INTERDIGITAL COMMUNICATIONS CORP, S-3, 1995-06-29

INTERDIGITAL COMMUNICATIONS CORP
S-3, 1995-06-29
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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As Filed with the Securities and Exchange Commission on June 29, 1995
Registration No. ________

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------

FORM S-3

REGISTRATION STATEMENT

Under
THE SECURITIES ACT OF 1933
---------------

INTERDIGITAL COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Charter)

PENNSYLVANIA 23-1882087
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)

</TABLE>

Suite 105
2200 Renaissance Boulevard
King of Prussia, Pennsylvania 19406
(610) 278-7800
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

William A. Doyle, President
InterDigital Communications Corporation
Suite 105, 2200 Renaissance Boulevard
King of Prussia, Pennsylvania 19406
(610) 278-7800
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
---------------

Approximate date of commencement of proposed sale to public: As soon as
practicable after the effectiveness of this Registration Statement.
---------------

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]

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CALCULATION OF REGISTRATION FEE

================================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities To Be Price Per Offering Registration
To be Registered Registered Share (2) Price (2) Fee
<S> <C> <C> <C> <C>

Common Stock 2,969,320 (1) $ 6.41 $ 19,024,000 $ 6,560

================================================================================================================================

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(1) Includes 2,863,002 shares of the Registrant's Common Stock issuable upon the
exercise of warrants and the resale of such shares by the Selling Shareholders,
and 106,318 additional shares of Common Stock which may be sold by the Selling
Shareholders.

(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1993 solely
for the purpose of calculating the registration fee.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

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 NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 29, 1995

PROSPECTUS

INTERDIGITAL COMMUNICATIONS CORPORATION

This Prospectus relates to 2,969,320 shares of Common Stock,
$.01 par value per share (the "Common Stock") of InterDigital Communications
Corporation (the "Company"), including:

(1) 2,863,002 shares of Common Stock which may be issued
by the Company upon the exercise of outstanding warrants (the "Warrants")
to purchase shares of Common Stock at per share exercise prices ranging from
$2.50 to $10.00, and the resale of such shares by Selling Shareholders. See
"Selling Shareholders."

(2) 106,318 additional shares of Common Stock which may
be sold by Selling Shareholders. See "Selling Shareholders."

There is no assurance that any of the Warrants will be
exercised, and therefore there are no assurances that the Company will
receive any proceeds hereunder. The Company will not receive any proceeds from
the sale of shares of Common Stock by Selling Shareholders. See "Selling
Shareholders."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

PROSPECTIVE PURCHASERS SHOULD CONSIDER THE RISKS AND
OTHER INFORMATION SET FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE
5.

The shares offered by the Selling Shareholders hereby will be
sold at market prices on the American Stock Exchange ("AMEX") or in private
sales at prevailing market prices or negotiated prices. Selling Shareholders may
pay commissions or other compensation to broker-dealers in connection with such
sales, which may be in excess of customary commissions charged for AMEX
transactions. See "Selling Shareholders."

The Common Stock is traded on the AMEX under the symbol IDC.
On June 28, 1995, the closing sales price of the Common Stock, as reported by
the AMEX, was $7 7/16.

The date of this Prospectus is _________, 1995

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AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-3
with the Securities and Exchange Commission (the "Commission") relating to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby.

The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Commission. Proxy
statements concerning the Company, reports and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices in New York (75 Park Place, New York,
New York 10007) and Chicago (Room 3190, John C. Kluczynski Building, 230 South
Dearborn Street, Chicago, Illinois 60604). Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.

The Company will furnish, without charge, to any person to
whom a copy of this Prospectus is delivered, upon such person's written or oral
request, a copy of any and all of the documents that have been incorporated by
reference in the Registration Statement and herein (not including exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Any such request should be directed to the Corporate
Secretary, InterDigital Communications Corporation, Suite 105, 2200 Renaissance
Boulevard, King of Prussia, Pennsylvania 19406, phone number: (610) 278-7800.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the
Commission are incorporated in this Prospectus by reference:

(a) The Company's Annual Report on Form 10-K for the
year ended December 31, 1994.

(b) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995,
as amended.

(d) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A dated
April 28, 1987, including any amendments or reports
filed for the purpose of updating such description.

(e) In addition, all documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the termination of
the offering shall be deemed to be incorporated by
reference herein from their respective dates of
filing.

Any statements contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

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THE COMPANY

The Company develops and markets advanced digital wireless
communications systems using proprietary technologies for voice and data
communications and has developed an extensive patent portfolio related to those
technologies. The Company offers its customers, licensees and alliance partners
what it believes is unique access to both Time Division Multiple Access ("TDMA")
and broadband Code Division Multiple Access ("B-CDMA") proprietary digital
wireless technology.

The Company's principal product is the UltraPhone(R), a radio
telephone system providing businesses and households access to basic telephone
service through a wireless local loop. The UltraPhone offers greater flexibility
and ease of installation than conventional wireline-based systems and is
designed to provide higher transmission quality, capacity and spectrum
efficiency. The UltraPhone, which incorporates the Company's TDMA technology, is
sold primarily to foreign and domestic telephone companies to provide basic
telephone service to their customers, primarily in rural and near-urban areas,
where the cost of, or time required for, installing, upgrading or maintaining
conventional wireline telephone service supports selection of an UltraPhone
System. Sales of UltraPhone accounted for approximately 86%, 88% and 40%,
respectively, of the total revenues of the Company during 1992, 1993 and 1994.
Through March 31, 1995, the Company has sold over 220 UltraPhone systems
worldwide, with aggregate Ultraphone sales totaling over $125 million.

The Company's objective is to become a significant global
supplier of digital wireless communications technology and systems through a
program of product development and marketing and patent and technology licensing
which leverages the Company's direct efforts through business alliances based on
the TDMA and B-CDMA technologies.

The Company's alliance program, if fully and successfully
concluded, is designed to improve its UltraPhone business by (i) making the
Company a more credible competitor in large scale telecommunications
infrastructure programs, (ii) expanding the depth and coverage of UltraPhone
marketing efforts around the world, (iii) facilitating greater focus in the
Company's direct sale activities, and (iv) funding and facilitating engineering
changes and alternative supply and production sources to attempt to
significantly reduce costs and expand product capabilities.

The alliance program is also designed to bolster its on-going
efforts to develop its B-CDMA open air interface technology and to spread the
commercialization of a wireless local loop application, and extend the scope of
such programs, if the alliance partners so decide, to develop wireless
personal communication service ("PCS") applications. The successful commercial
development and deployment of such products is dependent upon technological
achievement, including the continued validation of the theories upon which the
new technology is being designed, the continued availability of sufficient debt,
equity or partner funding sufficient to maintain a high level of sustained
efforts over several years and, ultimately, market acceptance of the resultant
product.

In December 1994, the Company completed the initial
implementation of the alliance program by entering into an integrated series of
agreements with Siemens Aktiengesellschaft ("Siemens") covering UltraPhone
marketing and product development, B-CDMA development, patent licensing and
other areas of cooperation.

