As Filed with the Securities and Exchange Commission on September 27, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VDC Communications, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-1524454
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
75 Holly Hill Lane
Greenwich, Connecticut 06830
(203) 869-5100
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(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
FREDERICK A. MORAN
Chief Executive Officer
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, Connecticut 06830
(203) 869-5100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
JOSEPH P. GALDA, ESQ.
Buchanan Ingersoll Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, Pennsylvania 19103
Telephone (215) 665-3879 Facsimile (215) 665-8760
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
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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 this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Amount Maximum Proposed Maximum Amount Of
Title of shares To Be Aggregate Price Aggregate Offering Registration
To Be Registered Registered Per Share(1) Price Fee
----------------------------- ------------------ ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
common stock,
$.0001 par value....... 1,388,706 $0.75 $1,041,529.50 $275
============================= ================== ======================= ====================== ======================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c). The price represents the average of the high and
low prices per share of common stock of VDC Communications, Inc. as
reported on the American Stock Exchange on September 25, 2000.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
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Prospectus herein also relates to Registration Statement No. 33-80107
pursuant to Rule 429.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion, dated September 27, 2000
Preliminary Prospectus
VDC Communications, Inc.
9,087,148 shares of common stock
The selling security holders identified on pages 13 and 14 of this
prospectus, may offer and sell, from time to time, up to 9,087,148 shares of the
common stock of VDC Communications, Inc. The shares of common stock which may be
resold by the selling security holders constitute approximately 37% of our
issued and outstanding common stock as of September 25, 2000. The selling
security holders may sell all or some of their respective shares through public
or private transactions, at prevailing market prices, or at privately negotiated
prices. We will not receive any part of the proceeds from sales of these shares.
Our common stock is listed on the American Stock Exchange under the
symbol "VDC". The last reported sale price of our common stock on September 26,
2000 on the American Stock Exchange was $0.6875 per share.
The selling security holders may sell the shares through broker-dealers
who may receive compensation from the selling security holders in the form of
discounts or commissions. We will pay the costs of registering the shares under
this prospectus, including legal fees.
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Investing in the common stock involves a high degree of risk. See "Risk Factors"
beginning on Page 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ___________, 2000
<PAGE>
VDC Communications, Inc.
<TABLE>
<CAPTION>
Table of Contents
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Page No.
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<S> <C>
About VDC Communications, Inc. 1
Risk factors 2
Forward-looking statements 12
Use of proceeds 13
Plan of distribution 20
Legal matters 22
Experts 22
Indemnification of directors and officers 22
Where you can find more information 23
</TABLE>
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This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information or representations provided in this
prospectus. VDC has authorized no one to provide you with different information.
VDC is not making an offer of these securities 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 the document.
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About VDC Communications, Inc.
VDC Communications, Inc., directly and through its subsidiaries, owns
telecommunications switching and ancillary equipment, leases telecommunications
lines and interconnects a global network of carriers and customers providing
domestic and international long distance telecommunications services. Our
customers include residential long distance end users and long distance
telephone companies that resell our services to their retail customers or other
telecommunications companies. We currently employ digital switching and
transmission technology, and Internet Telephony, or Voice over Internet Protocol
("VoIP") gateway technology. Our telecommunications equipment, currently located
in New York and Los Angeles comprises our operating facilities.
We believe the telecommunications industry is attractive given its
current size and future growth potential. We are currently a domestic and
international telecommunications company providing retail and wholesale carrier
services. Our objective is to provide these services to both retail and
wholesale customers utilizing VoIP and circuit switched technologies in the
short term; and, migrating towards a pure VoIP network in the long term. We have
already begun the process of transforming our network with next generation
technology.
During the fiscal year ended June 30, 2000, we initiated the
development of VDC's VoIP clearinghouse through a wholly-owned subsidiary. We
expect that utilizing new Internet technologies to provide voice and facsimile,
and possibly additional value added services in the future, will provide us: (i)
increased cost efficiencies; (ii) greater network flexibility; and, (iii) an
increased network scope. We expect that this can be achieved with a relatively
minimal capital outlay. During fiscal 2000, we began the development of this
clearinghouse through this subsidiary by: ordering IP, or Internet Protocol,
gateway equipment; and, provisioning to connect to the Internet. In addition, we
have since completed a trial and subsequently initiated the clearinghouse. Our
clearinghouse is expected to allow wholesale customers to connect and use our
network via the public Internet for the transmission of voice calls worldwide.
The clearinghouse will provide the clearing and settling of all amounts due as a
result of telecommunications traffic passed.
VDC Communications, Inc. ("VDC") was formerly the subsidiary of VDC
Corporation Ltd., a Bermuda public company ("VDC Bermuda") that had its shares
registered under the Securities Exchange Act of 1934. On November 6, 1998, VDC
Bermuda merged with and into VDC for the principal purpose of domesticating VDC
Bermuda from a Bermuda company to a Delaware corporation. This was done
primarily to: (i) facilitate access to the U.S. capital markets; (ii) enhance
the trading profile of VDC Bermuda's securities within the investment banking
and brokerage communities; and (iii) provide access to the comprehensive set of
corporate laws available to companies incorporated in Delaware.
The merger was completed in conjunction with a prior business
reorganization of VDC Bermuda. On March 6, 1998, VDC (then a wholly owned and
newly formed subsidiary of VDC Bermuda) acquired Sky King Communications, Inc.,
a development stage telecommunications company. The Sky King acquisition enabled
VDC Bermuda to enter the telecommunications business and reflected the
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culmination of an overall business reorganization in which VDC Bermuda curtailed
its prior lines of business. (As used in this document, the terms "VDC", "we"
and "us" include both VDC and VDC Bermuda. The use of these terms reflects the
fact that through November 6, 1998, the publicly held company was VDC Bermuda.
Thereafter, due to the merger, the publicly held company was VDC.)
Our executive offices are located at 75 Holly Hill Lane, Greenwich,
Connecticut, 06830, and our telephone number is (203) 869-5100.
Risk factors
An investment in the shares of common stock offered by this prospectus
involves a high degree of risk and you should invest only after you have
carefully gathered and reviewed information about VDC. This prospectus has been
filed as part of a registration statement on Form S-3, and only contains a
summary of information, which may be relevant to you in making an investment
decision. Accordingly, prior to making an investment decision, you should
carefully evaluate, among other materials, the following risk factors, the
remainder of the information set forth in this prospectus and the reports we
have filed with the SEC, and other information about us incorporated by
reference into this document.
1. The auditors' report on our financial statements contains a going
concern qualification.
We may not be able to continue as a going concern if we do not generate
profits or secure significant financing within the short term. Our auditors have
raised the issue that we may not be able to continue as a going concern as a
result of a lack of profits, working capital deficiency and future cash needs.
We have used substantial amounts of working capital in our operations and have
sustained significant operating losses. As of June 30, 2000, current liabilities
exceeded current assets by approximately $2,700,000. Our continued operations
are dependent upon meeting short term financing requirements and long term
profitability.
