As filed with the Securities and Exchange Commission on September 30, 1998
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
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WAVETECH INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Nevada 86-0916826
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. Number)
5210 East Williams Circle, Suite 200, Tucson, Arizona 85711
(520) 750-9093
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(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Gerald I. Quinn
Wavetech International, Inc.
5210 East Williams Circle, Suite 200
Tucson, Arizona 85700
(520-750-9093)
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
The Commission is requested to send copies of all
communications to:
Christopher D. Johnson, Esq.
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Approximate date of commencement of proposed sale to the public: As soon as
practicable from time to time after the date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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 file pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Aggregate Aggregate Amount of
Securities to be Registered Registered Price Per Unit* Offering Price* Registration Fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 4,456,921 shares $0.25 $1,114,230.25 $328.70
================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457 of the Securities Act of 1933, on
the basis of the last sale price for shares of Common Stock on September
29, 1998.
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, AS AMENDED (THE "SECURITIES ACT") OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS 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 30, 1998
PROSPECTUS
4,456,921 SHARES
WAVETECH INTERNATIONAL, INC.
COMMON STOCK
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The securities offered hereby (the "Offered Securities") are 4,456,921
shares of common stock, $.001 par value per share ("Common Stock"), of Wavetech
International, Inc., a Nevada corporation ("Wavetech" or the "Company"). The
Offered Securities will be offered and sold from time to time by certain
shareholders of the Company (the "Selling Shareholders"). See "Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
the Offered Securities by the Selling Shareholders, although the Company will
receive up to an aggregate of $318,250.00 of gross proceeds upon exercise of
outstanding warrants to purchase 265,000 shares of Common Stock, all of which
are included in the Offered Securities. The Company intends to use such
proceeds, if any, for its general corporate purposes. Substantially all expenses
in connection with the registration of the Offered Securities will be borne by
the Company, except for any underwriters', brokers' and dealers' commissions
and/or discounts. See "Plan of Distribution" and "Selling Shareholders."
The Common Stock is traded on the Nasdaq SmallCap Market under the Symbol
"ITEL". On September 29, 1998, the closing sale price for the Common Stock was
$0.25 per share, as reported by The Nasdaq Stock Market, Inc.
This Prospectus may be used from time to time by the Selling Shareholders
to sell the Offered Securities. The offering price of such Common Stock will be
determined by the Selling Shareholders and such sales may be made or in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Company will not receive any of the proceeds from the sale of
the Common Stock offered hereby.
SEE "RISK FACTORS" AT PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS TO BE
CONSIDERED PRIOR TO MAKING AN INVESTMENT DECISION IN THE SHARES OFFERED HEREBY.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is _______________, 1998.
<PAGE>
AVAILABLE INFORMATION
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 Securities and Exchange Commission (the
"Commission"). Such reports and other information (including proxy and
information statements) filed by the Company with the Commission may be read and
copied at the Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of prescribed rates. Information on the operation of the
Public Reference Room is available to the public by calling the Commission at
1-800-SEC-0330. In addition, the Commission maintains a website at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-3 under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the Common Stock, reference is made to the Registration Statement including the
exhibits thereto, copies of which may be inspected at the Public Reference Room
of the Securities and Exchange Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of any part thereof may be obtained
from the office of the Commission in Washington, D.C. upon the payment of the
prescribed fee. The statements contained in this Prospectus and the contents of
any contract or other document filed as an exhibit are of necessity brief
descriptions thereof, are not necessarily complete and the full text of such
statements is qualified in its entirety by reference to such contract or
document.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company
and are hereby incorporated by reference into this Prospectus: (i) the Company's
Annual Report on Form 10-KSB for the fiscal year ended August 31, 1997, as
amended; (ii) the Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended November 30, 1997, as amended, (iii) the Company's Quarterly
Report on Form 10-QSB for the fiscal quarter ended February 28, 1998; as
amended, (iv) Company's Quarterly Report on Form 10-QSB for the fiscal quarter
ended May 31, 1998; as amended, (v) the Company's Notice of Annual Meeting and
Preliminary Proxy Statement for the 1998 Annual Meeting of Stockholders, filed
on April 8, 1998, as amended; and, (vi) the description of the Company's Common
Stock contained in the Company's Registration Statement on Form 8-A filed with
the Commission pursuant to Section 12(g) of the Exchange Act, Commission File
No. 000-15482. All other documents and reports filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act from the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed to
be incorporated by reference herein and shall be deemed to be a part hereof from
the date of the filing of such reports and documents.
Any statement 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 subsequently filed document which also is or is 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.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request of such person, a copy
of any or all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in the document which this Prospectus incorporates).
Requests should be directed to Ms. Lydia Montoya, Chief Financial Officer, 5210
East Williams Circle, Suite 200, Tucson, Arizona 85711, telephone number (520)
750-9093.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. REFERENCE IS MADE TO, AND THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
Wavetech International, Inc. a Nevada corporation (together with its
wholly-owned subsidiaries, the "Company" or "Wavetech") is primarily engaged in
the development, preparation, marketing and sale of interactive communications
systems through the application of "intelligent" call processing technology and
proprietary software to reflect or target the needs of an identified audience.