InterDigital Technology Corporation ("ITC"), an indirect
approximately 94% owned subsidiary, and the Company, respectively, offer
non-exclusive, royalty bearing patent, technology and know-how licenses to
telecommunications manufacturers that manufacture or intend to manufacture
equipment that utilizes ITC's extensive TDMA and Code Division Multiple Access
("CDMA") patented technologies. The Company believes that, through ITC's patent
portfolio, and the Company's TDMA and B-CDMA research and development
capabilities, both it and ITC are positioned to take advantage of the present
evolution in wireless telecommunications to digital technology from the
currently predominant analog technology. ITC implemented a strategy during 1993
of negotiation and litigation with certain entities which it believed were
representative of the broader number of entities infringing the Company's
patents. These efforts have resulted in the recognition of $28.7 million of
licensing revenue in 1994 and $31.1 million during the first quarter of 1995,
the initiation of litigation with major telecommunications companies, and
license agreements with AT&T Corp., Matsushita

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Electric Industrial Co., Ltd., OKI Electric Industry Company, Ltd. and OKI
America, Qualcomm Incorporated, Pacific Communication Sciences, Inc. (a
subsidiary of Cirrus Logic, Inc.), NEC Corporation, Mitsubishi, Hitachi, Ltd.
and Sanyo Electric Company, Ltd, Hughes Network Systems, Inc. and Siemens. Many
of these agreements contain advance payment obligations pursuant to which, as of
the date of this Prospectus, ITC has received or is entitled to receive cash in
the aggregate of approximately $89.1 million in 1995. See "Risk Factors -
Motorola Trial."

As an adjunct to its primary business, the Company had
provided advanced digital wireless research and development services to
government and business organizations, and it also directly provided
telecommunications services to businesses and households through the ownership
and operation of telephone operating companies ("TELCOs") in certain rural areas
of the United States. The Company began to withdraw from the contract services
marketing during 1994 and it sold the TELCO operations during 1994.

Since its inception, the Company has expended substantial sums
to develop its proprietary and patented technology and establish and upgrade the
patent portfolio presently owned by ITC, to develop and commercialize products
delivering the advantages afforded by its technology, and for its activities to
establish a market for those products. The Company had an accumulated deficit of
$164.5 million as of March 31, 1995.

The Company was incorporated in Pennsylvania in 1972 and its
principal executive offices are located at Suite 105, 2200 Renaissance
Boulevard, King of Prussia, Pennsylvania 19406-2755. The Company's telephone
number is (610) 278-7800. As used herein and unless otherwise required by the
context, the "Company" shall mean InterDigital Communications Corporation and
its direct and indirect majority-owned subsidiaries.

RECENT DEVELOPMENTS

Philippine UltraPhone Order. In April 1995, the Company
received an order valued at approximately $17.6 million for UltraPhone equipment
and related services from the Philippine Long Distance Telephone Company. The
order includes a new generation of base stations, 64-line cluster units and a
new generation of subscriber units expected to be released in 1996. Installation
is expected to commence in metropolitan Manila in 1996.

Patent Licensing Activities.

Hitachi. On March 30, 1995, subsequent to the
announcement of the jury verdict in the Motorola trial, ITC entered into
royalty-bearing license agreements with Hitachi and its affiliate, covering the
manufacture, use and sale of TDMA-based subscriber units and infrastructure
equipment. Under the agreements, Hitachi has paid ITC a royalty advance of
approximately $3.5 million and has agreed, under specified conditions, to pay
additional royalties on various types of digital wireless telephones, including
those built in accordance with the TDMA based IS-54, IS-136, GSM, DCS-1800/1900,
PDC and PHS standards and PHS infrastructure equipment.

NEC. On May 9, 1995, the Company announced that ITC
entered into a royalty bearing license agreement with NEC Corporation
covering the manufacture, use and sale of TDMA-based subscriber units and
infrastructure equipment. Under the agreement, ITC has received a non-refundable
royalty advance in excess of $20 million and ITC has the right, under specified
conditions, to receive potential additional royalties on digital wireless
telephones and infrastructure equipment built in accordance with the TDMA based
IS-54, IS-136, GSM, DCS-1800/1900, PDC and PHS standards.

Litigation.

Motorola. In March 1995, a jury trial held in the
United States District Court for the District of Delaware (Civil Action No.
94-73 (D. Del.)) in a case involving Motorola, Inc. and ITC ended with the
jury's verdict, which is subject to varying interpretation, but which is
interpreted by the Company to mean that ITC's patent claims at issue in the
case, involving four of ITC's patents, are not infringed by Motorola and,

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if construed to be infringed, are invalid. Motorola has filed a motion with the
District Court requesting an order for the Company to pay Motorola's legal fees
and costs aggregating between $6 and $7 million. The Company has filed a motion
with the District Court requesting that the Court overturn and/or clarify all or
part of the jury verdict and, if that motion is unsuccessful, the Company
intends to appeal the jury verdict to the U.S. Court of Appeals for the Federal
Circuit. The Company believes that there are substantial grounds
for reversal of the jury's verdict and that the motion for attorney's fees and
costs is without merit. The Court has not yet ruled on either motion.

While the adverse verdict in the case should not affect the
Company's current alliance with Siemens, its ongoing B-CDMA development efforts,
its ability to market and sell the UltraPhone(R) system worldwide or the
obligation of licensors to pay non-refundable advances or paid-up license fees
under ITC's existing patent license agreements, the Company believes that in the
short term, the verdict may adversely affect the Company's efforts to generate
further revenue and cash flow from ITC's patent portfolio and may impair
generally the Company's ability to raise additional funds for general corporate
purposes. The outcome of the jury trial may also temporarily or permanently
adversely affect ITC's pending U.S. litigation against Ericsson GE Mobile
Communications, Inc. and certain of its affiliates (collectively, "Ericsson") as
well as ITC's ability to realize running royalties under certain of its license
agreements. An adverse ruling on Motorola's motion for legal fees could
adversely affect the Company's cash position. See "Risk Factors - Dependence on
Patented and Proprietary Technology" and "- Motorola Trial."

Hughes Network Systems. Effective June 2, 1995, the
Company entered into a Settlement Agreement and Mutual Release (the
"Settlement Agreement") with Hughes Network System, Inc. ("HNS") in connection
with the lawsuit filed against the Company by HNS in February 1993. In the
lawsuit, HNS alleged the Company breached certain agreements which were entered
into between HNS and the Company relating to the termination of certain prior
agreements between the parties. Under the terms of the Settlement Agreement, the
Company has paid HNS $7,500,000, which amount had been substantially previously
reserved by the Company, and HNS has been granted credits aggregating $900,000
against royalty and other payment obligations relating to the Company's
proprietary Time Division Multiple Access Technology ("Credits"). The Credits
may be applied to any royalties becoming due to the Company or its affiliates
from HNS after the date of the Settlement Agreement pursuant to the 1990 License
Agreement dated October 23, 1990, the 1992 License Agreement, dated February 29,
1992 and any other agreement between HNS and the Company or its affiliates
relating to intellectual property rights.

RISK FACTORS

In analyzing this offering, prospective purchasers should
carefully consider the following risks and other information.

Accumulated Deficit and History of Operating Losses. Although
the Company recorded net income for the fourth quarter of 1994 and the first
quarter of 1995, the Company has experienced losses from its inception in 1972
through 1994 and, as of March 31, 1995, the Company's accumulated deficit was
$164.5 million. In recent years, the Company has incurred significant increases
in expenses associated with its UltraPhone business activities, the development
of related product enhancements, the acquisition and development, as applicable,
of its TDMA and B-CDMA digital wireless technologies, and the enforcement of its
patents. There can be no assurance that the Company will realize revenues and
gross profits sufficient to achieve or sustain profitability on a quarterly or
annual basis in the future.