2. We are not profitable.
We have not yet experienced a profitable quarter and may not ever
achieve profitability. We have yet to build sufficient volume of
telecommunications voice and facsimile traffic to reach profitability. Our
current expenses are greater than our revenues. This will probably continue
until we reach a greater level of maturity and it is possible that our revenues
may never exceed our expenses. If operating losses continue we will need to find
new sources of financing which may or may not be available or our operations
will be in jeopardy.
3. We have limited capital.
Being a relatively small company in a capital intensive industry, our
limited capital is a significant risk to our future profitability and viability.
We may sell additional shares of our stock, or engage in other financing
activities, in order to provide capital that may be needed for our operations.
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There is no guarantee that market conditions will permit us to do this. If we
cannot secure additional capital, our continued operation may be in jeopardy.
4. We are a company in the early stages of development.
We commenced our present operations during the past 2-3 years, and
therefore, have only a limited operating history upon which you can evaluate our
business and performance.
5. We are diversifying our operations.
We have recently entered into a phase of rapid diversification. We are
expanding our business lines from being a provider of international wholesale
telecommunications services to becoming a diverse supplier of residential,
traditional wholesale, and VoIP wholesale telecommunications services. These
efforts require us to assume greater risks, which include but are not limited
to: greater demands on management's time; the ability of management to learn new
skills while continuing to manage effectively our existing operations;
investment risks associated with expenditures for new lines of business; and
increased pressures upon our operations and financial systems.
6. Our stock is highly volatile.
Our stock price fluctuates significantly. We believe that this will
most likely continue. Historically, the market prices for securities of emerging
companies in the telecommunications industry have been highly volatile. Future
announcements concerning us or our competitors, including results of operations,
technological innovations, government regulations, the gain or loss of
significant customers, general trends in the industry, market conditions,
analysts' estimates, proprietary rights, significant litigation, and other
events in our industry, may have a significant impact on the market price of our
stock. In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many
technology and telecommunications companies and that have often been unrelated
to the operating performance of these companies. These broad market fluctuations
may adversely affect the market price of our common stock.
7. There are a number of risks specifically associated with our
residential long distance operations.
We may not be able to successfully integrate the acquisition of Rare
Telephony, Inc. into VDC. In addition, we may not be able to develop our newly
acquired residential services successfully. If the market for our residential
service products does not develop as we expect, or develops more slowly than
expected, our business, financial condition and results of operations may be
materially and adversely affected. Our customers and potential customers may be
reluctant to use our residential services for a number of reasons, including,
but not limited to: lack of product recognition; perceptions that the quality of
service may be substandard; and, the reluctance of customers to change long
distance carriers.
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8. There are a number of risks that will be specifically associated with
our VoIP operations.
We may not be able to successfully develop our VoIP operations. If the
market for Internet telephony and new services does not develop as we expect, or
develops more slowly than expected, our business, financial condition and
results of operations may be materially and adversely affected. Our customers
may be reluctant to use VoIP services for a number of reasons, including, but
not limited to: perceptions that the quality of voice transmitted over the
Internet is substandard; and perceptions that Internet telephony is unreliable.
In addition, competition in the market place may limit our ability to obtain an
adequate profit margin.
9. There are a number of risks specifically associated with our
traditional wholesale operations.
Our traditional wholesale business depends partially on carriers and
other communications service providers generating international voice traffic
and selecting our network to carry at least some of this traffic. If the volume
of international voice traffic fails to increase, or decreases, and our
customers do not employ our network, our traditional wholesale operations will
not be profitable, which may materially and adversely affect our business,
financial condition and results of operations. We plan to de-emphasize our
traditional wholesale services during the year ending June 30, 2001. As such, it
is likely that the revenues derived from traditional wholesale services will not
grow and could decrease. We cannot assure you that end-users will continue to
purchase services from our customers or that our wholesale customers will
maintain a demand for our services.
10. We rely heavily on certain underlying carriers.
Separately, our wholesale and residential operations rely on one or
two underlying carriers for their underlying telecommunications connectivity
and/or call completion. If any of these carriers can longer no provide services
to us, or chooses to no longer provide services to us, it may materially and
adversely affect our business.
11. Additional shares will be available for sale in the public market which
could cause the market price of our stock to drop significantly.
We estimate that approximately 21.6 million shares of our common stock
are currently eligible for resale under applicable securities laws. This
prospectus registers the potential resale of up to an additional 1,388,706
shares of VDC common stock into the public trading market, including 587,073
shares on behalf of Frederick A. Moran and his wife. This would have the effect
of increasing the number of shares eligible for public trading. Sales of
substantial amounts of the stock in the public market could have an adverse
effect on the price of the stock and may make it more difficult for us to sell
stock in the future. Although it is impossible to predict market influences and
prospective values for securities, it is possible that the increase in the
number of shares available for sale, in and of itself, could have a depressive
effect on the price of our stock.
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12. The future issuance of additional shares of common stock could decrease
the value of the shares.
We are presently authorized to issue 50,000,000 shares of common stock,
of which 24,398,029 are outstanding as of September 25, 2000. Issuance of
additional shares would likely have a dilutive effect upon the existing
stockholders and may reduce the value of their investment. If, as of September
25, 2000, holders of our outstanding options and warrants exercise their rights
to purchase shares, we must issue up to 2,840,235 shares of common stock.
We may issue additional shares for valid business purposes within the discretion
of our board of directors, including, without limitation:
o additional equity financings;
o the acquisition of other companies; and
o compensation of our officers, employees, consultants, and
directors.
13. We may not be able to compete successfully with other long distance
carriers.
AT&T, MCI WorldCom and Sprint Corporation dominate the U.S.-based
international telecommunications services market. We also compete with ITXC,
Inc., iBasis, Inc. and other foreign and U.S.-based long distance and VoIP
providers, including the Regional Bell Operating Companies, which presently have
some FCC authority to resell and terminate international telecommunication
services. Many of these competitors have considerably greater financial and
other resources and more extensive domestic and international communications
networks than we do. If we compete with them for the same customers, their
financial strength could hinder our ability to succeed. For example, larger
competitors could discount services to attract or maintain customers. We may not
have the financial resources to effectively compete with them on that level.
Additionally, in the future we may compete abroad with a number of dominant
telecommunications operators that previously held various monopolies established
by law over the telecommunications traffic in their countries. Further, the
number of our competitors is likely to increase as a result of the competitive
opportunities created by a new Basic Telecommunications Agreement concluded by
members of the WTO in April 1997. Under the terms of the WTO agreement, starting
February 5, 1998, the United States and 68 countries have committed to open
their telecommunications markets to competition, increase foreign ownership and
adopt measures to protect against anti-competitive behavior. As a result, we
believe that competition will continue to increase, placing downward pressure on
prices. Such pressure could adversely affect our gross margins if we are not
able to reduce our costs commensurate with such price reductions.