These systems are often used as privatized networks for organizations and
special purpose groups. Although the Company was organized in 1986, it did not
commence its current operations until 1996. During 1994 and 1995, the Company's
operations consisted of infrastructure development for its call processing and
data management systems. Operations in the United States and Canada commenced on
a limited basis in 1996.
The Company conducts most of its operations through its wholly-owned
subsidiary, Interpretel, Inc., an Arizona corporation ("Interpretel").
Interpretel is a facilities based telecommunication company using an advanced
computer telephony platform to deliver enhanced calling card services, virtual
office and capabilities to offer interactive marketing applications. The
Company's products are highly customized and branded for specific distributor
applications and feature a single point of access, via any touch-tone telephone,
to a suite of information and communication services.
Sample services currently offered by Interpretel include: world-wide direct
calling; instant conference calling; over-the-phone language interpretation
supporting over 100 languages; fax-based language translation; news, weather and
sports headlines; integrated voice and fax mail; integration with customer call
centers; and in Canada, Dun & Bradstreet Express business services, and legal
consultations and referrals. All services are billed on a post-pay basis
directly to the subscriber, usually via a credit card. Positioned as an
added-value service, principal benefits to distributors include: cost-effective
information distribution and interactive marketing and promotion capability. The
product also becomes a customer retention vehicle and new profit center.
Since its inception, Interpretel has focused primarily on the development
of product specifications, proprietary application software (including
call-processing, billing, membership and customer service database software),
execution of vendor contracts, development of corporate infrastructure
(including customer service, sales and marketing divisions, regional sales
staff), design and printing of product and marketing brochures, and strategic
planning for international business development. The Company's software packages
are tightly integrated into a state-of-the-art communications system creating a
platform network that can be duplicated throughout the world as the Company
proceeds with its international expansion plans.
4
<PAGE>
Interpretel has been issued a tariff, bearing F.C.C. Tariff No. 2, filed in
compliance with the requirements of the Communications Act of 1934, as amended,
with the Federal Communications Commission.
On March 10, 1995, Interpretel (Canada) Inc. was incorporated under the
laws of the Province of Ontario as a wholly-owned subsidiary of Interpretel,
Inc. It was formed to secure a long distance reseller's registration and license
in that country through the Canadian Radio and Television Commission (CRTC),
which is the equivalent of the FCC in Canada. This reseller's license qualifies
Interpretel (Canada) Inc. to operate as a reseller of long distance services and
secure contracts with Canadian corporations and organizations as a Canadian
entity. Interpretel (Canada) Inc. is essentially a sales and customer service
operation.
Interpretel has a staff of four full-time employees. Wavetech has no
employees. The Company currently has operations underway in the United States
and Canada.
FEATURES AND CAPABILITIES OF THE COMPANY'S INTERACTIVE SYSTEM
The Company's call-processing architecture is a UNIX-based multi-tasking
digital call-processing system integrated with a Tandem database server, which
provides the ability to manage a wide range of diverse applications on a single
platform. The Company believes that its systems computer telephony integration
technology is "leading edge," is highly robust, modularly designed and can
support virtually limitless expansion and capacity. The system offers direct
T-1/DS-3 connectivity with the public telephone network and is networked
remotely for customer service/database management.
The Company's database management system is currently managed and
administered from its corporate offices in Tucson, Arizona, with the call
processing platforms located in Lincoln, Nebraska. Plans are currently underway
to locate call processing platforms in Toronto to support Canadian operations.
The Company currently offers the following programs:
THE INTERPRETEL TRAVELER CARD. Designed for worldwide business and
travel use, this application offers voice and fax mail with pager notification;
over-the-phone language interpretation; fax-based document translation; 12-way
conference calling; news and sports headlines; and access to domestic and
international calling card long distance service. Line charges are billed to the
subscriber's credit card of choice. The Company is considering distribution of
this program through a direct mail initiative or promotional program.
THE AFFINITY CARD PROGRAM. Building on the Interpretel Card, this
program allows a company to brand and fully customize services including
integration of Interpretel's communication features with their own services. The
Company currently has Affinity Card programs with Diners Club International and
Delta Hotels and Resorts, among others. The Affinity Card Program constitutes
the cornerstone of the Company's current marketing and sales initiatives.
5
<PAGE>
THE VIRTUAL OFFICE PROGRAM. Built as a customized "affinity" product
and featuring many of the same services as the Interpretel Traveler Card, this
product is positioned for the Small Office/Home Office (SOHO) market and uses a
private "888" number for access. Unique to this program is a "follow-me"
function which dials and searches multiple phone numbers locating the
subscriber. As a new initiative, during fiscal 1999, the Company intends to
commence marketing this product to multi- level sales organizations.
THE INTERACTIVE MARKETING PROGRAM. The Company's advanced
call-processing system can be used for non-card based applications, including
interactive voice response, fax-backs, surveys/polling and meet-me conferencing
systems. The modular call-processing architecture allows easy creation of
applications with virtually no limit. As the Company builds its sales and
marketing infrastructure, this program will receive greater attention in the
future.
STRATEGIES FOR THE FUTURE
The Company believes its technology is well-positioned to enable
significant expansion of its customer base and penetrate new markets. The
Company's proprietary interactive call-processing software and related systems
are designed to address the needs of the international customer and be easily
integrated into foreign telecommunication networks. The Company intends to seek
out and develop licensing agreements with international providers as they become
available. Although the Company has signed major distributor agreements over the
last three years, results are not expected to be commercially realized until at
least early 1999.