Need for Expansion of UltraPhone Sales. Prior to 1994, sales
of the UltraPhone system historically accounted for a substantial majority of
the Company's revenues. Sales of the UltraPhone system accounted for
approximately 88% and 40%, respectively, of the total revenues of the Company
during 1993 and 1994, and 14% during the first quarter of 1995. Commencing in
1994, licensing revenues became significantly more important as a component of
the Company's overall revenues. During 1994 and the first quarter of 1995,
licensing revenues constituted approximately 57% and 85% of the total revenues
of the Company, respectively. The Company's future profitability may, in the
event of any significant decline in licensing revenues, depend significantly on
the expansion of UltraPhone sales by increasing sales to its existing customers,
broadening the

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Company's customer base, or both. Since 1993, the Company has experienced
negative gross profit margins in its UltraPhone operations as a result of
insufficient production volumes and higher than desired variable costs in such
operations. There can be no assurance that the Company will be able to increase
UltraPhone sales and decrease UltraPhone variable operating costs sufficiently
to achieve profitability in its UltraPhone operations.

Dependence on a Limited Number of Customers and Licensees. In
1993, sales to each of two customers, P.T. Telekomunikasi Indonesia ("P.T.
Telkom") through P.T. Amalgam Indocorpora ("P.T. Amalgam"), the Company's
exclusive distributor in Indonesia, and Telefonos de Mexico S.A. de C.V.
("Telmex"), the Mexican national telephone company, accounted for 18% and 33%,
respectively, of the Company's UltraPhone sales. In 1994, sales to each of two
customers, P.T. Telkom through P.T. Amalgam, and Myanma Posts and
Communications, the Company's Myanmarian customer, accounted for 54% and 12%,
respectively, of the Company's UltraPhone sales. A substantial majority of
UltraPhone sales have historically been concentrated among only a few major
customers, and it is anticipated that such concentration will continue for the
foreseeable future. Customers engaged in multi-year telecommunications
infrastructure programs traditionally purchase different types of telephone
equipment in the various phases of a program and therefore typically would not
purchase a consistent number of UltraPhone systems in each year of the program.
Transitions to different phases of acquisition programs by significant
customers, other reductions in purchases from those customers (unless replaced
by other new orders), or the loss of such customers could have a material
adverse effect on the Company.

Similarly, the Company's licensing revenues have been
generated from only a few licensees. As of May 31, 1995, ITC has entered into
patent license agreements with 11 entities, resulting in the recognition of
$28.7 million of licensing revenue in 1994 and $31.1 million during the first
quarter of 1995. No licensing revenue was recognized in 1993. There can be no
assurance that ITC will enter into patent license agreements with any additional
entities or that additional licensing revenue will be generated from ITC's
existing patent license agreements. The failure of ITC to enter into additional
license agreements would have a material adverse effect on the Company.

Quarterly Fluctuations in Financial Results. Historically, the
concentration of UltraPhone sales to a few major customers and the signing of
patent license agreements providing for up-front license fees with a few
licensees has been a factor in the significant fluctuations in the Company's
revenues and operating results from quarter to quarter. UltraPhone sales are
expected to continue to be concentrated among only a few major customers who
purchase UltraPhone systems at sometimes unpredictable levels and intervals.
Likewise, new license agreements are not entered into on a regular, predictable
basis and there can be no assurance that the Company's licensing activities will
not diminish or cease during any relevant time interval. The Company's
UltraPhone sales and patent and technology licensing revenues may also fluctuate
as a result of other factors, including increased competition from other
products or technologies, announcements of new products or technologies by the
Company or its competitors, equipment acquisition and replacement patterns of
the Company's customers, general domestic and global economic and political
conditions, and perception of the strength and enforceability of the Company's
patent portfolio.

Competition for the UltraPhone System. Competition in the
communications industry is intense. Generally, a number of entities, many of
which are substantially larger and have substantially greater financial,
technical, marketing and other resources than the Company, sell or may introduce
products which compete both domestically and internationally with the
UltraPhone. Further, certain competing wireless telecommunications technologies
(principally analog cellular) offer a lower-cost product as compared to the
UltraPhone system as currently configured. There can be no assurance that the
Company's competitors will not market competitive wireless communications
systems in an increasingly aggressive manner, which could materially and
adversely continue to affect the Company's UltraPhone business in the future.

UltraPhone Engineering Modifications. The Company is
increasingly marketing the UltraPhone System in urban and near-urban
applications, including the recent $17 million Phillippine order, which
typically necessitate engineering modifications to the UltraPhone System. There
can be no assurance that the costs of making such engineering modifications will
not be substantial or that such engineering modifications will be successfully
designed or implemented on a timely basis for any particular application. The
failure of any such engineering modifications to be successfully and timely
designed or implemented could have a material adverse effect upon the Company's
financial condition and results of operations.

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Alliance Program. The Company has entered into an alliance
program designed, among other things, to enhance its UltraPhone marketing
efforts and to promote its CDMA efforts. For example, in December 1994, the
Company entered into an alliance agreement with Siemens, which has begun to
market the UltraPhone product. The Company does not currently anticipate the
possibility that the Siemens relationship will generate significant UltraPhone
shipments and revenues at least until 1996. The elements of the alliance
strategy are interdependent and the failure successfully to achieve any of the
objectives would adversely affect the success of the overall strategy and could
have a material adverse effect upon the Company's financial position and results
of operations.

Reliance on Sole Source Suppliers. The Company currently
obtains certain critical components for the UltraPhone system from sole source
suppliers. The failure of the Company to develop and enter into acceptable
contracts with alternative sources for other critical components, or to obtain
sufficient sole or limited source components of acceptable quality, as required,
could result in delays or reductions in product shipments which could adversely
affect the Company's business prospects and relations with its customers.

Dependence on Patented and Proprietary Technology. The
Company's UltraPhone business depends substantially upon its proprietary
technology, including technology covered by patents owned by ITC. ITC's
licensing opportunities depend upon its ability to enforce its patents against
third parties. In high technology fields, the validity and enforceability of
patents are often subject to complex legal and factual challenges and other
uncertainties. There can be no assurance that ITC's other existing patents or
any patents that may be issued in the future will not be declared invalid, or
that ITC's patents will afford the Company the required protection against
competitors with similar technology; nor can there be any assurance that patents
issued to ITC will not be infringed upon, or circumvented through design
changes, by others. See "Motorola Trial" below. In addition, in the normal
course of business, third parties have asserted, and may assert in the future,
that the Company is engaged in the infringing use of such third party's patents
or proprietary technology. If any such third party successfully asserts that the
Company is engaged in any such infringing use, the Company may be required to
contest the validity of such patents or proprietary technology, to acquire
licenses to use such patented or proprietary technology and/or to redesign the
Company's products to avoid further infringement. There can be no assurance that
such licenses can be obtained or that the Company would prevail in any such
contests. Furthermore, the Company relies upon non-competition and
non-disclosure agreements for the protection of certain other proprietary
technology. There can be no assurance that these agreements will prove adequate
to enforce the Company's proprietary rights in such technology. If the Company's
patents were declared invalid or the Company's proprietary technology were
otherwise used by third parties without licensing such patents and technologies
from the Company, the Company's financial position and results of operations
would be materially adversely affected.