14. Technical advancement could render our equipment obsolete.
The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of competitive product and service
offerings, such as the utilization of the Internet for international voice and
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data communications. We are unable to predict which technological developments
will challenge our competitive position or the amount of expenditures that will
be required to respond to a rapidly changing technological environment. We
expect that the future will bring significant technological change. It is
possible that these changes could result in more advanced telecommunications
equipment that could render our current equipment obsolete. If this were to
happen, we would most likely have to invest significant capital in this new
technology, which could have a material adverse effect on our business,
operating results and financial condition.
15. A small number of customers historically have accounted for a
significant percentage of our total sales.
For the year ended June 30, 2000, two customers accounted for
approximately 70% of our total sales. Our customers typically are not obligated
contractually to purchase any quantity of services in any particular period. The
loss of, or a material reduction in orders by, one or more of our key customers
could have a material adverse effect on business, financial condition and
results of operations.
16. Our cost of services and operating expenses may fluctuate
significantly.
Our cost of services, operating expenses and cash flow in any given
period can vary due to factors including, but not limited to:
(1) fluctuations in rates charged by carriers to terminate our
telecommunications traffic;
(2) increases in bad debt expense and reserves;
(3) the timing of capital expenditures and other costs associated
with acquiring or obtaining other rights to switching and
other transmission facilities;
(4) costs associated with changes in staffing levels of sales,
marketing, technical support and administrative personnel;
(5) changes in routing due to variations in the quality of vendor
transmission capability;
(6) loss of favorable routing options;
(7) actions by domestic or foreign regulatory entities;
(8) financial difficulties of major customers;
(9) pricing pressure resulting from increased competition;
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(10) the level, timing and pace of our expansion in international
and commercial markets; and
(11) general domestic and international economic and political
conditions.
17. Some of our customers are high credit risks.
We must assume a certain level of credit risk with our customers in
order to do business. Based on such failures in the past, we know that if one or
more of our customers fails or refuses to pay us in a timely manner, or at all,
it could have a material adverse affect on business, cash flow and financial
condition.
18. Limited long-term purchase and resale agreements and pricing pressures
for transmission capacity could adversely affect our gross margins.
A substantial portion of transmission capacity is obtained on a
variable, per minute and short-term basis, subjecting us to the possibility of
unanticipated price increases and service cancellations. Since we do not
generally have long-term arrangements for the purchase or resale of
international long distance services, and since rates fluctuate significantly
over short periods of time, our gross margins are subject to significant
fluctuations over short periods of time. Our gross margins also may be
negatively impacted in the longer term by competitive pricing pressures.
19. Our ability to implement our plan successfully is dependent on a few
key people.
We are dependent on the management of VDC and its subsidiaries. We are
particularly dependent upon Frederick A. Moran, the Chief Executive Officer of
VDC. Mr. Moran is also a significant shareholder and Chairman of the Board of
Directors of VDC. VDC has an employment agreement with Mr. Moran through March
2003. We believe the combination of his employment agreement and equity interest
in VDC keeps Mr. Moran highly motivated to remain with VDC. We do not maintain
key man insurance on Mr. Moran's life.
20. We may not be able to attract enough qualified technical personnel
because they are in short supply. If this happens, our ability to
compete in our industry would likely be curtailed.
We believe that our success will depend in large part upon our ability
to attract, retain, train and motivate highly-skilled employees, particularly
project managers and other senior technical personnel. Qualified personnel are
in great demand. There is significant competition for good employees and it is
likely that access to qualified personnel will remain limited for the
foreseeable future. Many of our competitors are in a better financial position
than VDC to offer higher compensation to qualified personnel. We may not be
successful in attracting a sufficient number of such personnel in the future, or
in retaining, training and motivating the employees we are able to attract.
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21. Numerous contingencies could have a material adverse effect on us.
Because we are in the early stages of development and because of the
nature of the industry in which we operate, there are numerous contingencies
over which we have little or no control, any one of which could have a material
adverse effect on us. The contingencies include, but are not limited to, the
addition or loss of major customers, whether through competition, merger,
consolidation or otherwise; the loss of economically beneficial routing options
for telecommunications traffic termination; financial difficulties of major
customers; pricing pressure resulting from increased competition; credit risk;
and technical difficulties with or failures of portions of our network that
could impact our ability to provide service to or bill our customers.
22. The future regulation of VoIP services may be burdensome and eliminate
cost advantages.
VoIP operations may become subject to regulation in the future. If VoIP
is regulated in a manner similar to traditional telephony, our VoIP operations
may be burdened and any cost advantages provided by VoIP may be eliminated. We
are unable to predict whether, and to what extent, VoIP will be regulated and
the impact such regulation may have on our business.
23. Government involvement in industry could have an adverse effect.
We are subject to various U.S. and foreign laws, regulations, agency
actions and court decisions. Our U.S. international telecommunications service
offerings are subject to regulation by the FCC. The FCC requires international
carriers to obtain authorization prior to acquiring international facilities by
purchase or lease, or providing international telecommunications service to the
public. Prior FCC approval is also required, in most cases, to transfer control
of certificated carriers such as our subsidiaries. We must file certain reports,
notifications, contracts, and other documents with the FCC and must pay
regulatory and other fees, which are subject to change. We are also subject to
FCC policies and rules. The FCC could determine, by its own actions or in
response to a third party's filing, that certain of our services, termination
arrangements, agreements with foreign carriers, or reports did not comply with
FCC policies and rules. If this occurred, the FCC could impose various
sanctions, including ordering us to discontinue such arrangements, fining us or
revoking our authorizations. Any of these actions could have a material adverse
effect on our business, operating results and financial condition.
24. Recent and potential FCC actions may adversely affect our business by
increasing competition, disrupting transmission arrangements and
increasing costs.
Regulatory action that may be taken in the future by the FCC may
intensify the competition which we face, impose additional operating costs upon
us, disrupt certain of our transmission arrangements or otherwise require us to
modify our operations. Recent FCC rulemaking orders and other actions have
lowered the entry barriers for new facilities-based and resale international
carriers by streamlining the processing of new applications and granting
non-dominant carriers greater flexibility in establishing non-standard
settlement arrangements with non-dominant foreign carriers, including the
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non-dominant U.S. affiliates of such carriers. In addition, the FCC's rules
implementing the WTO agreement presume that competition will be advanced by the
U.S. entry of facilities-based and resale carriers from WTO member countries,
thus further increasing the number of potential competitors in the U.S. market
and the number of carriers which may also offer end-to-end services. The FCC has
also sought to reduce the foreign termination costs of U.S. international
carriers by prescribing maximum or benchmark settlement rates which foreign
carriers may charge U.S. carriers for terminating switched telecommunications
traffic. The FCC has not stated how it will enforce its settlement benchmarks if
U.S. carriers are unsuccessful in negotiating settlement rates at or below the
prescribed benchmarks. If the FCC implements the reduced benchmarks, our
transmission arrangements to certain countries may need to modify our existing
arrangements.
