
continue to experience, extreme price and volume fluctuations. Prices of
securities of Internet-related companies have been especially volatile and have
often fluctuated for reasons that are unrelated to the operating performance of
the affected companies. The market price of shares of our common stock has
fluctuated greatly since our initial public offering and could continue to
fluctuate due to a variety of factors. In the past, companies that have
experienced volatility in the market price of their stock have been the objects
of securities class action litigation. If we were the object of securities class
action litigation, it could result in substantial costs and a diversion of our
management's attention and resources.
PROVISIONS OF OUR GOVERNING DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE
ACQUISITION PROPOSALS OR DELAY A CHANGE IN CONTROL.
Our certificate of incorporation and by-laws contain anti-takeover
provisions, including those listed below, that could make it more difficult for
a third party to acquire control of our company, even if that change in control
would be beneficial to stockholders:
- our board of directors has the authority to issue common stock and
preferred stock, and to determine the price, rights and preferences of any
new series of preferred stock, without stockholder approval;
- our board of directors is divided into three classes, each serving
three-year terms;
- our stockholders need a supermajority of votes to amend key provisions of
our certificate of incorporation and by-laws;
- there are limitations on who can call special meetings of stockholders;
- our stockholders may not take action by written consent; and
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- our stockholders must provide specified advance notice to nominate
directors or submit stockholder proposals.
In addition, provisions of Delaware law and our stock option plan may also
discourage, delay or prevent a change of control of our company or unsolicited
acquisition proposals.
IBASIS, INC.
COMPANY OVERVIEW
We are a leading provider of advanced Internet-based communications services
that enable telecommunications carriers and other communications service
providers to offer international voice, fax and other enhanced services that
combine the flexibility and power of the Internet with the simplicity and
ubiquity of the telephone. By outsourcing international communications services
to us, our customers are able to lower costs, generate new revenue and quickly
extend their business into Internet-based communications services while
maintaining service quality comparable to that of traditional voice networks. We
have deployed our VoCore hosted unified communications solution that permits our
customers to offer a communications solution that unifies the storage of and
access to e-mail and voice-mail messages as well as faxes. In addition, we are
currently working on developing a global communications infrastructure, which we
call the Global Spoken Web initiative, for voice sites, voice portals and
corporations providing speech-enabled on-line services.
On December 12, 2000, we entered into a merger agreement with
PriceInteractive, Inc. of Reston, Virginia, pursuant to which PriceInteractive
will be merged with and into our wholly-owned subsidiary, Penguin Acquisition
Corp. This merger is subject to certain conditions, including receipt of
approval by our stockholders of the issuance of the shares in the merger by us,
and is expected to close in the first quarter of 2001.
Founded in 1997, PriceInteractive is a recognized interactive voice response
and speech application service provider to Fortune 500 enterprises,
telecommunications carriers and operators of e-commerce sites and portals.
PriceInteractive also provides a line of interactive voice response services
under the name IPort. PriceInteractive's mission is to voice-enable the Internet
economy by rapidly extending Web-based applications to telephones and wireless
devices. PriceInteractive recently announced its high capacity flagship service,
SpeechPort, which makes available "Web-bound" content, customer relationship
management applications and e-commerce opportunities to wireless and fixed
telephones through an advanced speech recognition interface. PriceInteractive
believes that SpeechPort is one of the first application service provider
services specifically focused on bringing Web content to telephones and wireless
devices. Initial customers include AT&T, Worldcom, MicroStrategy and
Palm/Anyday.com. SpeechPort enables ubiquitous access for a business'
information in support of its e-business, e-commerce, e-customer relationship
management, or ERP initiatives. Although the service is designed primarily to
extend web-based applications, it also provides the ability to extend legacy
applications to the telephone.
By connecting these services to the iBasis Network, with its global reach
and significantly-reduced network costs, we hope to increase the value and scope
of the solutions PriceInteractive provides to its large enterprise and carrier
customers. We believe this expanding portfolio of comprehensive, outsourced
solutions will enable the combined companies' enterprise and service provider
customers affordably to extend global access to customer service solutions--from
mobile and fixed phones anywhere in the world. The acquisition of
PriceInteractive is an important step in our strategy to enhance the
capabilities of our global voice-over Internet infrastructure with new,
speech-enabled services that combine the power of the Internet with the
convenience, simplicity and ubiquity of the phone.
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INDUSTRY OVERVIEW
TELECOMMUNICATIONS MARKET OVERVIEW. According to the Gartner Group, a
leading market research firm, the global telecommunications market is expected
to grow to approximately $1.9 trillion by 2003. Global deregulation and rapid
technological advances have resulted in the emergence of many new communications
service providers, increased competition among traditional telecommunications
carriers, lower prices, innovative new services and accelerated customer
turnover. In their efforts to add and retain customers, communications service
providers are looking for ways to cut costs and offer compelling new services,
many of which cannot be deployed over traditional telephone networks, but
instead require a Voice-over-Internet-Protocol, or VoIP, infrstructure.
INTERNATIONAL LONG DISTANCE MARKET. The international long distance market
is a large and growing segment of the telecommunications market. According to
TeleGeography, a market research firm, the total market for international long
distance services in 1997 was approximately $65.9 billion. International Data
Corporation expects international long distance traffic to grow from
94.9 billion minutes in 1998 to 187.1 billion minutes in 2002. We believe that
this growth will accelerate as countries around the world continue to deregulate
their telecommunication markets.
EMERGENCE OF INTERNET TELEPHONY AND NEW SERVICES. Although it has been
possible to transmit voice over Internet-Protocol, or IP, data networks since
1995, only recently has the technology improved such that phone-to-phone calls
can be transmitted over data networks with quality approaching that of
traditional voice networks. In addition, International Data Corporation projects
that worldwide Internet telephony will grow from $0.5 billion in 1999, to
$18.7 billion in 2004, approximately half of which would be generated by new
services, including voice-enabled e-commerce and other enhanced services.
International Data Corporation estimates that revenues from unified
communications services will grow to $5.7 billion in 2004. Many
telecommunications carriers are realizing the need to offer enhanced services to
their customers in an effort to reduce customer turnover and increase the
minutes of voice traffic carried on their network. We believe it has become
increasingly important for telecommunications carriers to offer more than just
the network infrastructure.
Using Internet telephony to complete calls offers communications service
providers comparable quality to traditional networks at lower costs, along with
the ability to offer new enhanced services. Some of internet telephony's
principal advantages include:
- TECHNOLOGICAL EFFICIENCIES. Traditional voice networks use
circuit-switching technology, which establishes dedicated lines between an
originating and terminating point for the duration of a call. In contrast,
Internet telephony is based on packet switching technology. This
technology completes a call by digitizing and dividing a speaker's voice
into small packets that travel to their destination along lines carrying
packets of other Internet traffic. Packets from multiple calls or faxes
can be carried over the same line simultaneously with data from other
sources, in part given that there are gaps or silence in human
conversation, which results in a higher utilization of transmission lines
than can be achieved with circuit-switched technology. Unlike circuit-
switched traffic, data packets also can be compressed, which means that
Internet telephony uses less bandwidth per call than traditional
circuit-switched calling. As a result of these features, calls can be
completed at a lower cost using Internet telephony. We believe that
packet-switched networks, including the Internet, will allow other
traditional services to be offered more cost-effectively as well.
- ECONOMIES OF SCALE. Internet telephony calls are carried over large and
rapidly growing data networks. Businesses recently have spent billions of
dollars to upgrade their data networks to accommodate dramatic increases
in data traffic. According to TeleGeography, the total bandwidth used for
data has surpassed that used for voice in the United States long distance
market in 1998. This growth is driven largely by continuing technological
innovation and the rapid expansion of the Internet as a global medium for
communications and commerce. As data
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networks continue to grow, communications service providers should benefit
from greater economies of scale and be able to offer Internet-based
services, such as Internet telephony, more cost effectively than services
delivered over traditional voice networks.