Motorola Trial. In March 1995, a trial involving ITC and
Motorola, Inc., ended with the jury's verdict, which is subject to varying
interpretation, but which is interpreted by the Company to mean that ITC's
patent claims at issue in the case, involving four of ITC's patents, are not
infringed by Motorola and, if construed to be infringed, are invalid. Motorola
has filed a motion with the District Court requesting an order for the Company
to pay Motorola's legal fees and costs aggregating between $6 and $7 million.
The Company has filed a motion with the District Court requesting that the Court
overturn and/or clarify all or part of the jury verdict and, if that motion is
unsuccessful, the Company intends to appeal the jury verdict to the U.S. Court
of Appeals for the Federal Circuit. The Company believes that there
are substantial grounds for reversal of the jury's verdict and that the motion
for attorney's fees and costs is without merit. The Court has not yet ruled on
either motion. In the short term, the jury verdict may adversely affect the
Company's efforts to generate further revenue and cash flow from ITC's patent
portfolio and may impair generally the Company's ability to raise additional
funds for general corporate purposes. The outcome of the jury trial may also
temporarily or permanently adversely affect ITC's pending U.S. patent
infringement litigation against Ericsson and its ability to realize running
royalties under certain of its license agreements. An adverse ruling on
Motorola's motion for legal fees could adversely affect the Company's cash
position. There can be no assurance that the Motorola verdict will be reversed
or that Motorola's motion for legal fees will be denied, and any reversal of the
verdict should be expected to occur in the intermediate- to long-term rather
than in the near future.

Protecting Patents and Proprietary Technology. Litigation and
other costs of protecting a patent portfolio can be significant. ITC is
currently in litigation or involved in administrative proceedings, both

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in the United States and abroad, over certain of its patents. In the event any
of these proceedings were to have unfavorable results, or if any of ITC's
patents were to be declared invalid, it could have a material adverse effect on
ITC's patent licensing opportunities.

Dependence on Foreign Sales. The Company expects that sales of
UltraPhone systems to foreign customers will continue to account for a
substantial portion of the Company's total product revenues. Sales of UltraPhone
systems to foreign customers accounted for 65%, 79% and 86%, respectively, of
the Company's product revenues for 1993, 1994 and the first quarter of 1995. As
the Company's foreign sales are typically made to a foreign government or a
foreign country's nationally-owned or -controlled telephone company, foreign
sales of UltraPhone systems are also subject to political factors which may
result in delays in completing sales or the inability to complete sales. Foreign
sales of UltraPhone systems may be affected by changes in demand resulting from
fluctuations in currency exchange rates, as well as by risks such as tariff and
quota regulations and difficulties in obtaining export or import licenses, among
other things. The Company's UltraPhone sales usually depend upon a customer's
ability to obtain financing for the purchase, and there can be no assurance that
the Company's existing or prospective customers will be able to qualify for or
obtain the financing necessary to purchase UltraPhone systems.

International Operations. The Company's ability to conduct
business in certain areas outside the United States and its revenues derived
from foreign licensees may be adversely affected by certain risks inherent in
international operations. In conducting business in foreign jurisdictions the
Company may be subject, in addition to the effects of government regulation, to
the effects of tariffs and any other applicable trade barriers, currency control
regulations, political instability, potential adverse tax consequences, and
general delays in remittance and difficulties of collection of foreign payments,
among other things. Also, currency conversion gains and losses could contribute
to fluctuations in the Company's operating results. If for any reason exchange
or price controls or other restrictions on the conversion or repatriation of
foreign currencies were imposed, the Company's revenues derived from foreign
customers or licensees could be adversely effected.

Technological Change and Product Development. The
telecommunications industry is characterized by rapid technological change,
frequent product introductions and evolving domestic and international industry
standards. The Company believes that its potential for future success will
depend on, among other things, whether it will be able to (i) meet evolving
customer and country-specific requirements through continued refinements to the
UltraPhone (including frequency modifications), and (ii) reduce product costs to
allow for more aggressive UltraPhone product pricing and increased gross profit
margins. Such efforts will necessitate continued significant investment by the
Company in research and development and in sales and marketing. There can be no
assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to make the technological advances
necessary to achieve these goals and thereby capture a level of UltraPhone sales
sufficient to achieve its future success. There can be no assurance that the
Company's products will not be rendered obsolete or non-competitive by new
industry standards or changing technology or that the Company will be able
successfully to increase UltraPhone sales or to develop and market new products.

Regulatory and Standards Compliance. In general, the
telecommunications industry is subject to continued regulation on the federal,
state and international levels and, in many cases, domestic, regional and
international organizations, including financing agencies, impose standards for
acceptance or type certification of telecommunications products. Changes in
these regulations or standards may adversely impact the Company's ability to
sell UltraPhone systems or impose additional costs and/or time delays with
respect to such sales.

Government Regulations. The commercial potential for the
Company's proprietary technologies may be materially affected by regulations and
actions of the Federal Communications Commission ("FCC"), state public service
and utility commissions, the United States Congress and the courts relating to
the regulation of competition, rate tariffs and/or frequency use, which could
affect the market, demand and availability of communications systems. These
restrictions, and those imposed by counterpart agencies in foreign
jurisdictions, may be important factors in decisions by telephone companies,
cellular system operators and other authorized service providers concerning
utilization of the Company's proprietary technologies.

-8-

<PAGE>

Effect of Litigation on Cash Position. The Company is
currently in patent, securities and other litigation, both as a plaintiff and a
defendant, in the United States and abroad, and is involved in administrative
proceedings abroad, over certain of its patents. The legal fees and costs
associated with such litigation will be substantial. A judicial determination of
liability requiring the Company to pay substantial amounts could adversely
affect the Company's cash position. See "- Motorola Trial."

Need for Additional Financing. The Company's operations to
date have required substantial amounts of working capital, and the Company
expects to spend substantial funds to support its UltraPhone operations, to
develop improvements and enhancements to the UltraPhone system, to further
expand its research and development activities relating to its proprietary
technologies and to fund its patent enforcement activities. The Company's
working capital requirements will depend on numerous factors, including but not
limited to the level of demand for the UltraPhone system, the progress of the
Company's research and development programs, the ability to generate patent
license fees and royalties and the need to expend funds in connection with its
patent protection activities. To the extent that cash on hand and funds
generated from operations are insufficient, the Company will have to raise
additional funds to meet its working capital requirements. No assurance can be
given that additional financing will be available or, if available, that it will
be available on acceptable terms.

Dependence on Key Personnel. The Company's business will
continue to depend upon certain key personnel, none of whom currently are
parties to employment agreements with the Company. The Company believes that to
succeed in the future it will be required to continue to attract, retain and
motivate talented and qualified management, sales and technical personnel. There
can be no assurance that the Company will be able to retain its key employees,
or that the Company will be able to continue to attract, assimilate and retain
other skilled management, sales and technical personnel. The loss of any of its
existing key personnel or the inability to attract and retain such key employees
in the future could have a material adverse effect on the Company.

Adverse Effects to Common Stock Upon Issuance of Additional
Preferred Stock. The Company is authorized to issue 14,398,600 shares of its
preferred stock, par value $.10 per share ("Preferred Stock"), of which
approximately 106,000 shares were issued and outstanding as of March 31, 1995.
The Company's Board of Directors (the "Board"), without any further action by
the Company's shareholders, may issue from time to time the authorized and
unissued shares of Preferred Stock in one or more series, and may determine as
to each series the designation and number of shares to be issued and the
relative rights, preferences and limitations of the shares of each series,
including provisions with respect to voting powers, redemption, conversion,
dividend rights and liquidation preferences. The issuance of Preferred Stock
could adversely affect the voting power of the holders of Common Stock, deny
holders of Common Stock the receipt of a premium on their Common Stock and have
a depressive effect on the market price of the Common Stock. The issuance of
Preferred Stock could also have the effect of deterring or delaying any attempt
by a person or group to obtain control of the Company.