The Telecommunications Act of 1996 permits the FCC to forbear
enforcement of the tariff provisions in such act, which apply to all interstate
and international carriers. The FCC has adopted rules eliminating the tariffing
requirements for domestic interstate services and requiring those carriers to
de-tariff their interstate offerings. International service providers must
continue to file tariffs. The FCC routinely reviews the contribution rate for
various levels of regulatory fees, including the rate for fees levied to support
universal service, which fees may be increased in the future for various
reasons, including the need to support the universal service programs mandated
by the Telecommunications Act of 1996, the total costs for which are still under
review by the FCC. We cannot predict the net effect of these or other possible
future FCC actions on our business, operating results and financial condition,
although the net effect could be material.
25. Regulation of customers may materially adversely affect our revenues by
decreasing the volume of traffic we receive from major customers.
Our customers are also subject to actions taken by domestic or foreign
regulatory authorities that may affect the ability of customers to deliver
traffic to us. Future regulatory actions could materially adversely affect the
volume of traffic received from a major customer, which could have a material
adverse effect on our business, financial condition and results of operations.
26. Government regulatory policies may increase pricing pressures in our
industry.
We expect that government regulatory policies are likely to continue to
have a major impact on the pricing of network services and possibly accelerate
the entrance of new competitors and consolidation of the industry. These trends
may affect demand for such services. Tariff rates, whether determined
autonomously by telecommunications service providers or in response to
regulatory directives, may affect the cost effectiveness of deploying network
services. Tariff policies are under continuous review and are subject to change.
User uncertainty regarding future policies may also negatively affect demand for
our services.
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27. The international telecommunications market is risky.
The international telecommunications market involves certain risks,
such as changes in U.S. and foreign government regulations and
telecommunications standards, dependence on foreign partners, tariffs, taxes and
other trade barriers, the potential for nationalization and economic downturns
and political instability in foreign countries. Moreover, international
operations are subject to the Foreign Corrupt Practices Act ("FCPA"), which
generally prohibits U.S. companies and their intermediaries from bribing foreign
officials for the purpose of obtaining or keeping business. Failure by our
agents, strategic partners and other intermediaries, whether past or future, to
comply with the FCPA could result in our facing liability. In addition, our
business could be adversely affected by a reversal in the current trend toward
the deregulation of the telecommunications industry.
International sales are subject to inherent risks, including:
(1) unexpected changes in regulatory requirements, tariffs or
other barriers;
(2) difficulties in staffing and managing foreign operations;
(3) longer payment cycles;
(4) unstable political environments;
(5) dependence on foreign partners;
(6) greater difficulty in accounts receivable collection; and
(7) potentially adverse tax consequences.
We may rely on foreign partners to terminate traffic in foreign
countries and to assist in installing transmission facilities and network
equipment, complying with local regulations, obtaining required licenses and
assisting with customer and vendor relationships. We may have limited recourse
if our foreign partners do not perform. Our arrangements with foreign partners
may expose us to significant legal, regulatory or economic risks over which we
may have little control.
28. We may lose revenue or incur additional costs because of network
failure.
Any system or network failure that causes interruptions in our
operations could have a material adverse effect on our business, financial
condition or results of operations. Our services are dependent on our own and
other companies' abilities to successfully integrate technologies and equipment.
In connecting with other companies' equipment, we take the risk of not being
able to provide service due to their error. In addition, there is the risk that
our equipment may malfunction or that we could make an error, which may
negatively affect our customers' service and/or our ability to accurately bill
our customers for services. Our hardware and other equipment may also suffer
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damage from natural disasters such as fires, floods, hurricanes and earthquakes,
other catastrophic events such as civil unrest, terrorism and war and other
sources of power loss and telecommunications failures. We have taken a number of
steps to prevent our service from being affected by natural disasters, fire and
the like. We have built redundant systems for power supply to our equipment.
Nevertheless, there can be no assurance that any such systems will prevent the
switches from becoming disabled in the event of an earthquake, power outage or
otherwise. The failure of our network, or a significant decrease in telephone
traffic resulting from effects of a natural or man-made disaster, could have a
material adverse effect on our relationship with our customers and our business,
operating results and financial condition.
29. We may not be able to continue to obtain sufficient transmission
facilities on a cost-effective basis.
The failure to obtain telecommunications facilities that are sufficient
to support our network traffic in a manner that ensures the reliability and
quality of our telecommunications services may have a material adverse effect on
our business, financial condition or results of operations. Our business depends
in part, on our ability to obtain transmission facilities on a cost-effective
basis.
30. Foreign governments may not provide us with practical opportunities to
compete in their telecommunications markets.
We may be subject to regulation in foreign countries in connection with
certain of our business activities. For example, laws or regulations in either
the transmitting or terminating foreign jurisdiction may affect our use of
transit, resale or other routing arrangements. In addition, our operations may
be affected by foreign countries, either independently or jointly as members of
national organizations such as the WTO may have adopted or may adopt laws or
regulatory requirements regarding such services for which compliance would be
difficult or expensive and that could force us to choose less cost-effective
routing alternatives and that could adversely affect our business, operating
results and financial condition. To the extent that we seek to provide
telecommunications services in other non-U.S. markets, we are subject to the
developing laws and regulations governing the competitive provision of
telecommunications services in those markets. We may expand our operations as
these markets implement scheduled liberalization to permit competition in the
full range of telecommunications services in the next several years. The nature,
extent and timing of the opportunity for us to compete in these markets will be
determined, in part, by the actions taken by the governments in these countries
to implement competition and the response of incumbent carriers to these
efforts. The regulatory regimes in these countries may not provide us with
practical opportunities to compete in the near future, or at all, and we may not
be able to take advantage of any such liberalization in a timely manner.
Governments of many countries exercise substantial influence over
various aspects of their countries' telecommunications markets. In some cases,
the government owns or controls companies that are or may become competitors
with us and/or our partners, such as national telephone companies, upon which
11
<PAGE>
our foreign partners may depend for required interconnections to local telephone
networks and other services. Certain actions of these foreign governments could
have a material adverse effect on our operations. In highly regulated countries
in which we are not dealing directly with the dominant local exchange carrier,
the dominant carrier may have the ability to terminate service to us or our
foreign partner and, if this occurs, we may have limited or no recourse. In
countries where competition is not yet fully established and we are dealing with
an alternative operator, foreign laws may prohibit or impede new operators from
offering services.
31. Anti-takeover provisions may deter change in control transactions.
Certain provisions of our certificate of incorporation, as amended, and
bylaws, as amended, and the General Corporation Law of the State of Delaware
(the "GCL") could deter a change in our management or render more difficult an
attempt to obtain control of us, even if such transactions would be beneficial
to our shareholders. For example, we are subject to the provisions of the GCL
that prohibit a public Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's outstanding voting shares (an
"Interested Stockholder") for three years after the person became an Interested
Stockholder, unless the business combination is approved in a prescribed manner.