- OPPORTUNITY TO BY-PASS INTERNATIONAL SETTLEMENT RATES. Traditional
international long distance calls are completed over international voice
networks. These networks are typically owned by government bodies or
telecommunications carriers who charge settlement rates or tariffs for
their use. Although these fees are being reduced or eliminated,
international calls routed over the Internet bypass a significant portion
of these fees, and as a result can generally be completed at lower cost.
- ADDITIONAL CHANNEL FOR CARRIERS. Even the world's largest carriers
regularly outsource their voice and fax traffic, to take advantage of the
lowest-cost provider to a particular destination, and partner with
companies that can provide additional communications channels. Internet
telephony offers an opportunity for service providers with access to the
necessary VoIP technology to develop networks that can provide these
additional channels.
- MORE SERVICES AND EASIER ROLL OUT. In contrast to the closed, proprietary
structure inherent in traditional circuit-switched voice networks,
Internet telephony embraces an open architecture and open standards, which
facilitates innovation at lower costs. Traditional voice networks have
been designed specifically to provide one basic service, making it
difficult to introduce new services over those networks. In contrast, data
networks convert all services into data packets, and allow for the
introduction of an indefinite variety of packet-based services that were
not possible over the traditional network. Since the roll-out of new
services does not necessitate network-wide upgrades, it is easier for
communications service providers to deploy new services quickly. While
voice and fax are the dominant services provided today, additional
services, such as Internet call-waiting, unified messaging, unified
communications, speech applications and IP-based conferencing, can be
provided over data networks.
DEMAND FOR INTERNET TELEPHONY SOLUTIONS. While there are many reasons for
telecommunications carriers and other communications service providers to take
advantage of Internet telephony, for the most part, they have been slow to
establish in-house Internet telephony capability for a number of reasons. These
reasons include:
- lack of adequate Internet telephony technology until recently;
- concerns over quality;
- lack of trained and experienced IP engineering talent;
- prior substantial investment in circuit-switched networks and the
associated expertise; and
- a hesitation to build new networks and cannibalize traffic from their
traditional voice networks.
Developing an international Internet telephony network for a substantial
portion of a communications service provider's traffic would also be expensive
and time-consuming, requiring each service provider to negotiate agreements in
each country where it would like to be able to complete calls. Therefore, many
communications service providers are looking to outsource their Internet
telephony services.
To date, however, few Internet telephony providers have been able to offer
the quality, reliability and back-office support necessary to meet the larger
carriers' strict requirements. In addition, most Internet telephony providers do
not have the international presence to be able to complete calls to a sufficient
number of destinations, and do not have the capacity to carry the volume of
traffic required by carriers to any given location.
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DEMAND FOR UNIFIED COMMUNICATIONS SOLUTIONS. Service providers, such as
competitive local exchange carriers and wireless communications providers, face
increased competition, falling margins and growing customer turnover. Unified
communications offers a higher-margin value-added service that provides service
providers the ability to attract new customers while retaining their current
customer base.
DEMAND FOR SPEECH-ENABLED ON-LINE SERVICES. An increasing number of
companies are deploying speech recognition technology on servers connected to a
telephone as an interface to the public in an effort to reduce the costs of
operating call centers while providing new and existing high quality customer,
business and employee services available globally, regardless of time of day or
local time zone. In addition, a new class of Internet portal, which provides
access to speech-enabled Internet sites and speech-enabled business applications
and intranets via wireless and wireline telephones, is being deployed in the
U.S. and abroad.
THE IBASIS SOLUTION
As our core business, we provide advanced Internet-based communication
services to telecommunications carriers and other communications service
providers. Our solution enables communications service providers to outsource
their international voice, fax and other enhanced services over the Internet at
substantially lower costs than over traditional networks while maintaining a
high quality of service. We provide our customers access to the iBasis Network,
our international, scaleable, standards-based Internet telephony network,
through "Internet branch offices," as described under "the iBasis Network"
below, strategically located in major cities in Asia, Latin America, Europe and
Africa. Our services provide the following key benefits to our customers:
HIGH QUALITY VOICE AND FAX TRANSMISSIONS. Our network and proprietary
technology enables us to complete international voice and fax calls with quality
comparable to that of traditional circuit-switched voice networks. This is
supported by the fact that carriers are able to provide our Internet telephony
services to their customers undifferentiated from their traditional services.
Through our global network operations center and proprietary Assured Quality
Routing software, we are able to monitor our network and re-route traffic over
dedicated private lines or traditional circuit-switched lines when necessary to
maintain high quality. This enables us to provide consistently high quality
services to communications service providers.
COST EFFECTIVE SOLUTIONS. Our transmission costs are lower because packet
switching is more efficient than traditional circuit switching. In addition, we
leverage the Internet to deliver traffic, which results in lower costs than
transmission alternatives that deploy dedicated connections. Our packet-based
scaleable solution also allows us to better match our investment in equipment
with capacity needs, and provide lower cost world-class operating support
systems. Also, we are currently able to circumvent many of the international
tariffs or settlement rates associated with international calls over
circuit-switched voice networks, producing additional cost savings.
INTERNATIONAL HIGH-CAPACITY NETWORK. The iBasis Network is a growing
international network that allows us to complete calls worldwide. During our
third quarter ended September 30, 2000, we transported approximately
168 million minutes of traffic over the more than 7,800 lines we have deployed
internationally.
FLEXIBLE BACK OFFICE SOLUTION THAT FACILITATES NEW SERVICES AND EFFECTIVE
BUSINESS MANAGEMENT. We provide communications service providers with an
integrated network, making possible advanced reporting and monitoring that
customers can access from an easy-to-use web-based application. The flexibility
of our back office systems allows us to provide timely statistics and integrated
billing that enables a communications service provider to manage its costs more
effectively and offer new services more readily.
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EASE OF DEPLOYMENT AND TIME TO MARKET. We enable carriers to route calls
over our network in a timely and cost effective manner. Most carriers and other
communications service providers need no special equipment or technical
expertise in order to access our services as connections are made in the same
manner as traditional voice-based services. Our solution shortens communications
service providers' time-to-market by enabling them to complete calls to any
country on our network without experiencing the delays typically incurred in
establishing separate contracts with local service providers in each country.
OPEN, SCALEABLE ARCHITECTURE DESIGNED FOR NEW SERVICES. Our network
architecture is open, scaleable and standards- based. This allows for fast
deployment of services to new countries, and enables us to offer other enhanced
services over our network quickly and easily. We currently offer voice, fax,
billing and VoCore unified communications services and intend to offer other new
enhanced voice services as part of our Global Spoken Web offerings.
COMPETITIVE ADVANTAGES WITH VOCORE. Our VoCore offering is our hosted
unified communications solution that provides customers with a way of creating
new revenue sources from fully unified mailboxes accessible by phone, browser or
standard PC e-mail, for sending and receiving voicemail, e-mail and facsimiles.
Because our unified communications solution supports open IP standards, it
allows the development of new add-on services that enhance the offering as they
become available.
COMPETITIVE ADVANTAGES WITH GLOBAL SPOKEN WEB. The goal of our Global Spoke
Web business unit is to leverage four major trends that iBasis has identified:
(1) the growing quantity of information, including both text and multimedia
content, that can be reached via the internet and intranets, (2) the increase in
the number of enterprises that are leveraging automated call centers to lower
costs and increase customer satisfaction, (3) the increasing demand for mobile
access to data via cellular telephones and other wireless devices, and (4) the
continued growth in the number of telephones being installed world-wide. Using
the iBasis network as its core, the Global Spoken Web initiative is trying to
build a community of interconnected speech-enabled web sites that can be reached
by telephones and IP devices using the iBasis global network. Enhanced services,
content delivery, and a billing infrastructure are part of this vision.
THE IBASIS NETWORK
The iBasis Network is our international network, over which we deliver large
volumes of high quality international voice, fax and other enhanced services at
significant cost savings to our customers. During our third quarter ended
September 30, 2000, we transported approximately 168 million minutes of traffic
over our network. The iBasis Network consists of four principal elements:
- "Internet central offices" and "Internet branch offices" that translate
voice to data for transmission and reception over a data network;
- the transmission medium, which is principally the Internet;
- Assured Quality Routing, our proprietary software; and
- our global network operations center, from which we oversee and coordinate
the operation of the gateways and the transmission network.