Volatility of Securities Prices. Historically, market prices
for securities of companies involved in the wireless telecommunications industry
have been volatile. In addition, market prices for the Common Stock have
historically been particularly volatile due, in part, to the Company's history
of quarterly fluctuations of revenues and operating results. Announcements of,
among other things, technological innovations or new commercial products by the
Company or its competitors, developments concerning proprietary technologies,
results of patent enforcement activities, regulatory developments in both the
United States and other countries, and global and national economic and
political factors, as well as period-to-period fluctuations in financial
results, may have a significant impact on the market price of the Common Stock.
See " - Adverse Effects to Common Stock Upon Issuance of Additional Preferred
Stock."

Lack of Dividends on Common Stock. The Company has not
declared or paid cash dividends on the Common Stock since its inception. It is
anticipated that in the foreseeable future, no cash dividends will be declared
or paid on the Common Stock and any cash otherwise available for such dividends
will be reinvested in the Company's business.

Anti-Takeover Provisions. Unsolicited changes in control of
the Company could be deterred, delayed or made more expensive as a result of
applicable statutory protections (relating to transactions with certain
"interested persons" and "controlling persons"), the statutory authorization for
the Board to consider the

-9-

<PAGE>

interests of constituent groups (other than the Company's shareholders) when
determining whether a particular action is in the best interests of the Company,
provisions of the Company's Bylaws establishing a classified Board, and certain
provisions in the Company's Articles of Incorporation. Accordingly, these
provisions and protections may have a depressive effect on the price of the
Company's securities.

-10-

<PAGE>

SELLING SHAREHOLDERS

The following table sets forth the names of the Selling
Shareholders and certain information regarding the beneficial ownership of the
Company's Common Stock by the Selling Shareholders as of March 31, 1995 (except
as indicated below), and as adjusted to reflect the sale of the shares offered
by this Prospectus:

Beneficial Ownership
Number of After Offering
Shares --------------------
Beneficially Number of Percent of
Owned Prior to Shares Number of Class (if greater
Name Offering Offered Shares than 1%)
---- -------------- --------- --------- -----------------
<S> <C> <C> <C> <C>

Anthony Albright 3,500(1) 3,500(1) -- --

Steven Altman 90,473(2) 62,500(3) 27,973 --

George Anderson 77,500(4) 65,000(4) 12,500 --

Argon Electric 46,501(5) 3,750(6) 42,751 --

Argon Electric Co. -- --
Defined Benefit Pension Plan 7,500(7) 7,500(7)

Argus Consulting 10,000(8) 10,000(8) -- --

John Bambach 7,500(9) 7,500(9) -- --

Richard Bergfeld 1,000(10) 1,000(10) -- --

Carmelo Blacconeri 576,435(11) 90,835(12) 485,600 1.1%

Blacconeri Agency 21,751(13) 6,751(14) 15,000 --

Nancy Blacconeri 576,435(11) 1,875(15) 467,785 1.1%

Ridgely Bolgiano 254,305(16) 108,650(16) 145,655 --

Margaret S. Bracknell 840(17) 840(17) -- --

Phyllis M. Buffardi 43,202(18) 17,250(19) 25,952 --

A.G. Bunker 13,333(20) 13,333(20) -- --

David A. Burns
Jeffrey S. Burns
Michael A. Burns 357,893(21) 116,813(22) 241,080 --

David A. Burns 663,827(23) 53,208(24) 610,619 1.4%

David L. Burns 98,538(25) 98,538(25) -- --

William Burns 505,905(26) 1,000(27) 504,905 1.1%

Burns Fry, Inc. 14,107(28) 14,107(28) -- --

Madeleine K. Butcher 165,554(29) 10,650(30) 154,904 --

W.W. Keen Butcher 165,554(29) 35,500(31) 130,054 --

Barney Cacioppo 90,700(32) 33,750(33) 56,950 --

Joan P. Cacioppo 90,700(32) 3,750(34) 86,950 --

Dr. George M. Calhoun 112,700(35) 5,500(36) 107,200 --

</TABLE>

-11-

<PAGE>

Harry G. Campagna 156,725(37) 15,000(38) 141,725 --

Joseph Cannarrozzo 31,025(39) 21,775(39) 9,250 --

Cerberus International Ltd. 5,200(40) 5,200(40) -- --

James Chmura 58,067(41) 26,067(42) 32,000 --

George Chrachol 69,122(43) 4,875(43) 64,247 --

John S. Dean 13,332(44) 13,332(44) -- --

Warren Diederich 13,333(45) 13,333(45) -- --

Noel Fedje 13,333(46) 13,333(46) -- --

Linda F. Foster 13,520(47) 1,000(47) 12,520 --

Elliott Glassman 5,000(48) 5,000(48) -- --

John T. Gregorio, Jr. 59,208(49) 23,000(49) 36,208 --

Josephine Gregorio 19,750(50) 3,750(50) 16,000 --

Ronald J. Gregorio 239,249(51) 85,626(52) 153,623 --

Adiwibawa Halim 100,000(53) 100,000(53) -- --

Jefferson B. Hill 24,833(54) 20,833(54) 4,000 --

Joseph J. Hill 192,419(55) 20,834(56) 171,585 --

William J. Hilsman 210,250(57) 17,900(58) 192,350 --

JMG Capital Partners, L.P. 57,050(59) 57,050(59) -- --

Joseph LaRocca
Augustus LaRocca 352,921(60) 125,000(61) 227,921 --

Dean Ledger 53,550(62) 25,000(63) 28,550 --

Robert B. Liepold 36,857(64) 5,500(65) 31,357 --

James Lurgio 28,375(66) 1,875(67) 26,500 --

James A. Maisano 5,033(68) 1,000(69) 4,033 --

Robert Masterson 262,000(70) 93,750(70) 168,250 --

V. Louise McCarren 10,100(71) 10,100(71) -- --

Nomura Securities -- --
International, Inc. 125,000(72) 125,000(72)

Jacqueline I. McGehee 1,000(73) 1,000(73) -- --

Scott B. Mexic 32,000(74) 32,000(74) -- --

Mid-Co Mortgage Service 25,235(75) 15,001(76) 10,234 --

Claire Mindock 1,000(77) 1,000(77) -- --

</TABLE>

-12-

<PAGE>

Thomas C. Moss, Jr. 12,500(78) 12,500(78) -- --

Oppenheimer & Co., Inc. 125,000(79) 125,000(79) -- --

Paloma Securities 83,567(80) 83,567(80) -- --

Paresco, Inc. 218,946(81) 218,946(81) -- --

Janie P. Pinney 1,000(82) 1,000(82) -- --

Piscopo Investment
Partnership 62,500(83) 62,500(83) -- --

Dorothy J. Purpura 65,526(84) 19,626(85) 45,900 --

Rose Romanelli 1,100(86) 1,000(86) 100 --

Ray Rosato 12,800(87) 6,800(87) 6,000 --

Orhan Sadik-Khan 116,100(88) 37,500(89) 78,600 --

Vernon E. Sanders 100,000(90) 50,000(91) 50,000 --

Frank Sclafani 3,400(92) 3,400(92) -- --

Sherwin Seligsohn 468,731(93) 5,000(94) 463,731 --

Sims & Sims 306,900(95) 20,000(95) 286,900 --

Robert Spolum 6,666(96) 6,666(96) -- --

Louisa C.H. Spottswood 20,833(97) 20,833(97) -- --

Sunrise Partners Ltd. 8,000(98) 8,000(98) -- --

Rocco Suspenzi 35,000(99) 17,500(99) 17,500 --

Taft Securities 437,500(100) 437,500(100) -- --

Lloyd Thompson 6,666(101) 6,666(101) -- --

Edmund R. Tyson 6,666(102) 6,666(102) -- --

UltraCerberus International -- --
Ltd. 3,000(103) 3,000(103)

Valley Forge, Inc. 125,000(104) 125,000(104) -- --

WBR Investments 6,666(105) 6,666(105) -- --

Robert C. Wolf 48,837(106) 8,000(107) 40,837 --

Joseph Zizzo 18,750(108) 18,750(108) -- --

</TABLE>

- ----------------------------------

1. Consists of 3,500 shares issuable upon the exercise of warrants to
purchase such shares at $4.9375 per share which expire on May 18, 2004.