The certificate of incorporation includes undesignated preferred stock, which
may enable the board of directors to discourage an attempt to obtain control of
us by means of a tender offer, proxy contest, merger or otherwise. In addition,
the certificate of incorporation provides for a classified board of directors
such that approximately only one-third of the members of the board of directors
will be elected at each annual meeting of stockholders. A classified board of
directors may have the effect of delaying, deferring or discouraging changes in
control of us. Further, certain other provisions of the certificate of
incorporation and bylaws and of the GCL could delay or make more difficult a
merger, tender offer or proxy contest involving us. Additionally, certain
federal regulations require prior approval of certain transfers of control of
telecommunications companies, which could also have the effect of delaying,
deferring or preventing a change in control.
32. We have not paid any dividends to our stockholders and do not expect to
anytime in the near future.
Instead, we plan to retain future earnings, if any, for investment back
into VDC.
Forward-looking statements
This prospectus contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Although
forward-looking statements are based on assumptions made, and information
believed, by us to be reasonable, we cannot be certain that these statements
will prove to be correct. These statements are subject to risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, projected or expected.
12
<PAGE>
Use of proceeds
We will not receive any of the proceeds from the sale of the shares
offered by this prospectus, although we will receive the exercise price of the
warrants if the warrants are exercised. Any such proceeds will be used for our
general working capital.
Selling Security Holders
All of the shares of common stock of VDC offered by this prospectus are
being sold for the account of the selling security holders identified in the
following table.
The selling security holders are offering for sale an aggregate of
9,087,148 shares of common stock which include:
o 8,965,613 shares of common stock; and
o 121,535 shares of common stock issuable, if at all, upon the exercise
of certain common stock purchase warrants.
The following table sets forth as of September 7, 2000 the number of
shares being held of record or beneficially (to the extent known by VDC) by such
selling security holders and provides (by footnote reference) any material
relationship between VDC and such Selling Security Holder, all of which is based
upon information currently available to VDC. Both the number of shares listed as
being offered by the selling security holders in the table and the holders'
respective percentage of share ownership after the offering are based on the
assumptions that all of the shares being offered are sold pursuant to this
offering, and that no other shares of common stock are acquired or disposed of
by the selling security holders prior to the termination of this offering.
Because the selling security holders may sell all, some or none of their shares
or may acquire or dispose of other shares of common stock, we cannot estimate
the aggregate number of shares that will be sold in this offering or the number
or percentage of shares of common stock that each selling security holder will
own upon completion of this offering.
The shares of common stock offered by the selling security holders may be
offered for sale from time to time at market prices prevailing at the time of
sale or at negotiated prices, and without payment of any underwriting discounts
or commissions except for usual and customary selling commissions paid to
brokers or dealers.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES TO BE BENEFICIALLY
PRIOR TO OFFERING (1) OWNED AFTER OFFERING
NAME NUMBER OF SHARES PERCENT SHARES BEING OFFERED NUMBER OF SHARES PERCENT
---- ---------------- ------- -------------------- ---------------- -------
<S> <C> <C> <C> <C> <C>
Activated Communications Limited 39,072 * 39,072 0 0%
Partnership
Adase Partners, L. P. 206,000 * 206,000 (2) 0 0%
Anne Moran Trust (3) 250 * 250 0 0%
Dean Brizel and Jeanne Brizel 22,000 * 22,000 (4) 0 0%
Stephen Buell 2,000 * 2,000 (5) 0 0%
Capital Opportunity Partners One, L.P. 2,000 * 2,000 (5) 0 0%
Arthur Cooper and Joanie Cooper 4,000 * 4,000 (6) 0 0%
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<PAGE>
Mark Eshman and Jill Eshman trustees for 2,000 * 2,000 (5) 0 0%
the Eshman Living Trust dated 9/24/90
FAC Enterprises, Inc. 54,852 * 54,852 0 0%
Jeffrey Feingold and Barbara Feingold 2,000 * 2,000 (5) 0 0%
Fred Fraenkel 22,000 * 22,000 (4) 0 0%
Torunn Garin 66,000 * 66,000 (2) 0 0%
ING Barings, LLC 4,500 * 4,500 (7) 0 0%
Henry D. Jacobs, Jr. 112,740 * 40,740 (8) 72,000 *
The Lucien I. Levy Revocable Living Trust 31,500 * 27,500 4,000 *
The Elvire Levy Revocable Living Trust 18,000 * 10,000 8,000 *
Merl Trust 61,459 * 58,125 3,334 *
Anne Moran (9) 63,643 * 63,643 0 0%
Anne Moran IRA 61,046 * 61,046 0 0%
Clayton F. Moran (10) 1,448,663 (11) 5.9% 1,425,600 23,063 *
Frederick A. Moran (12) 4,112,387 (13) 16.8% 100,000 89,500 (14) *
Fred Moran, IRA 85,998 * 85,998 0 0%
Fred Moran Trust (15) 180 * 180 0 0%
Frederick A. Moran and Anne Moran 41,380 * 41,380 0 0%
Frederick A. Moran and Joan Moran (16) 973,510 3.9% 973,510 0 0%
Frederick W. Moran (17) 1,608,563 (18) 6.6% 1,608,500 63 *
Joan Moran IRA 248 * 248 0 0%
Kent Moran (19) 15,671 * 15,671 0 0%
Kent Moran IRA 333 * 333 0 0%
Luke Moran (19) 22,102 * 22,102 0 0%
Luke Moran IRA 333 * 333 0 0%
Kent F. Moran Trust (20) 1,328,810 5.4% 1,328,810 0 0%
Luke F. Moran Trust (21) 1,328,660 5.4% 1,328,660 0 0%
Moran Equity Fund, Inc. 938 * 938 0 0%
O.T. Finance, SA 88,375 * 76,375 12,000 *
Paradigm Group, LLC 170,914 * 170,914 (22) 0 0%
Robert Paterno (23) 239,943 * 45,000 194,943 *
PGP I Investors, LLC 133,318 * 133,318 (24) 0 0%
RC&A Group, Inc. 81,633 * 81,633 0 0%
Tab K. Rosenfeld 18,250 * 18,250 0 0%
Peter J. Salzano (25) 563,795 (26) 2.3% 50,000 513,795 2.1%
Santa Fe Capital Group (NM), Inc. 3,000 * 3,000 0 0%
Scott Schenker and Randi Schenker 22,000 * 22,000 (4) 0 0%
Alan B. Snyder 707,567 (27) 2.9% 641,667 65,900 *
Alan B. Snyder, IRA 125,000 * 125,000 0 0%
Eric M. Zachs 100,000 * 100,000 0 0%
-------
TOTAL 9,087,148
</TABLE>
(*) Less than 1%
(1) Based upon 24,398,029 shares of common stock outstanding as of
September 7, 2000.
(2) Includes 6,000 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(3) A trust for the benefit of Frederick W. Moran, Clayton F. Moran, Kent
F. Moran and Luke F. Moran. Anne Moran is the mother of Frederick A.
Moran.
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<PAGE>
(4) Includes 2,000 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(5) Represents 2,000 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(6) Represents 4,000 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(7) Represents 4,500 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(8) Includes 3,703 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(9) Mother of Frederick A. Moran.
(10) An adult son of Frederick A. Moran and employed as Chief Financial
Officer and Treasurer of VDC. Mr. Moran formerly served as Vice
President, Finance, of VDC and as a member of VDC's Audit Committee.