As companies are shifting from mass-marketing initiatives to "one-on-one
interactive" marketing, the Company believes it is uniquely and strategically
positioned for growth by enabling businesses to customize and personalize their
marketing initiatives using the Company's interactive telecommunications
systems. The Company intends to aggressively pursue the following growth
strategies:
SEEK OUT ATTRACTIVE ACQUISITION, MERGER AND JOINT VENTURE
OPPORTUNITIES. The Company believes there exist several unaffiliated third
parties whose operations or assets would complement the Company's products and
services. The Company intends to seek out potential acquisitions, mergers, joint
ventures or other partnerships as they arise. However, to date, the Company has
no binding agreements for any such opportunities. See "Risk Factors -
Uncertainty of Strategic Relations," "-- Potential Acquisitions" and "--Need for
Additional Financing."
FOCUS ON EXPANSION INTO INTERNATIONAL MARKETS. The Company intends to
aggressively seek expansion into international markets. From 1996 until 1998,
the Company had a licensing agreement with Switch Telecommunications Pty Ltd.
for use of the Company's platforms in Southeast Asia. The Company believes that
its technology can be readily adaptable to a variety of foreign communications
networks and that significant demand exists in international markets for the
Company's services. See " Risk Factors - Risks Associated with International
Expansion."
6
<PAGE>
EXPAND SALES AND MARKETING EFFORTS. The Company's operations to date
have consisted principally of developing its technology and product offerings.
The Company intends to increase revenues by expanding its base of users through
direct sales and marketing efforts, as well as through affiliations with other
third parties. See "Risk Factors - Intense Competition."
Wavetech was incorporated in the State of New Jersey on July 10, 1986 under
the name "Wavetech, Inc.", and in February 1998 changed its state of
incorporation to the State of Nevada. Its corporate headquarters are located at
5210 East Williams Circle, Suite 200, Tucson, Arizona 85711, and its telephone
number is (520) 750-9093.
-----------------------
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS", INCLUDING STATEMENTS
REGARDING, AMONG OTHER ITEMS, THE COMPANY'S GROWTH STRATEGY, FUTURE PRODUCTS AND
SERVICES AND ANTICIPATED TRENDS IN THE COMPANY'S BUSINESS. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER
OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THE COMPANY'S EARLY STAGE OF
DEVELOPMENT, THE NEED FOR ADDITIONAL FINANCING, INTENSE COMPETITION IN VARIOUS
ASPECTS OF ITS BUSINESS, THE SEASONAL NATURE OF ITS BUSINESS, ITS DEPENDENCE ON
KEY PERSONNEL, AND OTHER FACTORS DESCRIBED UNDER "RISK FACTORS" AND ELSEWHERE
HEREIN OR INCORPORATED HEREIN BY REFERENCE.
7
<PAGE>
THE OFFERING
Securities Offered Hereby.......... 4,456,921 shares of Common Stock
Common Stock Outstanding as
of August 31, 1998................. 16,994,887 shares (1)
Use of Proceeds.................... The Selling Shareholders will receive all
of the proceeds from the sale of the
Offered Securities. None of the proceeds
of this Offering will be received by the
Company, although the Company will
receive up to an aggregate of $318,250.00
of gross proceeds upon exercise of
outstanding warrants to purchase 265,000
shares of Common Stock, all of which are
included in the Offered Securities. The
Company intends to use such proceeds, if
any, for its general corporate purposes.
Risk Factors....................... The securities offered hereby involve a
high degree of risk. See "Risk Factors."
Nasdaq SmallCap Market Symbol...... "ITEL"
- -----------------
(1) Excludes 2,320,000 shares issuable pursuant to outstanding options,
1,380,000 shares reserved for issuance pursuant to future grants under the
Company's 1997 Stock Incentive Plan, and 2,295,000 shares issuable pursuant
to unexercised warrants (including 265,000 shares offered pursuant to the
Registration Statement of which this Prospectus forms a part).
8
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND SHOULD ONLY BE MADE BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT
DECISION, SHOULD GIVE CAREFUL CONSIDERATION, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, TO THE FOLLOWING RISK FACTORS.
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS," INCLUDING STATEMENTS
REGARDING, AMONG OTHER ITEMS, THE COMPANY'S GROWTH STRATEGY, FUTURE PRODUCTS,
SALES, ABILITY TO LICENSE FUTURE PRODUCTS AND MARKET PRODUCTS AND ANTICIPATED
TRENDS IN THE COMPANY'S BUSINESS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING,
BUT NOT LIMITED TO, THE COMPANY'S EARLY STAGE OF DEVELOPMENT, THE NEED FOR
ADDITIONAL FINANCING, INTENSE COMPETITION IN VARIOUS ASPECTS OF ITS BUSINESS,
ITS DEPENDENCE ON THIRD PARTY CONSULTANTS AND KEY PERSONNEL, AND OTHER FACTORS
DESCRIBED IN THE RISK FACTORS SECTIONS SET FORTH BELOW AND ELSEWHERE HEREIN. IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES OF
COMMON STOCK OFFERED BY THIS PROSPECTUS.