-13-

<PAGE>

2. Consists of shares issuable upon the exercise of warrants.

3. Consists of 62,500 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

4. Includes 40,000 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on May 19, 2004.

5. Consists of shares issuable upon the exercise of warrants. This
Selling Shareholder is the sponsor of the Defined Benefit Pension Plan
of Argon Electric, another Selling Shareholder.

6. Consists of 3,750 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on December 31,
1997.

7. Consists of 7,500 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on May 19, 2004.
This Selling Shareholder is the Defined Benefit Pension Plan of
Argon Electric, another Selling Shareholder.

8. Consists of 10,000 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on August 11,
2007.

9. Consists of 7,500 shares issuable upon the exercise of warrants to
purchase such shares at $3.00 per share which expire on January 1,
2005.

10. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $4.935 per share which expire on May 18, 2004.

11. Includes 515,909 shares (including 455,909 shares issuable upon the
exercise of warrants) owned by Carmelo Blacconeri and 13,540 shares
(including 7,540 shares issuable upon the exercise of warrants)
owned by Nancy Blacconeri. Also includes 21,751 shares (including
6,751 shares issuable upon the exercise of warrants) beneficially owned
by Blacconeri Agency, as well as 25,235 shares issuable upon
the exercise of warrants owned by Mid-Co Mortgage Service (with
respect to which Mid-Co Mortgage Service disclaims beneficial ownership
of 10,234 shares). Carmelo Blacconeri and Nancy Blacconeri
are husband and wife, and Carmelo Blacconeri is a co-owner of the
Blacconeri Agency and Mid-Co Mortgage Service, which are also Selling
Shareholders.

12. Consists of 90,835 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $5.875
per share which expire on dates ranging from December 5, 1997 and May
19, 2004.

13. Consists of shares issuable upon the exercise of warrants.

14. Consists of 6,751 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on December 31,
1997.

15. Consists of 1,875 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on December 31,
1997.

16. Consists of 108,650 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $5.00 to $9.25 per
share which expire on dates ranging from March 9, 1997 and December 21,
2002. Mr. Bolgiano is a member of the Board of Directors of the
Company.

17. Consists of 840 shares issuable upon the exercise of warrants to
purchase such shares at $6.53 per share which expire on March 9, 1997.

18. Includes 38,202 shares issuable upon the exercise of warrants.

-14-

<PAGE>

19. Includes 12,250 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $5.875
per share which expire on dates ranging from December 31, 1997 and May
19, 2004.

20. Consists of 13,333 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on June 6, 2004.

21. Includes 356,393 shares issuable upon the exercise of warrants owned by
the named Selling Shareholders. Also includes 1,500 shares issuable
upon the exercise of warrants owned by Southern Illinois, a company
owned by the named Selling Shareholders. The named Selling Shareholders
jointly own the shares indicated and are the sons of William J. Burns,
the Chief Executive Officer of the Company and Chairman of the Board of
the Company.

22. Consists of 116,813 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $4.39 to $5.875
per share which expire on dates ranging from December 5, 1997 and April
24, 2002.

23. Includes 1,500 shares issuable upon the exercise of warrants owned by
Southern Illinois, a company co-owned by David A. Burns, as well as
305,934 shares issuable upon the exercise of warrants owned by
David A. Burns. Also includes 356,393 shares issuable upon the
exercise of warrants owned jointly by David A. Burns, Jeffrey S. Burns
and Michael A. Burns, who are Selling Shareholders.

24. Consists of 53,208 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $5.875
per share which expire on dates ranging from December 5, 1997 to May
19, 2004.

25. Consists of 98,538 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on dates ranging
from December 5, 1997 to December 31, 1997.

26. Includes 335,000 shares issuable upon the exercise of options and
warrants owned by Mr. Burns. Also includes 1,500 shares issuable upon
the exercise of warrants owned by E.C. Development Corporation.
Mr. Burns is the Chief Executive Officer of the Company and Chairman
of the Board of Directors of the Company. Mr. Burns is a controlling
shareholder and an officer and director of E.C. Development
Corporation. Investment and voting power over certain of the listed
shares is shared with Mr. Burns' wife.

27. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $8.10 per share which expire on December 1,
1999.

28. Consists of 14,107 shares issuable upon the exercise of options to
purchase such shares at $7.875 per share which expire on December 18,
1997.

29. Includes 150,153 shares (including 93,017 shares issuable upon the
exercise of options and warrants and 8,500 shares issuable upon the
conversion of convertible preferred stock) owned by W.W. Keen Butcher
or by trusts of which Mr. Butcher is a trustee and 15,401 shares
(including 10,650 shares issuable upon the exercise of warrants and
1,000 shares issuable upon the conversion of convertible preferred
stock) owned by Madeleine Butcher. W.W. Keen Butcher and Madeleine
Butcher are husband and wife.

30. Consists of 10,650 shares issuable upon exercise of warrants to
purchase such shares at exercise prices ranging from $7.125 to $10.00
per share which expire on dates ranging from December 1, 1999 to March
6, 2002.

31. Consists of 35,500 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $6.25 to $8.10 per
share which expire on dates ranging from December 11, 1999 to September
21, 2003.

-15-

<PAGE>

32. As of May 5, 1995, includes 86,950 shares (including 50,950 shares
issuable upon the exercise of warrants) owned by Barney Cacioppo and
3,750 shares issuable upon the exercise of warrants owned by
Joan P. Cacioppo. Barney Cacioppo and Joan Cacioppo are husband and
wife.

33. Consists of 33,750 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $8.625
per share which expire on dates ranging form December 31, 1997 to May
19, 2004.

34. Consists of 3,750 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on December 31,
1997.

35. Consists of shares issuable upon the exercise of options and warrants.

36. Consists of 5,500 shares issuable upon the exercise of warrants to
purchase such shares at an exercise price of $8.10 per share which
expire on September 30, 2000.

37. As of May 5, 1995, includes 75,000 shares issuable upon the exercise of
warrants to purchase such shares at exercise prices ranging from $2.50
to $5.875 per share which expire on dates ranging from December 5, 1997
and May 19, 2004. Mr. Campagna is a member of the Board of Directors of
the Company.

38. Consists of 15,000 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on May 19, 2004.

39. As of May 5, 1995, consists of 21,775 issuable upon the exercise of
warrants to purchase such shares at exercise prices ranging from $3.75
to $5.875 per share which expire on dates ranging from December 5, 1997
and May 19, 2004, and with respect to which Joseph Cannarrozzo shares
investment and voting power with his son Frank Cannarrozzo.

40. As of May 5, 1995, consists of 5,200 shares issuable upon the exercise
of warrants to purchase such shares at an exercise price of $5.50 per
share which expire on December 21, 2002.