INTERNET CENTRAL OFFICES AND INTERNET BRANCH OFFICES. Our customers can
interconnect with the iBasis Network by connecting dedicated voice circuits from
their facilities to one of our strategically located Internet central offices,
located in: Amsterdam; Cambridge, Massachusetts; Frankfurt; Hong Kong; London;
Los Angeles; Miami; New York; Paris; Singapore; Stockholm; Sydney; Tokyo; and
Toronto. Alternatively, our customers may elect to install an iBasis Internet
branch office directly at their facilities to eliminate the cost of carrying
traffic from their facilities to one of our Internet central offices. Internet
branch offices are scaleable and flexible platforms built primarily using Cisco
Systems'
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equipment and optimized for interconnection with the iBasis Network. Internet
branch offices receive calls through a local carrier's switched network.
Gateways in each Internet branch office digitize, compress and packetize voice
and fax calls and then transmit them over the Internet. At the destination,
another Internet branch office reverses the process and the call is switched
back from the Internet to a local carrier's circuit-switched network in the
destination country. The scalability of the Internet branch offices permits us
quickly to increase capacity in discrete increments at relatively low cost,
either for a region or a customer. In addition, the Internet branch office
flexible architecture is designed to easily integrate and support the new
services we intend to offer. Our IBOExpress product is a solution that expedites
deployment of the Internet branch office. The iBasis Network currently has
Internet central offices or Internet branch offices in more than 45 countries.
THE INTERNET. Because of its global coverage, rapid growth and flexible
connectivity, we use the Internet to transmit the substantial majority of our
voice and fax traffic and deliver other enhanced voice services. By using the
Internet, we avoid having to build a private, dedicated network of fiber and
cable connections, which would delay our time-to-market in many locations and
would be more costly to deploy. We have addressed the challenges of using the
Internet by:
- selecting only high quality, service-oriented Internet service providers
as our vendors;
- purchasing high-speed connections into the Internet backbone; and
- continuously monitoring the quality of the connections between each
Internet branch office and the Internet.
We also use data transmission over private leased lines or traditional
circuit-based voice networks where the Internet is not available or would not
permit us to meet our quality standards.
ASSURED QUALITY ROUTING. We have deployed a proprietary software
application, Assured Quality Routing, to maintain high quality voice and fax
service. This application monitors the quality of calls placed over our network
by applying defined quality parameters to each processed call. These quality
parameters include measures of voice and fax quality that are important to
carriers including overall voice quality, call completion rates and post-dial
delay. The system alerts us whenever the transmission quality drops below
specific thresholds enabling us to temporarily route subsequent calls to a
circuit-switched network or an alternate Internet-based network to restore high
quality.
GLOBAL NETWORK OPERATIONS CENTERS. We manage our network of Internet
central offices and Internet branch offices around the world and implement our
proprietary Assured Quality Routing software through our global network
operations center which is located in Burlington, Massachusetts. Our global
network operations center are comprised of leading network management tools from
Hewlett-Packard and a number of other vendors that permit us to monitor, test
and diagnose all components of the iBasis Network. As part of monitoring the
iBasis Network, the global network operations center also monitors the hardware
and software used in our VoCore unified communications offering. The global
network operations centers are staffed and running 7 days a week, 24 hours a
day, complete with:
- real-time, end-to-end monitoring and analysis of call behavior patterns on
the iBasis Network to identify and address potential problems before they
become serious and to anticipate issues related to network growth;
- system redundancy, including power back-up and multiple network paths; and
- a help desk, which allows us to respond to our customers problems on a
timely basis.
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OUR SERVICES
Our current services include international voice and fax call completion,
and VoCore, our hosted unified communication solution. We also provide customers
with access to our web-based traffic analysis and reporting service called
Interactive Traffic Analysis Center, or iTrac. Customers have the option to
purchase these services as a complete suite or separately.
INTERNATIONAL VOICE AND FAX SERVICES. We offer international voice and fax
call completion services and other enhanced services that provide our customers
a high quality, low-cost alternative for international voice and fax transport
of phone-to-phone or fax-to-fax calls placed by their business and residential
customers. Our proprietary Assured Quality Routing software and web-based
extranet are important components of our services and are integrated elements of
our advanced operational support systems.
We offer service level agreements to our international customers. These
service level agreements for international termination services guarantee
customers sending calls over our network call completion rates equivalent to or
better than those provided by alternative networks, including the
public-switched telephone network. The call completion rate, known in the
telecommunications industry as the answer seizure ratio, represents the
percentage of calls out of all attempts that are successfully completed. The
higher the answer seizure ratio, the more reliable the network and the more
billable calls that result for a carrier.
INTERACTIVE TRAFFIC REVENUE ANALYSIS CENTER. iTrac is proprietary web-based
traffic reporting analysis software that enables our customers to better manage
their operations through real-time information exchange. iTrac provides
statistics on service quality and traffic volume, helping customers to quickly
address service issues and more effectively plan traffic routing and network
capacity. This traffic information are delivered in a cost-efficient manner
using sophisticated and secure extranet technologies that our customers access
using a standard web browser.
UNIFIED COMMUNICATIONS. We have deployed our VoCore hosted unified
communications solution infrastructure, which integrates Cisco Systems' uOne-TM-
unified communications application, on the iBasis Network. This enhanced service
offering will permit our customers to offer a communications solution that
unifies the storage of and access to e-mail and voice-mail messages as well as
faxes. With the proliferation of messaging worldwide and as people send more
e-mail, voice-mail and faxes, unified communications services will allow
subscribers to access these different message types from the commonly-used
communication devices, such as telephones and personal computers.
FUTURE SERVICES. We intend to add new services that leverage components of
the iBasis Network to generate additional sources of revenue. We believe that
our ability to deploy new Internet-based communication services makes us an
attractive partner for application developers. We also believe that the ability
to offer these new services will be beneficial to our customers, regardless of
whether they directly charge their end-users for these services, because they
will help our customers attract new subscribers and retain an "up-sell" to their
existing subscriber base. Some of the services that we may choose to introduce
in the future include:
- GLOBAL SPOKEN WEB. We plan to provide the global communications
infrastructure for voice sites and voice portals. Corporations that
currently have voice sites may be able to take advantage of the iBasis
Network to make these voice sites accessible as local calls from wirelined
and wireless phones around the world. For example, a business executive
traveling in Japan may wish to call her U.S.-based airline's reservation
system to make a flight change. Rather than having the airline charged for
an expensive international long distance call, the traveler may be able to
access the voice site by placing a less costly local call into a Tokyo
point of presence on The iBasis Network, over which we can transport the
call internationally to the airline reservation
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system. Beyond this, we plan to leverage the Internet infastructure to
enable the interconnection of these voice sites and portals.
- BASIC MESSAGING SERVICES. We may offer additional basic messaging
services, including outsourced voice-mail, store-and-forward fax, or
faxmail, and e-mail.
- OTHER ADVANCED MESSAGING SERVICES. We may offer other advanced messaging
services including: single-number reach, which allows subscribers to
consolidate existing office, home, and mobile numbers into a single
contact or "follow-me" number; Internet call management services such as
caller ID, call waiting and call forwarding; and message delivery that
includes the recording and scheduling of a message, repeated delivery
attempts and message delivery confirmation. These services may in some
cases leverage components of our network to provide international
call-termination services and operational support services.
- INFORMATION SERVICES. We may offer Internet-based information services
that deliver detailed, metered billing information that can help customers
to understand better how their network is being used.
- DIRECTORY SERVICES. We may offer subscriber-based directory services that
maintain important customer information. This would enable communications
service providers to customize and automate their services.
- INTERNET AND CIRCUIT-SWITCHED INFRASTRUCTURE. We may offer
circuit-switched access, dedicated Internet access, and equipment
co-location services to help our customers meet their time-to-market
objectives.
- CONFERENCING SERVICES. We may offer audio, video and data conferencing
services.