PREVIOUS LOSSES. The Company has incurred net losses of approximately
$(1,629,285), $(1,860,204) and $(1,055,099) during each of the fiscal years
ended August 31, 1997, 1996 and 1995, respectively. Although the Company
recorded revenues for the quarter ended February 28, 1997, it has incurred
losses since then and there can be no assurance that the Company will record a
profit in any future periods. If the Company is unable to operate at a profit,
its financial position and results of operations, as well as the price at which
its Common Stock trades, may be materially adversely affected.
POTENTIAL INABILITY TO CONTINUE AS GOING CONCERN. The Company's auditors
have issued a report which states that, in their opinion, there exists
substantial uncertainty as to the Company's ability to continue as a "going
concern," as a result of its lack of sufficient capital resources. Since the
date of such report, the Company issued shares of its Series A Preferred Stock
in April 1998 in consideration of gross proceeds of $600,000. In addition, in
May 1998 certain warrant holders of the Company exercised outstanding warrants,
resulting in additional proceeds to the Company of approximately $222,500. In
August 1998, the Company received gross proceeds of $2.1 million upon exercise
of a put option to sell certain shares of Switch Holdings Pty which it owned.
The Company believes that its current capital resources are adequate to sustain
its current limited operations for at least one year following the date of this
Prospectus. However, the Company may be unable to generate sufficient revenues
or otherwise obtain adequate capital resources in the future, it may be unable
to continue its business operations as currently planned, or at all. See "--
Need for Additional Financing".
LIMITED OPERATING HISTORY. Interpretel, Inc., the Company's principal
operating subsidiary, was incorporated in 1995; however, it did not have any
significant business operations until 1997. Accordingly, the Company has only a
limited operating history upon which an evaluation of the Company and its
prospects can be based. The Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stages of operations. Such risks include, but are not limited to,
9
<PAGE>
the possibility that the Company may be unable to develop products and services
which are responsive to consumer demands, unable to achieve sales of such
products and services sufficient to enable the Company to become profitable, and
unable to develop the operational infrastructure necessary to support its
intended operations. To the extent the Company is unable in the future to
adequately address these and other risks and uncertainties associated with its
early stage of operations, its business, financial condition and results of
operations may be materially adversely affected.
RISK OF DELISTING. The Company has been notified by Nasdaq that it is
currently not in compliance with the $1.00 minimum bid price requirement. The
Company has requested a hearing to appeal Nasdaq's decision to delist its Common
Stock for failure to meet this requirement. However, an unfavorable outcome of
such hearing or the failure to satisfy one or more of the other maintenance
requirements of Nasdaq could result in the Company's securities being delisted
from Nasdaq, with the result that the Company's securities would trade on the
OTC Bulletin Board or in the "pink sheets" maintained by the National Quotation
Bureau Incorporated. As a consequence of such delisting, an investor could find
it more difficult to dispose of or to obtain accurate quotations as to the
market value of the Company's securities. Among other consequences, delisting
from Nasdaq may cause a decline in the stock price, the loss of news coverage
about the Company and difficulty in obtaining future financing. See "-- Nasdaq
Listing and Maintenance Requirements."
FACTORS AFFECTING OPERATING RESULTS. The Company's operating results have
varied significantly from period to period in the past and may vary
significantly in the future. Special factors that may cause the Company's future
operating results to vary include the unique nature of strategic relationships
into which the Company may enter in the future, changes in operating expenses
resulting from such strategic relationships and other factors, the continued
acceptance of the Company's licensing program, the financial performance of the
Company's licenses, the timing of new services and announcements, market
acceptance of new and enhanced versions of the Company's existing services,
potential acquisitions, changes in legislation and regulation that may affect
the competitive environment for the Company's communications services and
general economic and seasonal factors, among others. In the future, revenues
from the Company's strategic relationships may become an increasingly
significant portion of the Company's total revenues. Due to the unique nature of
each strategic relationship, these relationships may change the Company's mix of
expenses relative to revenues.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. Quarterly revenues are
difficult to forecast because the market for the Company's information and
telecommunications services is rapidly evolving. The Company's expense levels
are based, in part, on its expectations as to future revenues. If actual revenue
levels are below expectations, the Company may be unable or unwilling to reduce
expenses proportionately and operating results would likely be adversely
affected. As a result, the Company believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all of the foregoing
factors, among others, it is likely that in some of the Company's future fiscal
quarters, the Company's operating results will be below the expectations of
public market analysts and investors. In such event, the price of the Company's
Common Stock will likely be adversely affected.
10
<PAGE>
INTENSE COMPETITION. The information and telecommunications services
industries are intensely competitive, rapidly evolving and subject to rapid
technological change. The Company expects competition to increase in the future.
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition, larger customer bases and substantially
greater financial, personnel, marketing, engineering, technical and other
resources than the Company. For example, the Company's worldwide long distance
services and features, such as conference calling, compete with services
provided by companies such as AT&T, MCI and Sprint Communications ("Sprint"), as
well as smaller interexchange long distance providers. The Company's voice mail
services compete with voice mail services provided by certain regional Bell
operating companies ("RBOCs") as well as by independent voice mail vendors such
as Octel Communications Corporation, among others. Many of the Company's planned
future products and services are likely to compete with products and services
offered by the Company's existing competitors, as well as additional companies
with which the Company does not presently compete. There can be no assurance
that the Company will be able to successfully compete with such entities. Such
current or future competition could materially adversely affect the Company's
business, operating results and financial condition.