(11) Includes options to purchase 23,000 shares of common stock and 63
shares that Mr. Moran has the right to acquire upon demand from a
trust. Does not include options to purchase 212,000 shares of common
stock which may vest in or after November 2000.
(12) Frederick A. Moran serves as Chairman, Chief Executive Officer,
Secretary and Director of VDC. Mr. Moran also serves as a member of
VDC's Audit Committee and Compensation Committee. Mr. Moran formerly
served as Chief Financial Officer of VDC.
(13) Includes options, in the name of Mr. Moran, to purchase 60,000 shares
of common stock and options, in the name of Joan Moran, to purchase
4,500 shares of common stock. Does not include 1,608,563 shares
beneficially owned by Frederick W. Moran and 1,448,663 shares
beneficially owned by Clayton F. Moran, both of whom are Mr. Moran's
adult children. Does not include options, in the name of Mr. Moran, to
purchase 760,000 shares of common stock which may vest in or after
November 2000. Does not include options, in the name of Mr. Moran's
wife, to purchase 33,000 shares of common stock which may vest in or
after November 2000. The beneficial ownership of the following shares
is attributed to Frederick A. Moran: Frederick A. Moran (125,000 shares
plus options to purchase 60,000 shares); Joan Moran (options to
purchase 4,500 shares); Frederick A. Moran and Joan Moran (973,510
shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran
Equity Fund, Inc. (938 shares); the Luke F. Moran Trust (1,328,660
shares); the Kent F. Moran Trust (1,328,810 shares); Luke F. Moran
(22,102 shares); Kent F. Moran (15,671 shares); the Frederick A. Moran,
IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne
Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent
Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran
(63,643 shares); and the Anne Moran IRA (61,046 shares). Mr. Moran has
15
<PAGE>
filed a Schedule 13D (and an amendment thereto) reporting beneficial
ownership of more than 10% of VDC Communications, Inc.'s outstanding
shares of common stock. This Schedule 13D contains numerous disclaimers
including one in which he asserts "[t]he filing of this Statement shall
not be construed as an admission that Mr. Moran is, for purposes of
Section 13(d), or 13(g) of the Act, the beneficial owner of any
securities covered by the Statement."
(14) All shares beneficially owned by Mr. Moran, other than those
represented by vested options and another 25,000 shares of common stock
beneficially owned by Mr. Moran, are being offered hereby.
(15) A trust for the benefit of Frederick W. Moran, Clayton F. Moran, Kent
F. Moran and Luke F. Moran.
(16) Joan Moran is the wife of Frederick A. Moran and an employee of VDC.
(17) An adult son of Frederick A. Moran.
(18) Includes 63 shares that Mr. Moran has the right to acquire upon demand
from a trust.
(19) A minor child of Frederick A. Moran.
(20) A trust for the benefit of Kent F. Moran.
(21) A trust for the benefit of Luke F. Moran.
(22) Includes 64,814 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(23) A former employee of Rare Telephony, Inc., a wholly-owned subsidiary of
VDC.
(24) Includes 18,518 shares issuable, if at all, upon the exercise of
outstanding warrants to purchase common stock.
(25) An independent contractor of Rare Telephony, Inc., a wholly-owned
subsidiary of VDC.
(26) Includes 125,167 shares in the name of Mr. Salzano and beneficial
ownership of 438,628 shares through Mr. Salzano's role as President of
Network Consulting Group, Inc.
(27) Does not include 125,000 shares in the name of Alan B. Synder, IRA,
over which Mr. Snyder has investment control.
We will pay all offering expenses except the fees and expenses of any
counsel and other advisors that the selling security holder may employ to
represent them in connection with the offering and all brokerage or underwriting
discounts or commissions paid to broker-dealers in connection with the sale of
the shares.
16
<PAGE>
Description of securities
Common stock
VDC is authorized to issue 50,000,000 shares of common stock, $.0001
par value per share, of which 24,398,029 are outstanding as of September 25,
2000.
Holders of common stock have equal rights to receive dividends when and
if declared by the board of directors, out of legally available funds. Holders
of common stock have one vote for each share held of record and do not have
cumulative voting rights.
Holders of common stock are entitled upon liquidation of VDC to share
ratably in the net assets available for distribution, subject to the rights, if
any, of holders of any preferred stock then outstanding. Shares of common stock
are not redeemable and have no pre-emptive or similar rights. All outstanding
shares of common stock are fully paid and non-assessable.
Preferred stock
Pursuant to VDC's certificate of incorporation, the board of directors
has the authority to issue up to 10,000,000 shares of preferred stock, $.0001
par value per share, in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by VDC's
stockholders. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of VDC without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of common stock. The issuance of preferred stock with voting and conversion
rights may adversely affect the voting power of the holders of common stock,
including the loss of voting control to others.
Warrants
As of September 25, 2000, warrants to purchase 125,535 shares of
Company common stock are outstanding (the "Warrants") as follows:
<TABLE>
<CAPTION>
Number of Warrants Exercise Price Expiration Date
------------------ -------------- ---------------
<S> <C> <C>
4,500 August 7, 2001
$7.00
121,035 $6.00 May, 2002
-------
TOTAL: 125,535
</TABLE>
Registration rights
This prospectus has been prepared, in part, pursuant to contractual
registration rights granted in connection with the prior sale of certain
securities by VDC in private transactions.
17
<PAGE>
Provisions having a possible anti-takeover effect
Delaware General Corporation Law
The provisions of Section 203 of the Delaware General Corporation Law,
an anti-takeover law, govern us. In general, the law prohibits a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. "Business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the stockholder. An "interested stockholder" is a person who, together with its
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
The provisions regarding certain business combinations could delay,
defer or prevent a change in control of VDC or the removal of existing
management. A takeover transaction frequently affords stockholders the
opportunity to sell their shares at a premium over current market prices.
The provisions described above, together with the ability of the board
of directors to issue preferred stock, may delay or deter a change in the
control or management of VDC.
Certificate of incorporation and bylaws
VDC's certificate of incorporation, as amended, provides that the board
of directors be divided into three classes of directors, with each class serving
a staggered three-year term. The classification system of electing directors may
tend to discourage a third party from making a tender offer or otherwise
attempting to obtain control of VDC and may maintain the incumbency of the board
of directors, as the classification of the board of directors generally
increases the difficulty of replacing a majority of the directors.
Additionally, VDC's bylaws, as amended, provide that special meetings
of stockholders may only be called by either the Chief Executive Officer or the
President, or pursuant to a written request of a majority of the board of
directors. Special meetings may not be called by the stockholders. These
provisions could have the effect of delaying consideration of a stockholder
proposal until the next annual meeting. The provisions would also prevent the
holders of a majority of the voting power of the capital stock of VDC entitled
to vote from unilaterally using the written consent procedure to take
stockholder action. Moreover, a stockholder could not force the board of
directors to call a special meeting of the stockholders prior to the time such
persons believe such consideration to be appropriate, except as required by
Delaware law.
The bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the board of directors or a committee thereof, of candidates for election as
directors. These procedures provide that stockholder nominations for the
election of directors at an annual meeting must be in writing and received by
VDC's Secretary not less than 50 days nor more than 75 days prior to the
meeting; provided, however, that in the event that less than 60 days' notice or
prior public disclosure of the date of the meeting is given or made to
18
<PAGE>
stockholders, notice by the stockholder must be received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. The notice of nominations for the elections of directors must set
forth certain information with respect to the stockholder giving the notice and
with respect to each nominee.
By requiring advance notice of nominations by stockholders, the
foregoing procedures will afford the board of directors an opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the board of directors, to inform stockholders about
such qualifications. By requiring advance notice of other proposed business,
such procedures will provide the board of directors with an opportunity to
inform stockholders prior to such meetings, of any business proposed to be
conducted at such meetings, together with any recommendations as to the board of
directors' position regarding action to be taken with respect to such business,
so that stockholders can better decide whether to attend such a meeting or to
grant a proxy regarding the disposition of any such business.
Although the certificate of incorporation and the bylaws do not give
the board of directors any power to approve or disapprove stockholder
nominations for the election of directors or proposals for action, they may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, with regard to whether consideration of such nominee or proposals
might be harmful or beneficial to VDC and its stockholders.
The certificate of incorporation provides that the bylaws of VDC may be
adopted, altered, amended or repealed by the board of directors of VDC except as
otherwise provided by law. The certificate of incorporation also provides that
any bylaw made by the board of directors, may be altered, amended or repealed,
and new bylaws made by the affirmative vote of the holders of two-thirds of the
combined voting power of the then outstanding shares of stock entitled to vote
on the proposed adoption, alteration, amendment or repeal of or to the bylaws.
This provision modifies the default rules of the Delaware General Corporation
Law by providing that the board of directors may adopt and modify the bylaws.
Additionally, the provision alters the Delaware General Corporation Law by
requiring the affirmative vote of two-thirds of the combined voting power of the
than outstanding shares, as opposed to a simple majority.
The certificate of incorporation provides that amendments to the
certificate of incorporation shall require the affirmative vote of the holders
of two-thirds of the combined voting power of the then outstanding shares of
stock entitled to vote on any proposed amendment to the certificate of
incorporation. However, in the event that a resolution to amend the certificate
of incorporation is adopted by the affirmative vote of at least eighty percent
(80%) of the board of directors, approval of the amendment shall only require
the affirmative vote of the holders of a majority combined voting power of the
then outstanding shares of the stock entitled to vote generally on such
amendment. This provision modifies the default rules of the Delaware General
Corporation Law by requiring a higher level of shareholder approval in favor of
modifying the certificate of incorporation.
19
<PAGE>
Pursuant to VDC's certificate of incorporation, the board of directors
has the authority to issue up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without further vote or action by VDC's stockholders. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of VDC without further action by the stockholders and may adversely
affect the voting and other rights of the holders of common stock. The issuance
of preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others.
The foregoing provisions of the certificate of incorporation and bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of VDC. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of VDC. These provisions are designed to reduce the
vulnerability of VDC to an unsolicited acquisition proposal. The provisions also
are intended to discourage certain tactics that may be used in proxy fights.
However, such provisions could have the effect of discouraging others from
making tender offers for VDC's shares and, as a consequence, they also may
inhibit fluctuations in the market price of VDC's shares that could result from
actual or rumored takeover attempts. Such provisions also may have the effect of
preventing changes in the management of VDC.
Plan of distribution
The selling security holders have not advised us of any specific plan
for distribution of the shares offered hereby, but it is anticipated that the
shares will be sold from time to time by the selling security holders or by
pledgees, donees, transferees or other successors in interest. Such sales may be
made on the American Stock Exchange, any other exchange upon which our shares
may trade in the future, over-the-counter, or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares may be sold by one or more of the following:
o a block trade 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;
o purchases by a broker or dealer for its account pursuant to this
prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o through options, swaps or derivatives;
o in privately negotiated transactions;
20
<PAGE>
o in transactions to cover short sales;
o through a combination of any such methods of sale; or
o in accordance with Rule 144 under the Securities Act, rather than
pursuant to this prospectus.
The selling security holders may sell their shares directly to
purchasers or may use brokers, dealers, underwriters or agents to sell their
shares. In effecting sales, brokers or dealers engaged by the selling security
holders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions, discounts or concessions from the selling
security holders, or, if any such broker-dealer acts as agent for the purchaser
of shares, from the purchaser in amounts to be negotiated immediately prior to
the sale. The compensation received by brokers or dealers may, but is not
expected to, exceed that which is customary for the types of transactions
involved. Broker-dealers may agree with a selling security holder to sell a
specified number of shares at a stipulated price per share, and, to the extent
the broker-dealer is unable to do so acting as agent for a selling security
holder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling security holder.
Broker-dealers who acquire shares as principal may thereafter resell the shares
from time to time in transactions, which may involve block transactions and
sales to and through other broker-dealers, including transactions of the nature
described above, in the over-the counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions. In connection with
resales of the shares, broker-dealers may pay to or receive from the purchasers
of shares commissions as described above.
The selling security holders and any broker-dealers or agents that
participate with the selling security holders in the sale of the shares may be
deemed to be "underwriters" within the meaning of the Securities Act. In that
event, any commissions received by broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
From time to time the selling security holders may engage in short
sales, short sales against the box, puts and calls and other hedging
transactions in our securities, and may sell and deliver the shares in
connection with such transactions or in settlement of securities loans. These
transactions may be entered into with broker-dealers or other financial
institutions. In addition, from time to time, a selling security holder may
pledge its shares pursuant to the margin provisions of its customer agreements
with its broker-dealer. Upon delivery of the shares or a default by a selling
security holder, the broker-dealer or financial institution may offer and sell
the pledged shares from time to time.
We will not receive any proceeds from the sale of the shares. We will
pay the expenses of preparing this prospectus and the related registration
statement. The selling security holders have been advised that they are subject
to the applicable provisions of the Exchange Act, including without limitation,
Rules 10b-5 and Regulation M thereunder.
21
<PAGE>
Legal matters
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for us by Buchanan Ingersoll Professional
Corporation, Eleven Penn Center, 1835 Market Street, 14th Floor, Philadelphia,
Pennsylvania 19103.
Experts
The financial statements incorporated in this prospectus by reference
from VDC's Reports on Forms 10-K and 8-K/A for the year ended June 30, 2000 have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their reports (which contain
explanatory paragraphs regarding VDC's ability to continue as a going concern),
which are also incorporated herein by reference, and have been so incorporated
in reliance upon the reports of said firm as experts in auditing and accounting.