- BILLING SERVICES. We may offer outsourced billing services such as on-line
bill presentment and Internet telephony clearinghouse settlement services.
MARKETS AND CUSTOMERS
Telephone companies can be segregated by size into first tier, second tier
and third tier carriers. Generally, first tier carriers are large domestic and
international carriers, such as MCI WorldCom, Cable & Wireless, and certain
government-affiliated dominant carriers, such as the Japanese telecommunications
carrier KDD. First tier carriers generally have annual revenues in excess of
$2 billion. Second tier carriers have revenues generally in the $750 million to
$2 billion range, but have fewer direct operating agreements with other carriers
and fewer international facilities. Third tier carriers are typically
switch-based resellers with revenues of less than $750 million.
The majority of traffic over the iBasis Network is from Tier One and Two
carriers in the United States, who transmit voice and fax traffic through our
New York or Los Angeles Internet central offices for completion overseas. As of
December 31, 2000, we were providing services to eleven of the top twelve
highest-volume United States-based international carriers. The ability to
provide quality consistently acceptable to these classes of carriers is of vital
importance because these carriers often have traffic volumes that regularly
overflow their capacity.
Overseas, we have established relationships with in-country companies and
local service providers that have local market expertise and relationships to
build strong businesses. Some of our overseas partners/customers are very large,
well-established national carriers. Others are emerging carriers or Internet
service providers who are able to provide the services necessary to terminate
minutes for us in their country. During 2000, we also experienced significant
increase in the volume of traffic originated from overseas carriers, which
represents a substantial growth opportunity for iBasis. As of December 31, 2000,
iBasis provided traffic exchange services for more than 100 carriers worldwide.
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Our unified communications services are directed at service providers such
as competitive local exchange carriers, wireless, cable, application service
providers and Internet service providers. As of December 31, 2000, we had not
generated any revenue from the provision of unified communicating services.
SALES AND MARKETING
SALES STRATEGY. Our sales efforts for Internet telephony and Unified
Communications target leading telecommunications carriers both in the United
States and overseas. Our sales force, comprised of experienced personnel with
well-established relationships in the telecommunications industry, is frequently
supplemented by senior members of management. In the United States, we sell
directly to carriers and have successfully developed brand-awareness and
beneficial relationships through numerous channels including the web, trade
shows, speaking engagements and joint marketing programs. The ability to provide
quality acceptable to leading carriers is a prerequisite for selling to them and
others. Major carriers have traffic that frequently exceeds their capacity and
compels them to seek alternative channels that offer comparable quality,
particularly where those channels can offer better pricing. Our sales process
often involves a test by our potential customers of our services in which they
route traffic over our network to a particular country. Our experience to date
has been that once a carrier has begun to use our network for a single country
and has found our quality to be acceptable, the sales process for other
countries becomes easier.
In overseas markets, we seek to establish relationships with local service
providers that have the local market expertise to provide the termination
services we need. We believe that our ability to terminate a substantial number
of minutes through these local service providers makes us an attractive partner.
We also offer licensed international carriers in overseas markets the
opportunity to benefit from the favorable economics of Internet telephony by
sending their international long distance traffic to the iBasis Network for
transport and termination in other countries. This represents a significant
opportunity for revenue growth distinct from the growth in traffic from
U.S.-based carriers.
We have established sales offices providing sales coverage in Latin America
and the Caribbean, Europe, the Middle East and Africa, and in the Asia/Pacific
regions and in North America.
MARKETING STRATEGY. Our marketing strategy includes aggressive public
relations campaigns, outreach to and interaction with industry analysts,
participation in industry trade shows and conferences, and a comprehensive
website at www.ibasis.net. We have engaged public relations firms on a regional
basis to conduct campaigns that support our positioning as the preeminent
provider of advanced Internet-based communications services. We aggressively
pursue favorable coverage in the trade and business press and participate in and
place executive speakers at a variety of industry trade shows and conferences,
including Voice on the Net, the International Telecommunications Union events,
The Telephone Voice User Interface Conference, and other focused sales,
marketing and industry events. We believe our website will continue to be an
effective marketing tool in international markets.
STRATEGIC TECHNOLOGY RELATIONSHIPS
We have entered into strategic technology relationships with a number of
leading technology providers in the Internet telephony industry, including Cisco
Systems and Digiquant, formerly known as Belle Systems. We believe that our
strategic technology relationships are important because they give us early
access to new technologies and because many of our strategic relationship
partners are an important part of our sales and marketing programs.
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CISCO SYSTEMS
As a Cisco Alliance Partner, we have access to Cisco's sales, marketing and
technical resources to aid our global expansion. We understand that Cisco has
selected fewer than 30 companies to participate in this program. The Cisco sales
and marketing resources available to us under this program include matching
funds for selected marketing activities, joint-sales calls, event sponsorship
and seminar support. In addition, as a Cisco Alliance Partner, we have access to
Cisco technical resources and early opportunities to bring new products and
features to the marketplace. Currently, we are engaged in three beta programs
with Cisco for new products and features. We also conduct joint sales and
marketing programs with Cisco, participate with Cisco in industry trade shows
and periodically meet with consultants at Cisco's executive briefing center.
Under the terms of our alliance agreement with Cisco, we have committed to
appoint Cisco as our preferred vendor. In addition, we are required to purchase
80% of our total net purchases of any network equipment from Cisco, where Cisco
has a solution.
In addition, the iBasis Network has been designated by Cisco as a certified
Cisco Powered Network-TM-. This designation permits us to leverage Cisco's
significant worldwide brand equity by displaying the Cisco Powered Network-TM-
trademark in our literature and exhibits. In June 2000, iBasis was the first
company to receive Cisco Powered Network-TM- status for unified communications.
DIGIQUANT SYSTEMS (FORMERLY BELLE SYSTEMS)
We also have a strategic alliance with Digiquant A/S, formerly Belle
Systems, a leading provider of billing systems for Cisco-based IP Networks.
Digiquant billing solutions are based on an architecture that provides the
scalability and flexibility that is critical to our continued success in
deploying IP-messaging services.
Under the agreement, we license computer software from Digiquant that allows
us to integrate their billing system into our network; in exchange we pay
product and license fees, which for specified products are not to exceed the
lowest price offered by Digiquant to any of its customers for the same or
similar products. Digiquant will provide general service and support for the
system, and use its best efforts to provide any additional assistance for a
reasonable price, also not to exceed the lowest prices charged by Digiquant to
other customers. The agreement also contains a limited warranty for the system,
a mutual non-disclosure obligation, and a source code escrow at our expense.
COMPETITION
As described in "Risk Factors", the market for international voice and fax
call completion services is highly competitive. We face competition from a
variety of sources including large communications service providers with more
resources, longer operating histories and more established positions in the
telecommunications marketplace, some of whom have begun to develop Internet
telephony capabilities. We also compete with small companies who have focused
primarily on Internet telephony or unified communications. We believe that we
compete principally on quality of service, price and bandwidth. We also expect
that the ability to offer enhanced service capabilities, including new services,
will become an increasingly important competitive factor in the near future.
TELECOMMUNICATIONS COMPANIES AND LONG DISTANCE PROVIDERS.
Large carriers around the world carry a substantial majority of
telecommunications traffic. These carriers, such as British Telecom and Deutsche
Telecom, have started or begun to deploy packet-switched networks for voice and
fax traffic. These carriers retain substantial resources and have large budgets
available for research and development. In addition, several companies, many
with significant resources, such as Level 3 and Qwest Communications, are
building fiber optic networks, primarily in
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the United States, for Internet telephony traffic. These networks can be
expected to carry voice and fax and these newer companies may expand into
international markets.
The nature of the telecommunications marketplace is such that carriers
regularly buy from and sell to each other. Major carriers have multiple routes
to virtually every destination, and frequently buy and sell based on the
strength and capacity to a particular country. We have relationships with many
of these carriers and have carried traffic for them in the past. We expect to
continue to exchange traffic with many of these companies in the future, even as
they begin to devote more resources to competing in the Internet telephony
market.