In addition, the Telecommunications Act of 1996 allows local exchange
carriers ("LECs"), including the RBOCs to provide inter-LATA long distance
telephone service, which will likely significantly increase competition for long
distance services. The new legislation also grants the Federal Communications
Commission ("FCC") the authority to deregulate other aspects of the
telecommunications industry. Such deregulation may, if authorized by the FCC,
facilitate the offering of an integrated suite of information and
telecommunications services by regulated entities, including the RBOCs, in
competition with the Company. Such increased competition could have a material
adverse effect on the Company's business, operating results and financial
position. See "-- Potential Adverse Effects of Regulation."
Telecommunications companies often compete for consumers based on price
with major long distance carriers conducting extensive advertising campaigns to
capture market share. Many of the Company's competitors are able to realize a
profit while offering low rates to individual consumers because they are able to
attract a greater number of total customers than the Company. As a result, the
Company may be required to reduce the prices at which it offers services in
order to make its services attractive to customers. However, if the Company is
unable to generate sufficient revenues to offset its expenses, it will be unable
to become profitable. A decrease in the rates charged for communications
services by the major long distance carriers or other competitors, whether
caused by general competitive pressures or the entry of the RBOCs and other LECs
into the long distance market, could have a material adverse effect on the
Company's business, operating results and financial condition.
The Company expects that the information and telecommunications services
markets will continue to attract new competitors and new technologies, possibly
including alternative technologies that are more sophisticated and cost
effective than the Company's technology. The Company does not have the
contractual right to prevent its subscribers from changing to a competitor's
network, and the Company's subscribers may generally terminate their services
with the Company at will. If the Company is unable to compete with emerging
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technologies or services, it may lose customers and, as a result, its business
and operating results may be materially adversely affected.
The personal telecommunications products industry is intensely competitive
and subject to rapid change. The Company believes that the principal competitive
factors affecting the markets for its products include customer service,
content, quality, price, marketing, distribution, uninterrupted service and
proprietary technology. In addition, consumer demand for particular
telecommunications products may be adversely affected by the increasing number
of competitive products from which to choose, making it difficult to predict the
Company's future success in producing personal telecommunications products for
the retail market.
RAPID TECHNOLOGICAL CHANGE. The information and telecommunications services
markets in which the Company competes are characterized by rapid technological
change, frequent new product introductions and evolving industry standards. The
Company's future success will depend in significant part on its ability to
anticipate industry standards, apply advances in technologies, enhance its
current services, enhance its software and call processing platform and achieve
market acceptance of products and services based on evolving or new technology.
The Company intends to develop and introduce new products and services, and
enhancements to existing products and services, which will complement the
services currently offered or planned by the Company. However, rapid changes in
technology and product obsolescence require the Company to develop or acquire
new products and to enhance its existing products on a timely basis. There is no
assurance that the Company will be able to predict such changes or have the
resources required or otherwise be able to respond to market or technological
changes in order to compete successfully in the future.
DEPENDENCE ON NEW SERVICES. The Company's operating and growth strategies
are largely dependent upon its ability to develop new services in a timely and
effective manner. Development and implementation of such services is expected to
require the Company to upgrade its existing systems, acquire new technological
and other resources and develop additional strategic relationships. There can be
no assurances that the Company will be able to meet these needs. The Company
intends to upgrade its call processing network during early fiscal 1999.
Network development will include the deployment of call processing
platforms in Canada, as well as expansion of call processing to other
international locations. The Company is currently in negotiation with an
international telecommunications company to form a strategic partnership for
utilization of switches and network access in over 60 countries. Currently,
there is no binding agreement with respect to such relationship and there can be
no assurance that such relationship will be consummated. This relationship, if
consummated, will require additional software development as well as the
installation of additional call processing platforms. There can be no assurance
when, if ever, such relationship will generate revenues for the Company.
The Company's future planned products include new products based on its
custom post-pay calling card program, including a "virtual office" service.
Implementation of this service does not require any hardware purchases or
installation of additional phone lines; however, the Company's management will
be required to devote its energy and resources to the development,
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implementation and marketing of this and other future planned products. There
can be no assurance that such product will ultimately generate revenues
sufficient to offset the costs associated with the development and marketing of
any future planned product or service. There can be no assurance that the
Company will be successful in developing and marketing service enhancements or
new services in response to technological changes, evolving industry standards
or customer demands and preferences. The Company may experience difficulties
that could delay or prevent the successful development, introduction and
marketing of its services. Additionally, to the extent the Company is able to
develop new services, if at all, there can be no assurances that such services
or any enhancements thereto, will adequately meet the requirements of the
marketplace and achieve market acceptance. Delays in the introduction of new
services, the inability of the Company to develop such new services or the
failure of such services to achieve market acceptance could have a material
adverse effect on the Company's business, operating results and financial
condition.
UNCERTAINTY OF STRATEGIC RELATIONSHIPS. A principal element of the
Company's growth strategy is the creation and maintenance of strategic
relationships that will enable the Company to offer its services to a larger
customer base than the Company could otherwise reach through its direct
marketing efforts. The Company has entered into or initiated strategic
relationships with several companies, including DonTon Travel, Inc. and Pacific
Image, Inc. These relationships were formed recently, and have not produced
significant revenues to date. There can be no assurances as to when, if ever,
any of such relationships will generate revenues or net profits for the Company.