41. Includes 25,000 shares issuable upon the exercise of warrants.

42. Includes 5,000 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on May 19, 2004.

43. Consists of 4,875 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 which expire on December 31, 1997.

44. Consists of 13,332 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on dates ranging
from June 10, 2004 to July 3, 2004.

45. Consists of 13,333 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on dates ranging
from June 10, 2004 to June 3, 2004.

46. Consists of 13,333 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on June 3, 2004.

47. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire on September 30,
2000. Investment and voting power over certain of the listed shares is
shared with Ms. Foster's husband.

48. Consists of 5,000 shares issuable upon the exercise of warrants to
purchase such shares at $5.75 per share which expire May 16, 2000.

-16-

<PAGE>

49. As of May 5, 1995, consists of 23,000 shares issuable upon the exercise
of warrants to purchase such shares at exercise prices ranging from
$2.50 to $5.875 per share which expire on dates ranging from December
31, 1997 and May 19, 2004.

50. As of May 5, 1995, consists of 3,750 shares issuable upon the exercise
of warrants to purchase such shares at $5.875 per share which expire
on December 31, 1997. Josephine Gregorio is the mother of John T.
Gregorio, Jr. and Ronald J. Gregorio, who are also Selling
Shareholders.

51. Includes 194,014 shares issuable upon the exercise of options and
warrants. Also includes 25,235 shares issuable upon the exercise of
warrants owned by Mid-Co Mortgage Service (with respect to which
Mid-Co Mortgage Service disclaims beneficial ownership of 10,234
shares). Mr. Gregorio is a co-owner of Mid-Co Mortgage Service.

52. Includes 65,626 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $5.875
which expire on dates ranging from December 5, 1997 to May 19, 2004.

53. Consists of 100,000 shares issuable upon the exercise of warrants to
purchase such shares at $7.50 per share which expire on May 29, 1997.

54. Consists of 20,833 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

55. Consists of 20,834 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002, and 146,785 shares held by family members or in trust for the
benefit of members of Mr. Hill's family.

56. Consists of 20,834 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

57. Consists of shares issuable upon the exercise of options and warrants.

58. Consists of 17,900 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $6.53 to $8.10 per
share which expire on dates ranging from November 24, 1999 to March 1,
2002.

59. As of May 5, 1995, consists of 57,050 shares issuable upon the exercise
of warrants to purchase such shares at $5.50 which expire on April 21,
2002.

60. Consists of shares issuable upon the exercise of warrants.

61. Consists of 125,000 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

62. Includes 50,000 shares issuable upon the exercise of options and
warrants.

63. Consists of 25,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire September 30,
2000.

64. Includes 34,440 shares issuable upon the exercise of options and
warrants. Mr. Liepold is a former director of the Company.

65. Consists of 5,500 shares issuable upon the exercise of warrants to
purchase such shares at $8.10 per share which expire on November 24,
1999.

66. Includes 17,375 shares issuable upon the exercise of warrants to
purchase such shares, and 8,000 shares held by (or jointly with) Mr.
Lurgio's wife.

-17-

<PAGE>

67. Consists of 1,875 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 which expire on December 31, 1997.

68. Includes 1,185 held by members of Mr. Maisano's family and includes
1,000 shares issuable upon the exercise of warrants.

69. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire September 30,
2000.

70. Consists of 93,750 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

71. Consists of 10,100 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $5.875 to $8.10
per share which expire on dates ranging from November 24, 1999 to May
16, 2000.

72. Consists of 125,000 shares issuable upon the exercise of warrants to
purchase such shares at $4.9375 per share which expire on June 24,
1998.

73. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire on September 30,
2000.

74. Includes 7,000 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire May 19, 2004.

75. As of May 5, 1995, consists of shares issuable upon the exercise of
warrants, with respect to which Mid-Co Mortgage Service disclaims
beneficial ownership of 10,234 shares.

76. Consists of 15,001 shares issuable upon the exercise of warrants to
purchase such shares at $5.875 per share which expire on December 5,
1997.

77. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire on September 30,
2000.

78. Consists of 12,500 shares issuable upon exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

79. Consists of 125,000 shares issuable upon the exercise of warrants to
purchase such shares at $7.875 which expire on December 18, 1997.

80. As of May 5, 1995 consists of 83,567 shares issuable upon the exercise
of warrants to purchase such shares at exercise prices ranging from
$4.47 to $5.50 per share which expire on dates ranging from April 15,
2002 to April 21, 2002.

81. As of May 5, 1995, consists of 218,946 shares issuable upon the
exercise of warrants to purchase such shares at exercise prices ranging
from $4.75 to $5.50 per share which expire on dates ranging from April
14, 2002 and December 21, 2002.

82. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $6.00 per share which expire September 30,
2000.

83. Consists of 62,500 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

84. Includes 52,275 shares issuable upon the exercise of warrants.

-18-

<PAGE>

85. Consists of 9,375 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $5.875 to $8.625
per share which expire on dates ranging from December 5, 1997 and
December 38, 1997.

86. Consists of 1,000 shares issuable upon the exercise of warrants to
purchase such shares at $9.25 per share which expire on March 6, 2002.

87. Consists of 6,800 shares issuable upon the exercise of warrants to
purchase such shares at $3.75 per share which expire on May 19, 2004.

88. Consists of shares issuable upon the exercise of warrants.

89. Consists of 37,500 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $5.50 to $9.50 per
share which expire on dates ranging from March 5, 2002 to December 21,
2002.

90. Includes 50,000 shares issuable upon the exercise of warrants. Also
includes 50,000 shares held as trustee for Children's World PSP.

91. Consists of 50,000 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

92. Consists of 3,400 shares issuable upon the exercise of warrants to
purchase such shares at $3.75 per share which expire on May 19, 2004.

93. Includes 83,051 shares issuable upon the exercise of options and
warrants.

94. Consists of 5,000 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

95. Consists of 20,000 shares issuable upon the exercise of warrants to
purchase such shares at $9.65 per share which expire on March 5, 2002.
Sims & Sims is controlled by Harley L. Sims, a member of the Board of
Directors of the Company.

96. Consists of 6,666 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire June 3, 2004.

97. Consists of 20,833 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

98. As of May 5, 1995, consists of 8,000 shares issuable upon the exercise
of warrants to purchase such shares at an exercise price of $5.50 per
share which expire on December 21, 2002.

99. Consists of 17,500 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire May 19, 2004.

100. Consists of 437,500 shares issuable upon the exercise of warrants to
purchase such shares at $5.50 per share which expire on December 21,
2002.

101. Consists of 6,666 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on June 10, 2004.

102. Consists of 6,666 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on June 6, 2004.

103. As of May 5, 1995, consists of 3,000 shares issuable upon the exercise
of warrants to purchase such shares at an exercise price of $5.50 per
share which expire on December 21, 2002.

-19-

<PAGE>

104. As of May 5, consists of 125,000 shares issuable upon the exercise of
warrants to purchase such shares at $5.50 per share which expire on
December 21, 2002.

105. Consists of 6,666 shares issuable upon the exercise of warrants to
purchase such shares at $2.50 per share which expire on June 3, 2004.

106. Includes 23,602 shares issuable upon the exercise of warrants. Also
includes 25,235 shares issuable upon the exercise of warrants owned by
Mid-Co Mortgage Service (with respect to which Mid-Co Mortgage Service
disclaims beneficial ownership of 10,234 shares). Mr. Wolf is a
co-owner of Mid-Co Mortgage Service.