INTERNET TELEPHONY SERVICE PROVIDERS
A number of companies have started Internet telephony operations in last few
years. AT&T Clearinghouse, GRIC Communications and ITXC sell international voice
and fax over the Internet and compete directly with us. Other Internet telephony
companies, including Net2Phone and deltathree.com, are currently focusing on the
retail market and personal computer-based Internet telephony, but may compete
with us in the future.
UNIFIED COMMUNICATION PROVIDERS
Numerous companies offer a complete unified communication solution or a
specific subset of unified communication functionality. Several companies only
offer a retail unified communication solution which, in some cases, provide
limited services for no charge. However, these companies may provide a full
complement of VoCore-type services to compete with our offering in the future.
SPEECH-ENABLED ON-LINE SERVICES PROVIDERS
Several companies are offering various speech recognition and telephone
web-access applications. Although some of these companies have established
customers and revenues, in many cases, these companies cannot provide the global
reach that the iBasis Network offers.
PriceInteractive's primary competitors are traditional interactive voice
response companies that are attempting to enter the speech recognition arena,
new speech application service provider, or ASP, entrants and
business-to-consumer portals attempting to provide speech-enabled application
service provider services.
In addition to the direct competitors described above, PriceInteractive
faces potential competition from--as well as partnering opportunities
with--several other types of businesses that may enter or border on the speech
ASP space. These include (1) mainstream application service providers that may
forward integrate into the communications or Speech ASP space and (2) other
specialized ASPs, such as Internet telephony ASPs, like iBasis, or application
roll-up ASPs, that may enter the speech market. Internet data center companies
as well as hosting companies could either forward integrate by incorporating
Speech ASP offerings similar to PriceInteractive's or form strategic alliances
with competitive entities.
Recently large communications carriers have increasingly emphasized
value-added, enhanced services, such as complex hosting. In addition, integrated
communications providers may increasingly focus on hosting to more tightly bind
themselves to customers and to create higher profit margins.
Finally, there are a number of startup companies offering voice portals.
These companies do not compete with PriceInteractive directly, but rather with
some of its customers, as they provide a focused and integrated speech plus
content and E-commerce service. AudioPoint, a Washington, D.C. based voice
portal to popular Web functions, is now offering service. This development-stage
company is approximately 10% owned by PriceInteractive.
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PriceInteractive believes that customers focus on the following elements
when selecting a Speech ASP: references, integration capabilities, and a vendor
with the staying power to be a long-term strategic partner. We believe the
combined companies will be positioned to respond favorably to these criteria and
that its client base, expertise in developing hundreds of applications, and high
capacity platform are key competitive differentiators.
GOVERNMENT REGULATION
DOMESTIC REGULATION OF THE INTERNET AND INTERNET TELEPHONY. We believe that
under United States law the Internet-related services that we provide constitute
information services, rather than telecommunications services. As such, our
services are not currently regulated by the Federal Communications Commission or
state agencies responsible for regulating telecommunications carriers, although
aspects of our operations not wholly related to the Internet may be subject to
state or federal regulation such as regulations governing licensing, universal
service funding, confidentiality of communications, copyright and excise taxes.
However, several efforts have been made to enact federal legislation that would
either regulate or exempt from regulation services provided over the Internet.
Therefore, we cannot assure you that one or more of the services we provide will
not be regulated in the future. Increased regulation of the Internet may slow
its growth by negatively impacting the cost of doing business over the Internet.
This would materially adversely affect our business, financial condition and
results of operations.
We also cannot assure investors that Internet telephony will continue to be
lightly regulated by the FCC and state regulatory agencies. Although the FCC has
determined that, at present, information service providers, including Internet
telephony providers, are not telecommunications carriers, we cannot be certain
that this position will continue. If the FCC determines that Internet telephony
is subject to regulation as a telecommunications service, it may subject
providers of Internet telephony services to traditional common carrier
regulation and require them to make universal service contributions and pay
access charges where they do not already through terminating providers. It is
also possible that the FCC will adopt a regulatory framework for Internet
telephony providers different than that applied to traditional common carriers.
Finally, Congressional dissatisfaction with the FCC's conclusions regarding
Internet telephony could result in legislation requiring the FCC to impose
greater or lesser regulation. Any change in the existing regulation of Internet
telephony by the FCC or Congress could materially adversely affect our business,
financial condition and results of operations.
In addition to the FCC and Congress, the Office of Foreign Asset Control of
the U.S. Department of the Treasury, or OFAC, administers the United States'
sanctions against certain countries. OFAC rules restrict many business
transactions with such countries and, in some cases, require that licenses be
obtained for such transactions. We may currently, or in the future, transmit
telecommunications between the U.S. and countries subject to U.S. sanctions
regulations and undertake other transactions related to those services. We have
undertaken such activities in reliance on our good faith interpretation of the
sanctions regulations. We cannot assure you that OFAC will agree with our
interpretation or position. We have contacted OFAC about certain such
transactions, and are in the process of seeking approval, if necessary, for any
such transactions.
State regulatory authorities and legislators may also assert jurisdiction
over the provision of intrastate Internet telephony services. While we do not
currently provide intrastate services and have no current plans to do so,
additional regulation of Internet telephony by the states could preclude us from
entering the intrastate market, or make entrance more difficult or costly.
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In addition to Internet telephony, we provide other services over the
Internet infrastructure such as VoCore unified communications and calling card
services. We believe that our VoCore unified communications services are not
subject to federal or state regulation. Indeed, certain features of the VoCore
unified communications service, such as the voice mail, electronic mail, and
facsimile services, have been expressly found by the FCC to be an enhanced
service not subject to regulation. In addition, we secure telephony functions
from other providers, such as numbering resources for local or toll-free access
to voicemail. We provide this service, in part, by collocating equipment
connected to the public Internet with competitive local exchange providers
around the country. Because we purchase these services as an end-user, we do not
believe that we are subject to any associated regulation. However, some of the
other VoCore unified communications features, which are integrated as part of a
package of features, are less easily classified as unregulated services. These
features include outbound calling which, if standing alone and not carried over
the Internet, could be regulated as a traditional telephony service. Such
regulations could impose on us or our wholesale customers requirements such as
licensing, universal service contributions and other subsidies and surcharges,
and the requirement to file tariffs containing terms and conditions of service.
Our prepaid international calling card services are offered to international
carrier customers, some of which provide these services to end-user customers,
enabling them to call to their home countries over the iBasis network when
traveling in the U.S. Although the calling cards are not marketed or intended
for domestic interstate or intrastate use, we have not blocked the ability to
place such calls or required our wholesale customers to show evidence of their
compliance with United States and state regulations. As a result, there may be
incidental domestic use of the cards. Domestic calling may employ transport and
switching that is not connected to the Internet and, therefore, may not enjoy
the lighter regulation to which our Internet-based services are subject. Because
we are a wholesale carrier, we do not believe that we are subject to federal or
state regulation for the possible uses of these services described here and,
accordingly, we have not obtained state licenses, or filed state or federal
tariffs, or undertaken other possible compliance steps. There can be no
assurance that the FCC and state regulatory authorities will agree with our
position. If they do not, we could become subject to regulation at the federal
and state level for these services, and could become subject to licensing and
bonding requirements, and federal and state fees and taxes, including universal
service contributions and other subsidies.
The FCC also requires that all calling card service providers that enable
users to place toll-free calls from payphones in the United States to compensate
the payphone operator for each call placed from a payphone. Future change in FCC
payphone compensation rules and/or the failure of a company that provides
toll-free numbers to us to compensate payphone companies could affect our
revenues.
Finally, Congress continues to consider and adopt legislation that regulates
certain aspects of the Internet, including online content, user privacy, and
taxation. In addition, Congress and other federal entities have considered other
proposals that would further regulate use of the Internet. These proposals
address a wide range of issues including Internet spamming, database privacy,
gambling, pornography and child protection, Internet fraud, privacy, and digital
signatures. Similarly, various states have adopted or are considering
Internet-related legislation. Increased regulation of the Internet may slow its
growth, which may negatively impact the cost of doing business over the Internet
and materially adversely impact our business, financial condition and results of
operations.