The Company is unable to predict their success or failure due to limited
operating experience with these strategic partners. The Company believes that
its strategic partner relationships may be an effective and efficient means of
marketing its products and services. Consequently, the Company's future success
is largely dependent upon the ultimate success of these relationships and on the
ability of these strategic partners to effectively market the Company's
services. Failure of one or more of the Company's strategic partners to
successfully develop and sustain a market for the Company's services, or the
termination of one or more of the Company's relationships with a strategic
partner, could have a material adverse effect on the Company's overall
performance due to the possibility of more costly direct marketing expenditures
by the Company and other factors.
Although the Company views its strategic relationships as a key factor in
its overall business strategy and in the development and commercialization of
its services, there can be no assurance that its strategic partners view their
relationships with the Company as significant for their own businesses or that
they will not reduce or even eliminate their commitment to the Company in the
future. The Company's arrangements with its strategic partners do not establish
minimum performance requirements for the Company's strategic partners, but
instead rely on the voluntary efforts of these partners in pursuing joint goals.
The ability of the Company's strategic partners to incorporate the Company's
services into successful commercial ventures will require the Company, among
other things, to continue to successfully enhance its existing services and
develop new services. The Company's inability to meet the requirements of its
strategic partners or to comply with the terms of its strategic partner
arrangements could result in its strategic partners failing to market the
Company's services, seeking alternative providers of communication and
information services or canceling their contracts with the Company, any of which
could have a material adverse impact on the Company.
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DEPENDENCE ON LICENSING RELATIONSHIPS. To date, the Company has licensed
its services to one company, Switch Telecommunications, Pty Ltd. ("Switch"),
located in Australia. The Switch licensing arrangement was terminated in July,
1998 and the Company received $150,000.00 from Switch as consideration for
terminating the licensing agreement. The Company currently has no other licenses
with other entities. The Company intends to seek additional licensing
arrangements. However, the majority of companies that have historically
outsourced communications card services to the Company have been small or
medium-sized telecommunications companies that may be unable to withstand the
intense competition and rapid change currently experienced in the
telecommunications industry. The inability of the Company to attract larger or
more license transactions, the failure of one or more of the Company's licensees
to develop and sustain a market for the Company's services, or termination of
one or more of the Company's licensing relationships, could have a material
adverse effect on the Company's business, operating results and financial
condition.
ABILITY TO MANAGE GROWTH. In order to maintain its viability, the Company
will need to experience substantial growth in 1999 and thereafter as it begins
to operate its call processing networks. This growth, if any, can be expected to
place significant demands on all aspects of the Company's business, including
its administrative, technical and financial personnel and systems. In addition,
expansion by the Company may strain the Company's management, financial and
other resources. There can be no assurance that the Company's systems,
procedures, controls and existing resources will be adequate to support
expansion of the Company's operations. The Company's future operating results
will substantially depend on the ability of its officers and key employees to
manage changing business conditions and to implement and improve its technical,
administrative, financial control and reporting systems. If the Company is
unable to respond to and manage changing business conditions, then the quality
in the Company's services, its ability to retain key personnel and its results
of operations could be materially adversely affected. At certain stages of
growth in network usage, the Company is required to add capacity to the call
processing platform, thus requiring the Company to continually predict growth in
its network usage and add capacity to its system accordingly. Difficulties in
managing continued growth, including difficulties in predicting the growth in
network usage, could have a material adverse effect on the Company, its business
and results of operations.
DEPENDENCE ON KEY MANAGEMENT AND PERSONNEL. The Company's survival has
historically been largely dependent upon its executive officers, the loss of one
or more of whom could have a material adverse effect on the Company. The Company
believes that its ability to become successful in the future will depend to a
significant extent upon the efforts and abilities of its executive officers and
other key personnel. The loss of services of any of these individuals could have
a material adverse effect upon the Company. The Company does not currently
maintain key person life insurance on the lives of any of these persons.
The Company also believes that its success depends upon its ability to hire
and retain highly qualified engineering and product development personnel.
Competition in the recruitment of qualified personnel in the information and
telecommunications services industry is highly intense. The inability of the
Company to identify, attract and retain such personnel may have a material
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adverse effect on the Company. No assurance can be given that the Company will
be able to retain its key employees or that it will be able to attract qualified
personnel in the future.
The Company, in an effort to dramatically reduce its overhead, drastically
reduced its numbers of key management, technical and operations employees in
1997. The positions that the Company eliminated are not crucial to the Company's
future success, but the Company will need to hire additional personnel in order
to carry out its current business plan. Competition for persons with the skills
and experience which the Company seeks is intensely competitive, and there are
no assurances that the Company can either attract or retain the qualified
personnel required to create and manage growth, nor can it assure that it will
generate revenues sufficient to offset the costs of attracting and retaining
such personnel.
DEPENDENCE ON CALL PROCESSING PLATFORM, DAMAGE, FAILURE AND DOWNTIME.
Delivery of the Company's services is dependent upon the uninterrupted service
of its call processing platform and other systems. The Company currently
maintains a single UNIX-based multi-tasking call-processing system integrated
with a Tandem database server located in Lincoln, Nebraska. See "-- Dependence
Upon Telecommunications Providers, Specifically MCI and Interact, Inc." below.