107. Consists of 8,000 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 per share to
$5.875 per share which expire on dates ranging from December 5, 1997
and May 19, 2004.

108. Consists of 18,750 shares issuable upon the exercise of warrants to
purchase such shares at exercise prices ranging from $2.50 to $5.875
per share which expire on dates ranging from December 31, 1997 and May
19, 2004.

The Selling Shareholders or their pledgees, donees, transferees or
other successors in interest, may sell all, a portion or none of the securities
offered by them hereby from time to time. Any such sales may be in one or more
transactions on the AMEX at prices prevailing at the times of such sales or in
private sales of the securities at prices related to the prevailing market
prices or negotiated prices. The sales may involve (a) a block transaction in
which the broker or dealer so engaged will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction, (b) a purchase by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus, (c) ordinary
brokerage transactions in which the broker solicits purchasers, or (d) short
sales of Common Stock which may be deemed to be sales of the shares offered
hereby. Broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions (which compensation may be in excess of
customary commissions). The Selling Shareholders and any broker-dealers that
participate in the distribution of the shares may be deemed to be underwriters
and any commissions received by them and any profit on the resale positioned by
them might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.

There can be no assurance that the Selling Shareholders will
sell any or all of their shares of Common Stock offered hereby. There can be no
assurance that short sales of the Common Stock by Selling Shareholders hereunder
will not have an adverse market impact on the current market price of the Common
Stock. The Company will receive no proceeds from any sales of Common Stock
hereunder by the Selling Shareholders.

In connection with their acquisition of their shares of Common
Stock and the Warrants, the Company granted to certain of the Selling
Shareholders certain registration rights and agreed to certain indemnification
and payment obligations as discussed below. The Registration Statement of which
this Prospectus is a part has been filed with the Commission pursuant to the
exercise by those Selling Shareholders of such registration rights. The Company
has agreed to pay the filing fees, costs and expenses associated with such
Registration Statement, including compliance with any state blue sky
requirements. The Company has also agreed to indemnify certain Selling
Shareholders, and to the extent applicable, their officers, directors and
controlling persons, and any underwriters, for certain civil liabilities in
connection with such Registration Statement and the securities offered thereby
and hereby, including liabilities under the Securities Act of 1933.

-20-

<PAGE>

LEGAL MATTERS

The validity of the Common Stock offered hereby has been
passed upon for the Company by Howard E. Goldberg, Esq., Suite 105, 2200
Renaissance Boulevard, King of Prussia, Pennsylvania 19406. Mr. Goldberg is
Executive Vice President, General Counsel and Secretary of the Company.

EXPERTS

The consolidated financial statements and schedules of the
Company for each of the three years in the period ended December 31, 1994
incorporated in this Prospectus by reference have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report.

-21-

<PAGE>

No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation is unlawful. The delivery
of this Prospectus at any time does not imply that information contained herein
is correct as of any time subsequent to its date.

-------------------

TABLE OF CONTENTS

Page
----
<S> <C>
Available Information.................................. 2
Incorporation of Certain
Documents by Reference............................. 2
The Company............................................ 3
Recent Developments.....................................4
Risk Factors........................................... 5
Selling Shareholders.................................. 10
Legal Matters......................................... 20
Experts............................................... 20

</TABLE>

INTERDIGITAL
COMMUNICATIONS
CORPORATION

-------------
PROSPECTUS
-------------

____________, 1995

<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
SEC registration fee................................. $ 6,560 *
Accounting fees and expenses......................... $ 1,500 **
Legal fees and expenses.............................. $ 25,000 **
Miscellaneous........................................ $ 6,940 **

Total........................................... $ 40,000 **
</TABLE>

* Actual
** Estimated for the 12-month period commencing June 29, 1995.

Item 15. Indemnification of Directors and Officers

Sections 1741-1750 of the Pennsylvania Business Corporation
Law of 1988 (the "BCL"), Section 8365 of Title 42 of the Pennsylvania
Consolidated Statutes ("Section 8365") and the Company's By-Laws provide for
indemnification of the Company's directors and officers and certain other
persons. Under Sections 1741-1750 of the BCL, directors and officers of the
Company may be indemnified by the Company against all expenses incurred in
connection with actions (including, under certain circumstances, derivative
actions) brought against such director or officer by reason of his or her status
as a representative of the Company, or by reason of the fact that such director
or officer serves or served as a representative of another entity at the
Company's request, so long as the director or officer acted in good faith and in
a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company. As permitted under Section 1741-1750 of the BCL and
Section 8365, the Company's By-Laws provide that the Company shall indemnify
directors and officers against all expenses incurred in connection with actions
(including derivative actions) brought against such director or officer by
reason of the fact that he or she is or was a director or officer of the
Company, or by reason of the fact that such director or officer serves or served
as an employee or agent of any entity at the Company's request, unless the act
or failure to act on the part of the director or officer giving rise to the
claim for indemnification is determined by a court in a final, binding
adjudication to have constituted willful misconduct or recklessness.

Reference is made to Item 17 of this Registration Statement
for additional information regarding indemnification of directors and officers.

Item 16. Exhibits
<TABLE>
<S> <C>
* 5 Opinion of Howard E. Goldberg, Esq.

24.1 Consent of Arthur Andersen LLP. (see "Consent of Independent Public Accountants" on page
II-3).

*24.3 Consent of Howard E. Goldberg, Esq. (to be included in Exhibit 5).

25 Power of Attorney (see pages II-4 and II-5).
</TABLE>

- -------------
* To be filed by amendment.

II-1

<PAGE>

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions discussed in Item
15 of this Registration Statement, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person with the securities being registered,
the Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i) to include any prospectus required
by Section 10(a)(3) of the Act; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that clauses (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement; (2) that, for the
purpose of determining any liability under the Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (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 Company hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or 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.

II-2

<PAGE>

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our reports dated March 22,
1995, included in InterDigital Communications Corporation's Form 10-K for the
year ended December 31, 1994, and to all references to our Firm included in this
Form S-3 Registration Statement.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
June 28, 1995

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in King of Prussia, Pennsylvania, on June 27, 1995.

INTERDIGITAL COMMUNICATIONS CORPORATION

By: /s/ William J. Burns
--------------------------------------------
William J. Burns, Chief Executive Officer and
Chairman of the Board, the principal executive
officer

By: /s/ James W. Garrison
--------------------------------------------
James W. Garrison, Vice President, Chief
Financial Officer and Treasurer, the principal
financial officer and principal accounting
officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints William J. Burns, William A. Doyle and
Howard E. Goldberg, and each or any of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, 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 and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their, his or her substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on June 27, 1995
in the capacities indicated.

/s/ William J. Burns
-----------------------------------------------
William J. Burns, Chief Executive Officer and
Chairman of the Board, the principal executive
officer

/s/ James W. Garrison
-----------------------------------------------
James W. Garrison, Vice President, Chief
Financial Officer and Treasurer, the principal
financial officer and principal accounting
officer

[EXECUTIONS CONTINUED]

II-4

<PAGE>

/s/ Barney J. Cacioppo
----------------------------
Barney J. Cacioppo, Director

/s/ D. Ridgely Bolgiano
-----------------------------
D. Ridgely Bolgiano, Director

/s/ Harry G. Campagna
-----------------------------
Harry G. Campagna, Director

/s/ Harley L. Sims
-----------------------------
Harley L. Sims, Director

II-5

<PAGE>