INTERNATIONAL GOVERNMENT REGULATION OF THE INTERNET AND INTERNET
TELEPHONY. We provide our Internet telephony services in various countries in
Europe, Asia, Latin America, Africa and the Middle East. The regulatory
treatment of Internet telephony and other iBasis services in these countries
varies widely and is subject to constant change. Until recently, most countries
either did not have regulations addressing Internet telephony or other VoIP
services such as unified communications and calling cards, classifying these
services as unregulated enhanced services. As the Internet telephony market has
grown and matured, increasing numbers of regulators have begun to reconsider
whether to regulate Internet
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telephony and other VoIP services. Some countries currently impose little or no
regulation on Internet telephony or VoIP services, as in the United States.
Conversely, other countries that prohibit or limit competition for traditional
voice telephony services generally do not permit Internet telephony or VoIP
services or strictly limit the terms under which it may be provided. Still other
countries regulate Internet telephony and VoIP services like traditional voice
telephony services, requiring Internet telephony companies to make universal
service contributions and pay other taxes, countries may also determine on a
case-by-case basis whether to regulate Internet telephony and VoIP services as
voice services, as enhanced services or as another service. The varying and
constantly changing regulation of Internet telephony and VoIP in the countries
in which we currently provide or may provide services may materially adversely
affect our business financial condition and results of operations.
The European Union, for example, distinguishes between voice telephony,
which may be regulated by the member states, and other enhanced services, which
are fully liberalized. With regard to Internet telephony, the European
Commission has made pronouncements that at present, Internet telephony should
not be considered voice telephony and should not be regulated as such by the
member. However, the Commission noted that providers of Internet telephony whose
services satisfied the European Union's definition of voice telephony could be
considered providers of voice telephony and could be regulated by the member
states. Moreover, Commission pronouncements are not binding on the member
states. Therefore, there can be no assurance that the services provided by us in
the European Union will not be deemed voice telephony and, accordingly, subject
to heightened regulation by one or more European Union countries in the future.
We also provide our services in countries where the regulation of Internet
telephony is more restrictive than in the United States and the European Union.
Despite this, we have found service partners in various countries who can
establish an Internet branch office, and in some countries where we have planned
to deploy an Internet central office, we have been able to obtain regulatory
approval to provide the full range of iBasis services. Despite restrictive
regimes in China, Mexico and other countries, we have also provided substantial
international services into these countries. Changes in the regulatory regimes
of all of these countries, that have the effect of limiting or prohibiting
Internet telephony or other iBasis services, or that impose new or additional
regulatory, universal service, tax or financial requirements on providers of
such services, may result in our being unable to provide service to one or more
countries in which we currently operate.
In addition, as we expand into additional foreign countries, such countries
may assert that we are required to qualify to do business in the particular
foreign country, that we are otherwise subject to regulation, or that we are
prohibited from conducting our business in that 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, would materially adversely affect
our business, financial condition and results of operations, including by
subjecting us to taxes and penalties and/or by precluding us from, or limiting
us in, enforcing contracts in such jurisdictions. Likewise, our customers and
partners may be or become subject to requirements to qualify to do business in a
particular foreign country, otherwise to comply with regulations, or to cease
from conducting business in that country. We cannot be certain that our
customers and partners are currently in compliance with regulatory or other
legal requirements in their respective countries, that they will be able to
comply with existing or future requirements, and/or that they will continue in
compliance with any requirements. The failure of our customers and partners to
comply with these requirements could materially adversely affect our business,
financial conditions and results of operations.
Other international regulations may affect our business. For example, the
European Union imposes restrictions on the collection and use of personal data
and grants European Union citizens broad rights to access and limit the use of
their personal data. United States companies that collect or transmit
information over the Internet from individuals in European Union Member States
are subject to European Union legislation, which imposes restrictions that are
more stringent than existing Internet
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privacy standards in the United States. The potential effect on us of
development in this area is uncertain; however, a prohibition on the export of
personal data by us could have a material adverse impact on our business,
financial condition and results of operations.
Finally, the International Telecomunications Union, or the ITU, an
international treaty organization that deals with telecommunications matters,
has not taken any action in favor or against Internet telephony. In 2000,
however, the ITU convened meetings and published reports on the Internet and
Internet telephony issues, partly in response to concerns from some developing
countries over Internet Telephony and tariffing of international Internet
backbone traffic. The ITU will hold additional meetings and will issue
additional reports on Internet telephony during 2001 that may encourage some
countries to increase or reduce their regulation of Internet telephony. In
particular, an ITU study group is examining how international Internet backbone
providers compensate each other for traffic. These efforts, which may take
several years to be completed and which are currently opposed by the United
States and some European countries, may eventually result in changes in national
or international regulations dealing with financial compensation for
international Internet traffic which could affect certain of our costs.
INTELLECTUAL PROPERTY
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success and we rely
on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights. In addition, following the acquisition of
PriceInteractive, we will own rights to certain patents, patent applications and
other intellectual property. We intend to rely on patent law and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights in such patents and patent applications. We
pursue the registration of our trademarks and service marks in the United States
and have applied for the registration of certain of our trademarks and service
marks. We have been granted trademark registration for the mark Assured Quality
Routing in the United States, and have pending registration applications for the
service marks iBasis, VoCore, IBOxpress and 800xtend. In addition, following the
acquisition of PriceInteractive, we will own rights to a number of registered
trademarks and pending trademark registration applications as will as rights to
certain patents, patent applications and other intellectual protection. However,
effective protection may not be available in every country in which we have, or
will have, a commercial presence.
EMPLOYEES
As of December 31, 2000, we had 333 full-time employees and one part-time
employee, with approximately 115 in sales and marketing, 142 in engineering and
operations and 76 in general and administrative. As of December 31, 2000, we
engaged approximately 80 independent contractors and we employ a limited number
of temporary employees. Our employees are not represented by a labor union and
we consider our labor relations to be good.
As of December 31, 2000, PriceInteractive had 138 full-time employees and 4
part-time employees, with approximately 18 in sales and marketing, 37 in
engineering and operations, 68 in professional services, and 19 in general and
administrative. As of December 31, 2000, PriceInteractive engaged approximately
6 independent contractors and employed a limited number of temporary employees
PriceInteractive's employees are not represented by a labor union.
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FACILITIES
We currently lease the following facilities:
<TABLE>
<CAPTION>
ADDRESS SQUARE FOOTAGE EXPIRATION OF LEASE FACILITY USE
------- -------------- ------------------- ------------------------
<S> <C> <C> <C>
20 Second Avenue Burlington, MA..... 27,235 March 2005 headquarters
10 Second Avenue Burlington, MA..... 23,269 Mach 2005 executive office space,
including sales and
marketing and finance
and administration
31 Third Avenue Burlington, MA...... 9,230 May 2003 executive office space,
including sales and
marketing and finance
and administration;
including a global
network operations
center
Los Angeles, CA..................... 3,156 April 2009 house telecommunications
equipment
New York, NY........................ 4,372 July 2008 house telecommunications
equipment
New York, NY........................ 7,280 October 2010 house telecommunications
equipment
Miami, FL........................... 10,500 February 2010 house telecommunications
equipment
Cambridge, MA....................... 9,440 March 2003 house telecommunications
equipment
Hong Kong, CHINA.................... 6,000 October 31, 2003 executive office space
and to house a global
network operations
center
</TABLE>
We have obtained collocation space in special facilities around the world
that are dedicated to housing equipment of multiple competitive telephony
carriers. We lease these smaller spaces to house Internet routing and related
equipment in Amsterdam, Chicago, Frankfurt, Honolulu, Hong Kong, Lima, London,
Madrid, Paris, Philadelphia, San Francisco, Seattle, Singapore, Stockholm,
Sydney, Tokyo, Toronto and temporary office space in London.
PriceInteractive leases 42,000 square feet in Reston, Virginia, twenty miles
from Washington, D.C. and ten miles from Dulles International airport, where its
primary business offices and the main service platform are located. In addition,
PriceInteractive leases space in St. Louis, Missouri, providing platform back-up
to its Reston facility. In the third quarter of 2000, PriceInteractive occupied
an Equinix outsource data center facility located in nearby Ashburn, Virginia,
to host the planned expansion of the SpeechPort platform.