The Company has taken certain precautions to protect its systems from events
that could interrupt delivery of the Company's services including, damage that
may be caused by fire, power loss, technical failures, unauthorized intrusion,
natural disasters, sabotage and other similar events. These precautions include
physical security systems, an uninterruptible power supply and an on-site power
generator designed to be sufficient to continue operation of the Company's
network in the event of a power outage. The Company's network is further
designed such that the data on each network server is duplicated on a separate
network server. Notwithstanding such precautions, there can be no assurance that
a fire, act of sabotage, technical failure, natural disaster or a similar event
would not cause the failure of a network server and its backup server, other
portions of the Company's network, or the Lincoln facility as a whole, thereby
resulting in an outage of the Company's services. Such an outage could have a
material adverse effect on the Company.
While the Company has not experienced any downtime of its network due to
natural disasters or similar events, on occasion the Company has experienced
downtime due to various technical failures. When such failures have occurred,
the Company has worked to remedy the failure as soon as possible. The Company
believes that these technical failures have been infrequent and have not
resulted in any material downtime of the call processing platform since the
Company's inception. Although the Company maintains business interruption
insurance providing for aggregate coverage of approximately $25,000 per
occurrence, there can be no assurance that the Company will be able to maintain
its business interruption insurance, that such insurance would continue to be
available at reasonable prices, that such insurance would cover all such losses
or that such insurance would be sufficient to compensate the Company for losses
it experiences due to the Company's inability to provide services to its
subscribers.
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. The Company relies primarily
on a combination of copyright and trade secret laws and contractual
confidentiality provisions to protect its proprietary rights. These laws and
contractual provisions provide only limited protection of the Company's
proprietary rights. The Company has no patents or patent applications pending
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and has no registered trademarks or copyrights. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's software or services or to obtain and use information that the
Company regards as proprietary. Although the Company is not aware of any current
or previous infringement upon its proprietary rights, there can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
technology. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to as great an extent as the laws of the United
States. An inability of the Company to adequately protect its proprietary
technology or other assets could have a material adverse effect on its business
and results of operations.
RISKS OF INFRINGEMENT BY THE COMPANY. To date, no actions have been filed
against the Company with respect to either alleged patent or trademark
infringement claims. However, no assurance can be given that actions or claims
alleging trademark, patent or copyright infringement will not be brought against
the Company with respect to current or future products or services, or that, if
such actions are brought, the Company will ultimately prevail. Any such claiming
parties may have significantly greater resources than the Company to pursue
litigation of such claims. Any such claims, whether with or without merit, could
be time consuming, result in costly litigation, cause delays in introducing new
or improved services, require the Company to enter into royalty or licensing
agreements or cause the Company to discontinue use of the challenged tradename,
service mark or technology at potentially significant expense to the Company
associated with the marketing of a new name or the development or purchase of
replacement technology, any of which results could have a material adverse
effect on the Company.
DEPENDENCE UPON SOFTWARE. The software developed and utilized by the
Company in providing its services may contain undetected errors. Although the
Company engages in extensive testing of its software prior to introducing the
software onto its network, there can be no assurance that errors will not be
found in software after commencement of use of such software. Any such error may
result in partial or total failure of the Company's network, additional and
unexpected expenses to fund further product development or to add programming
personnel to complete a development project, and loss of revenue because of the
inability of subscribers to use the Company's network or the cancellation by
subscribers of their service with the Company, any of which could have a
material adverse effect on the Company.
DEPENDENCE UPON TELECOMMUNICATIONS PROVIDERS, SPECIFICALLY MCI AND
INTERACT, INC. The Company does not own a transmission network and, accordingly,
depends on MCI for transmission of its subscribers' long distance calls. For the
year ended August 31, 1998, MCI was responsible for carrying traffic
representing virtually all of the minutes of long distance transmissions billed
to the Company. Further, the Company is dependent upon LECs for call origination
and termination. If there is an outage affecting the Company's terminating
carriers, the Company's call processing platform may not complete a call. The
Company has not experienced significant losses in the past because of
interruptions of service at terminating carriers, but no assurance can be made
in this regard with respect to the future integrity of such carriers. The
Company's ability to maintain and expand its business depends, in part, on its
ability to continue to obtain telecommunications services on favorable terms
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from a long distance carrier and the cooperation of both interexchange and LECs
in originating and terminating service for its subscribers in a timely and
effective manner. A partial or total failure of the Company's ability to receive
or terminate calls would result in a loss of revenues by the Company and could
lead to a loss of subscribers, either of which could have a material adverse
effect on the Company.
The Company obtains virtually all of its long distance telecommunications
services pursuant to supply agreements with Interact, Inc. of Lincoln, Nebraska,
and, to a lesser extent, with MCI. No assurance can be given that the Company
will be able to obtain long distance services in the future at favorable prices
or at all, and the unavailability of long distance services to the Company, or a
material increase in the price at which the Company is able to obtain long
distance service, would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company is not
currently a party to a long distance telecommunications services agreement that
requires the Company to purchase a minimum amount of service each month.
However, the Company may in the future determine that it is desirable to enter
into agreements containing minimum purchase requirements. No assurance can be
given that demand for services in the areas covered by the Company's
transmission suppliers will exceed any minimum purchase requirement in the
future. To the extent the Company is unable to generate revenues sufficient to
offset minimum purchase requirements or other expenses, its financial condition
would be materially adversely affected.