Indemnification of directors and officers
Our certificate of incorporation reflects the adoption of the
provisions of Section 102(b)(7) of the Delaware General Corporation Law, which
eliminate or limit the personal liability of a director to our stockholders or
us for monetary damages for breach of fiduciary duty under certain
circumstances. Our certificate of incorporation also provides that we shall
indemnify any person, who was or is a party to a proceeding by reason of the
fact that he is or was a director or officer of VDC, or is or was serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with a proceeding if he acted in good faith and in a manner he
reasonably believed to be or not opposed to our best interests, in accordance
with, and to the full extent permitted by, the GCL as it currently exists or may
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits VDC to provide broader indemnification rights than said law
permitted VDC to provide prior to such amendment). Our certificate of
incorporation also provides that we may, by action of our board of directors,
provide indemnification to employees and agents of VDC with the same scope and
effect as the foregoing indemnification of directors and officers. The
determination of whether indemnification is proper under the circumstances,
unless made by the court, shall be determined by our board of directors.
We have liability insurance for the benefit of our directors and
officers. The insurance covers claims against such persons due to any:
o breach of duty; o misleading statement;
o neglect; o omission; or
o error; o negligent act.
o misstatement;
22
<PAGE>
The insurance also provides certain coverage for VDC and employees of
VDC in connection with certain securities law claims. The insurance covers
claims referenced above, except as prohibited by law, or otherwise excluded by
such insurance policy.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of VDC
pursuant to the foregoing provisions, or otherwise, VDC has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
Where you can find more information
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document VDC files at the SEC's public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov and at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048 and Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained upon written request addressed to the Commission at
the Public Reference Section, at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Our SEC filings are also available at the office of the
American Stock Exchange. For further information on obtaining copies of our
public filings at the American Stock Exchange, you should call 212-306-1484.
The SEC allows VDC to "incorporate by reference" the information VDC
files with them, which means that VDC can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and later information that VDC
files with the SEC will automatically update and supersede this information. VDC
incorporates by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling security holders sell all the shares.
1. Annual Report on Form 10-K for the year ended June 30, 2000;
2. Report on Form 8-K dated June 14, 2000 reporting acquisition
of Rare Telephony, Inc;
3. An Amendment to Form 8-K (Form 8-K/A) filed with the
Securities and Exchange Commission on August 25, 2000 amending
a previously filed Form 8-K dated as of June 14, 2000 relative
to the Company's acquisition of Rare Telephony, Inc; and
4. The descriptions of the VDC's common stock which are contained
in registration statements on Form 8-A under the Exchange Act,
including any amendment reports filed for the purpose of
updating such description.
23
<PAGE>
VDC will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the information
incorporated herein by reference. Exhibits to any of such documents, however,
will not be provided unless such exhibits are specifically incorporated by
reference into such documents. The requests should be made to:
Clayton F. Moran, Chief Financial Officer
VDC Communications, Inc.
75 Holly Hill Lane
Greenwich, Connecticut 06830
(203) 869-5100
24
<PAGE>
[LOGO]
9,087,148 shares
VDC Communications, Inc.
Common Stock
-------------------
P r o s p e c t u s
-------------------
_______________, 2000
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee $ 275
Counsel fees and expenses*............................................. $ 5,000
Accounting fees and expenses*.......................................... $ 5,000
Miscellaneous expenses*................................................ $ 5,000
-------------------
Total*............................................................ $ 15,275
----------
* Estimated
</TABLE>
We will bear all expenses of issuance and distribution listed above.
The costs of fees and expenses of legal counsel and other advisors, if any, that
any selling security holder employs in connection with the offering will be
borne by that selling security holder.
Item 15. Indemnification of Directors and Officers.
Our certificate of incorporation reflects the adoption of the
provisions of Section 102(b)(7) of the Delaware General Corporation Law, which
eliminate or limit the personal liability of a director to our stockholders or
us for monetary damages for breach of fiduciary duty under certain
circumstances. Our certificate of incorporation also provides that we shall
indemnify any person, who was or is a party to a proceeding by reason of the
fact that he is or was a director or officer of VDC, or is or was serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with a proceeding if he acted in good faith and in a manner he
reasonably believed to be or not opposed to our best interests, in accordance
with, and to the full extent permitted by, the GCL as it currently exists or may
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits VDC to provide broader indemnification rights than said law
permitted VDC to provide prior to such amendment). Our certificate of
incorporation also provides that we may, by action of our board of directors,
provide indemnification to employees and agents of VDC with the same scope and
effect as the foregoing indemnification of directors and officers. The
determination of whether indemnification is proper under the circumstances,
unless made by the court, shall be determined by our board of directors.
We have liability insurance for the benefit of our directors and
officers. The insurance covers claims against such persons due to any:
o breach of duty; o misleading statement;
o neglect; o omission; or
o error; o negligent act.
o misstatement;
II-1
<PAGE>
The insurance also provides certain coverage for VDC and employees of VDC in
connection with certain securities law claims. The insurance covers claims
referenced above, except as prohibited by law, or otherwise excluded by such
insurance policy.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of VDC
pursuant to the foregoing provisions or otherwise, VDC has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
We refer you to Item 17 for our undertakings with respect to
indemnification of liabilities arising under the Securities Act.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
5 Opinion of Buchanan Ingersoll Professional
Corporation as to validity of common stock.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Buchanan Ingersoll Professional
Corporation (contained in the opinion filed
as Exhibit 5 to the Registration Statement).
24 Powers of Attorney of certain officers and
directors of VDC (contained on the signature
page of this Registration Statement).
</TABLE>
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each such post-effective amendment as a new registration statement of the
securities offered, and the offering of such securities at that time shall be
the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
II-2
<PAGE>
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-3
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Greenwich, State of Connecticut, on the 27th day of
September, 2000.
VDC Communications, Inc.
By: /s/ Frederick A. Moran
-------------------------------------
Chairman of the Board and
Chief Executive Officer
By: /s/ Clayton F. Moran
-------------------------------------
Chief Financial Officer/Principal
Accounting Officer
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each of Clayton F. Moran, James
B. Dittman, Dr. Hussein A. Elkholy, and Dr. Leonard Hausman constitutes and
appoints Frederick A. Moran 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 all 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 or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Frederick A. Moran Chairman, Chief Executive Officer, September 27, 2000
------------------------ Secretary, and Director
Frederick A. Moran
/s/ Clayton F. Moran Chief Financial Officer and Treasurer September 27, 2000
---------------------
Clayton F. Moran
/s/ James B. Dittman Director September 27, 2000
---------------------
James B. Dittman
/s/ Dr. Hussein A. Elkholy Director September 26, 2000
--------------------------
Dr. Hussein A. Elkholy
/s/ Dr. Leonard Hausman Director September 27, 2000
-----------------------
Dr. Leonard Hausman
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C> <C>
5.1 Opinion of Buchanan Ingersoll Professional Corporation as to validity
of common stock. Filed herewith
23.1 Consent of BDO Seidman, LLP. Filed herewith
23.2 Consent of Buchanan Ingersoll Professional Corporation
(contained in the opinion filed as Exhibit 5 to the
Registration Statement). Filed herewith
24.1 Powers of Attorney of certain officers and directors of the Filed herewith
Registrant (contained on the signature page of this Registration
Statement).
</TABLE>