We believe that our existing facilities are adequate for our current needs
and that suitable additional or alternative space will be available in the
future on commercially reasonable terms.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
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USE OF PROCEEDS
iBasis will not receive any proceeds from the sale of the shares of common
stock offered pursuant to this registration statement by the selling
stockholders.
SELLING STOCKHOLDERS
The selling stockholders covered by this prospectus are certain persons who
will receive iBasis common stock, or options to purchase iBasis stock, in
connection with the acquisition by iBasis of PriceInteractive, Inc. Pursuant to
an Agreement and Plan of Merger and Reorganization, dated as of December 12,
2000, among iBasis, iBasis's wholly-owned subsidiary Penguin Acquisition Corp.,
PriceInteractive and certain stockholders of PriceInteractive, iBasis intends to
consummate a merger of PriceInteractive with and into Penguin Acquisition, with
Penguin Acquisition being the surviving corporation. As a result of the merger,
iBasis would issue shares of iBasis common stock and a certain amount of cash to
the holders of the issued and outstanding capital stock of PriceInteractive and,
upon exercise, "vested" options to acquire PriceInteractive stock (including
options the vesting of which is accelerated by the merger). The table set forth
below includes certain information regarding the beneficial ownership of our
common stock as of , 2001, by each of the selling stockholders upon
the closing of the transaction.
Certain of the selling shareholders have had a significant relationship with
PriceInteractive prior to the merger and we expect that they will continue to be
employed by iBasis after the merger. Prior to the merger, Daniel J. Price was a
co-founder and served as the President and Chief Executive Officer of
PriceInteractive, and will serve as a director and Senior Vice President of the
line of business acquired from PriceInteractive, Inc. of iBasis after the
merger. Prior to the merger, Timothy W. Price was a co-founder and served as
Executive Vice President and the Chief Architect at PriceInteractive, Daniel E.
Moore served as the Chief Operating Officer and Chief Financial Officer of
PriceInteractive, Dana K. Skaddan served as the Executive Vice President of
PriceInteractive. These individuals will hold key positions in the combined
company.
Under a Registration Rights Agreement dated December 12, 2000, among iBasis
and the selling stockholders, we agreed to register for resale by those selling
stockholders and their transferees the shares of the iBasis common stock issued
in the acquisition of PriceInteractive, Inc. and to use commercially reasonable
efforts to keep the Registration Statement effective for two years, or until all
of the shares are sold under the Registration Statement, whichever comes first.
This two year period may be extended in the event we exercise our right to
suspend trading under this prospectus for limited periods.
The information provided in the table below assumes that each selling
stockholder will sell all of such stockholder's iBasis common stock. Our
registration of the shares of common stock covered by this prospectus does not
necessarily mean that the selling stockholders will sell all or any of the
shares. The information provided in the table below with respect to each selling
stockholder has been obtained from such selling stockholder. Except as otherwise
disclosed below, none of the selling stockholders has, or within the past three
years has had, any position, office or other material relationship with iBasis
or any of its predecessors or affiliates. Because the selling stockholders may
sell all or some portion of the shares of common stock beneficially owned by
them, only an estimate (assuming each selling stockholder sells all of their
shares offered hereby) can be given as to the number of shares of common stock
that will be beneficially owned by the selling stockholders after this offering.
In addition, the selling stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or from
time to time since the date on which they last provided to iBasis any
information regarding the shares of common stock beneficially owned by them, all
or a portion of the shares of common stock beneficially owned by them in
transactions exempt from the
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<PAGE>
registration requirements of the Securities Act of 1933. Certain selling
stockholders have not provided updated information to us regarding the shares of
common stock beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES NUMBER OFFERING(1)
BENEFICIALLY OWNED OF SHARES -------------------
NAME OF BENEFICIAL OWNER PRIOR TO OFFERING(1) BEING OFFERED NUMBER PERCENT
------------------------ -------------------- ------------- -------- --------
<S> <C> <C> <C> <C>
DANIEL J. PRICE................................
TIMOTHY W. PRICE............................... -0- %
DANIEL E. MOORE(2)............................. -0- %
DANA SKADDAN(3)................................ -0- %
ENTITIES AFFILIATED WITH:
SUMMIT PARTNERS(4).............................
MICROSTRATEGY INCORPORATED..................... -0- %
JOHN R. RAMSEY................................. -0- %
JAMES J. KIM(5)................................ -0- %
SAMIR KHUNDY(6)................................ -0- %
JAMES J. MAIWURM(7)............................ -0- %
ROBERT NELSON(8)............................... -0- %
JAMES HEERWAGEN(9)............................. -0- %
PHILIP GRANT(10)............................... -0- %
</TABLE>
------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities and Exchange Act of
1934, as amended. Shares of Common Stock issuable pursuant to options,
warrants and convertible securities, to the extent such securities are
currently exercisable or convertible within 60 days of , 2001 are
treated as outstanding for computing the percentage of the person holding
such securities but are not treated as outstanding for computing the
percentage of any other person. Unless otherwise noted, each person or
group identified possesses sole voting and investment power with respect to
shares, subject to community property laws where applicable. Shares not
outstanding but deemed beneficially owned by virtue of the right of a
person or group to acquire them within 60 days are treated as outstanding
only for purposes of determining the number of and percent owned by such
person or group.
(2) Includes shares Mr. Moore has the right to acquire within 60 days
upon exercise of options.
(3) Includes shares Mr. Skaddan has the right to acquire within 60 days
upon exercise of options.
(4) Summit Partners is the name used to refer to a group of investment
partnerships. Shares reflected include shares held by Summit
Investors III, L.P., shares held by Summit Ventures IV, L.P.,
shares held by Summit Ventures V, L.P., shares held by Summit V
Companion Fund, L.P., shares held by Summit V Advisors Fund, L.P. and
shares held by Summit V Advisors Fund (QP), L.P. The sole general
partner for Summit Ventures IV, L.P. is Summit Partners IV, L.P., the sole
general partners of which is Stamps, Woodsum & Co. IV. The general partner
for each of Summit Ventures V, L.P., Summit V Companion Fund, L.P.,
35
<PAGE>
Summit V Advisors Fund, l.P., and Summit V Advisors Fund (QP), L.P. is
Summit Partners V, L.P., the general partner of which is Summit Partners
LLC. Summit Partners LLC, through an investment committee, exercises sole
voting and investment poser with respect to the shares owned by these
entities, Summit Investors III, L.P. and Summit Ventures IV, L.P.;
individually no member of Summit Partners LLC is deemed to have or share
such voting or investment power and such members expressly disclaim
beneficial ownership of these shares, except tot he extent of their
respective pecuniary interests therein. The address for each of the Summit
entities is 600 Atlantic Avenue, Suite 2800, Boston, Massachusetts
02210-2227.
(5) Includes shares Mr. Kim has the right to acquire within 60 days upon
exercise of options.
(6) Includes shares Mr. Khundy has the right to acquire within 60 days
upon exercise of options.
(7) Includes shares Mr. Maiwurm has the right to acquire within 60 days
upon exercise of options.
(8) Includes shares Mr. Nelson has the right to acquire within 60 days
upon exercise of options.
(9) Includes shares Mr. Heerwagen has the right to acquire within
60 days upon exercise of options.
(10) Includes shares Mr. Grant has the right to acquire within 60 days
upon exercise of options.
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders or their donees, pledgees, transferees and other successors in
interest in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. When used herein, the term "selling stockholders" refers to all of their
donees, pledgees, transferees and other successors in interest. The shares of
common stock may be sold in one or more of the following transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Stock Market,
- in the over-the-counter market,
- in private transactions, block sales, short sales or other similar types
of transactions
- through options,
- in an underwritten offering, or
- a combination of any of the above transactions.
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering. The supplement will set forth the
aggregate number of shares of common stock being offered and the terms of such
offering, including the name or names of the broker/dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
reallowed to be paid to broker/ dealers.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholders. Alternatively, the selling
stockholders may from time to time offer shares of common stock to or through
broker/dealers or agents. The selling stockholders and any broker/dealers
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<PAGE>
or agents that participate in the distribution of the shares of common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933.
Any profits on the resale of shares of common stock and any compensation
received by any broker/dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933.
The selling stockholders, alternatively, may sell all or any part of the
shares offered hereby through an underwriter. No selling stockholder has entered
into any agreement with a prospective underwriter and there is no assurance that
any such agreement will be entered into. If a selling stockholder enters into
such an agreement or agreements, the relevant details will be set forth in a
supplement or revisions to this prospectus.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholders may not sell all of the
shares. The selling stockholders may transfer, devise or gift such shares by
other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, if applicable,
the common stock must be offered or sold only through registered or licensed
brokers or dealers. In addition, in certain jurisdictions, the common stock may
not be offered or sold unless they have been registered or qualified for sale or
an exemption is available and complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, any person engaged in a distribution of the common stock offered hereby
may not simultaneously engage in market-making activities with respect to our
common stock for a specified period prior to the start of the distribution. In
addition, each selling stockholder and any other person participating in a
distribution will be subject to the Securities Exchange Act and the rules and
regulations promulgated under the Exchange Act, including Regulation M, which
may limit the timing of purchases and sales of common stock by the selling
stockholders or any such other person. These factors may affect the
marketability of the common stock and the ability of brokers or dealers to
engage in market-making activities.
All expenses of this registration will be paid by iBasis. These expenses
include the SEC's filing fees and fees under state securities or "blue sky"
laws. The selling stockholders will pay all underwriting discounts and selling
commissions, if any.
LEGAL MATTERS
Bingham Dana LLP, Boston, Massachusetts has given its opinion that the
shares offered in this prospectus have been duly authorized and upon issuance
will be validly issued, fully paid and non-assessable. As of the date hereof,
attorneys at Bingham Dana LLP own 18,249 shares of iBasis common stock.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
iBasis, iBasis has been informed 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.
EXPERTS
The financial statements of iBasis, Inc. incorporated by reference to our
Annual Report on Form 10-K for the year ended December 31, 1999 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
37
<PAGE>
The financial statements of PriceInteractive, Inc. as of and for the year
ended December 31, 1999 have been incorporated in this registration statement
and prospectus by reference to the iBasis Preliminary Proxy on Schedule 14A
filed on January 16, 2001 in reliance on the report of KPMG LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG LLP covering the 1999 financial
statements of PriceInteractive refers to a change in the method of computing
depreciation.
38
<PAGE>
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION
WHERE AN OFFER OR SOLICITATION IS NOT PERMITTED. NO SALE MADE PURSUANT TO THIS
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS IBASIS SINCE THE DATE OF THIS PROSPECTUS.
10,232,974 SHARES
IBASIS, INC.
COMMON STOCK
------------------------
PROSPECTUS
---------------------
JANUARY , 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount, are
estimated as follows:
<TABLE>
<CAPTION>
TOTAL
----------
<S> <C>
SEC Registration Fee........................................ $ 10,873
NASDAQ Listing Fee.......................................... $ 17,500
Printing and Engraving Expenses............................. $ 150,000
Legal Fees and Expenses..................................... $ 500,000
Accountants' Fees and Expenses.............................. $ 300,000
Miscellaneous Costs......................................... $2,500,000
----------
Total..................................................... $3,478,373
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent and under the circumstances set forth therein.
The Amended and Restated Certificate of Incorporation of the Registrant and
the Amended and Restated By-laws of the Registrant, copies of which are filed as
Exhibits 3.1 and 3.2, provide for indemnification of officers and directors of
the Registrant and certain other persons against liabilities and expenses
incurred by any of them in certain stated proceedings and under certain stated
conditions.
The above discussion of the Registrant's Amended and Restated Certificate of
Incorporation, Amended and Restated By-Laws and Section 145 of the Delaware
General Corporation Law is not intended to be exhaustive and is qualified in its
entirety by such Amended and Restated Certificate of Incorporation, Amended and
Restated By-Laws and statute.
On December 12, 2000, the Registrant entered into a Registration Rights
Agreement with PriceInteractive, Inc. security holders that will become holders
of the capital stock of the Registrant following the acquisition of
PriceInteractive by the Registrant. As part of the Registrations Rights
Agreement, the Registrant has agreed to indemnify the security holder parties
thereto, including Daniel J. Price who will become a director of the Registrant
followin the acquisition, in certain circumstances relating to the registration
of the shares of Registrant's capital stock held by such security holders.
ITEM 16. EXHIBITS
The following is a list of exhibits filed as a part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
December 12, 2000, among the Registrant, PriceInteractive,
Inc. and certain stockholders of PriceInteractive, Inc.
named therein.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference from Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (file
no. 333-96535)).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
3.2 Amended and Restated By-Laws of the Registrant (incorporated
by reference from Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (file no. 333-96535)).
4.1 Specimen Certificate for shares of the Registrant's common
stock (incorporated by reference from Exhibit Specimen
Certificate for shares of the Registrant's common stock to
the Registrant's Registration Statement on Form S-1 (file
no. 333-85545)).
5.1 Opinion of Bingham Dana LLP, counsel to the Registrant,
regarding the legality of the shares of common stock
registered hereunder.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Bingham Dana LLP, counsel to the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to
Registration Statement).
99.1 Registration Rights Agreement, dated as of December 12,
2000, among the Registrant and the holders of the capital
stock of the Registrant who become parties thereto.
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
pursuant to this Registration Statement, a post-effective amendment to
this Registration Statement to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
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 described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Burlington, Commonwealth of Massachusetts, on
this 16th day of January, 2001.
<TABLE>
<S> <C> <C>
IBASIS, INC.
By: /s/ OFER GNEEZY
-----------------------------------------
Ofer Gneezy
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Ofer Gneezy,
Gordon J. VanderBrug and Michael J. Hughes, and each of them severally, acting
alone and without the other, his true and lawful attorney-in-fact with full
power of substitution or resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign on such person's
behalf, individually and in each capacity stated below, any and all amendments
to this Registration Statement on Form S-3 including post-effective amendments,
and to sign any and all additional registration statements relating to the same
offering of securities of the Registration Statement that are filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, or their 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 on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ OFER GNEEZY Officer and Director
------------------------------------------- (Principal Executive January 16, 2001
Ofer Gneezy Officer)
Vice President, Finance and
/s/ MICHAEL J. HUGHES Chief Financial Officer
------------------------------------------- (Principal Financial and January 16, 2001
Michael J. Hughes Accounting Officer)
------------------------------------------- Director January , 2001
Gordon J. VanderBrug
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ CHARLES S. HOUSER
------------------------------------------- Director January 16, 2001
Charles S. Houser
/s/ JOHN JARVE
------------------------------------------- Director January 16, 2001
John Jarve
/s/ CHARLES N. CORFIELD
------------------------------------------- Director January 16, 2001
Charles N. Corfield
------------------------------------------- Director January , 2001
Charles M. Skibo
/s/ CARL REDFIELD
------------------------------------------- Director January 16, 2001
Carl Redfield
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
December 12, 2000, among the Registrant, PriceInteractive,
Inc. and certain stockholders of PriceInteractive, Inc.
named therein.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference from Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (file
no. 333-96535)).
3.2 Amended and Restated By-Laws of the Registrant (incorporated
by reference from Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (file no. 333-96535)).
4.1 Specimen Certificate for shares of the Registrant's common
stock (incorporated by reference from Exhibit Specimen
Certificate for shares of the Registrant's common stock to
the Registrant's Registration Statement on Form S-1 (file
no. 333-85545)).
5.1 Opinion of Bingham Dana LLP, counsel to the Registrant,
regarding the legality of the shares of common stock
registered hereunder.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG LLP.
23.3 Consent of Bingham Dana LLP, counsel to the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to
Registration Statement).
99.1 Registration Rights Agreement, dated as of December 12,
2000, among the Registrant and the holders of the capital
stock of the Registrant who become parties thereto.
</TABLE>