POTENTIAL ADVERSE EFFECTS OF REGULATION. Various regulatory factors may
have an impact on the Company's ability to compete and on its financial
performance. The Company is subject to regulation by the FCC and by various
state public service and public utility commissions. Federal and state
regulations and regulatory trends have had, and may have in the future, both
positive and negative effects on the Company and on the information and
telecommunications service industries as a whole. FCC policy currently requires
interexchange carriers to provide resale of the use of their transmission
facilities. The FCC also requires LECs to provide all interexchange carriers
with equal access to the origination and termination of calls. If either or both
of these requirements were removed, the Company's access to these services could
be severely limited or available only on commercially unfavorable terms,
resulting in a material adverse impact to its business and results of
operations. These carriers may experience disruptions in service due to factors
outside the Company's control, which may cause the Company to lose the ability
to complete its subscribers' long distance calls.
The Company believes it has made all required filings with the FCC
necessary to allow the Company to provide interstate and international long
distance service. In order to provide intrastate long distance service, the
Company is required to obtain certification to provide telecommunications
services from the public service or public utility commissions of each state, or
to register or be found exempt from registration by such commissions. The
Company has not yet made any filings or taken any actions to become certified or
tariffed to provide intrastate card services to customers throughout the United
States. To date, the Company has not been denied any licenses or tariffs.
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 which will allow LECs, including the RBOCs, to
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provide inter-LATA long distance telephone service and which also grants the FCC
authority to deregulate other aspects of the telecommunications industry. To
date, such deregulation has resulted in significant amounts of industry
litigation, uncertainty and confusion. Such legislation may result in increased
competition for the Company from others, including RBOCs, and increased
transmission costs in the future. See "-- Competition" above. In conducting
various aspects of its business, the Company is subject to various laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code, and is also subject to the electronic funds transfer
regulations embodied in Regulation E promulgated by the Board of Governors of
the Federal Reserve System ("Federal Reserve"). Given the expansion of the
electronic commerce market, the Federal Reserve might revise Regulation E or
adopt new rules for electronic funds transfer affecting users other than
consumers. Congress has held hearings on whether to regulate providers of
services and transactions in the electronic commerce market, and it is possible
that Congress or individual states could enact laws regulating the electronic
commerce market. If enacted, such laws, rules and regulations could directly
regulate the Company's business and industry and could have a material adverse
effect on the Company's business, operating results and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION. A key component of the
Company's strategy is its planned expansion into international markets. The
Company intends to establish call processing platforms in Canada in 1999 and
potentially other countries thereafter. If international revenues are not
adjusted to offset the expense of establishing and maintaining these
international operations, the Company's business, operating results or financial
condition could be materially adversely affected. To date, the Company has only
limited experience in marketing and distributing its services internationally.
There can be no assurance that the Company will be able to successfully
establish the proposed international call processing platforms, or to market,
sell and deliver its services in these markets. In addition to the uncertainty
as to the Company's ability to expand its international presence, there are
certain difficulties and risks inherent in doing business on an international
level, such as burdensome regulatory requirements and unexpected changes in
these requirements, export restrictions, export controls relating to technology,
tariffs and other trade barriers, difficulties in staffing and managing
international operations, longer payment cycles, problems in collecting accounts
receivable, political instability, fluctuations in currency exchange rates,
seasonal reduction in business activity during the summer months in certain
parts of the world and potentially adverse tax consequences, any of which could
have a material adverse effect on the performance of the Company's international
operations. There can be no assurance that one or more of such factors will not
have a material adverse effect on the Company's future international operations
and, consequently, on the Company's business, operating results and financial
condition.
RISK OF LOSS FROM RETURNED TRANSACTIONS, FRAUD, BAD DEBT, THEFT OF
SERVICES. The Company utilizes Intrust Bank, N.A. financial payment clearance
systems for electronic fund transfers and ICVerify software for electronic
credit card settlement. In its use of these established payment clearance
systems, the Company generally bears the same credit risks normally assumed by
other users of these systems arising from returned transactions caused by
insufficient funds, stop payment orders, closed accounts, frozen accounts,
unauthorized use disputes, theft or fraud. From time to time, persons may be
able to gain unauthorized access to the Company's network and obtain services
without rendering payment to the Company by unlawfully utilizing the access
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numbers and personal identification numbers ("PINs") of authorized users.
Although to date the Company has not experienced material losses due to such
unauthorized use of access numbers and PINs, no assurance can be given that
future losses due to unauthorized use will not be material. The Company
currently seeks to manage these risks through its internal controls and
proprietary billing system. The Company's call processing platform prohibits a
single access number and PIN from establishing multiple simultaneous connections
to the network system, and the Company establishes preset spending limits for
each subscriber. The Company also maintains a reserve for such risks. Past
experience in estimating and establishing reserves and the Company's historical
losses are not necessarily accurate indications of the Company's future losses
or the adequacy of the reserves established by the Company in the future.
Although the Company believes that its risk management practices and bad debt
reserves are adequate, there can be no assurance that the Company's risk
management practices or reserves will be sufficient to protect the Company from
unauthorized or returned transactions or thefts of services which could have a
material adverse effect on the Company's business, operating results and
financial condition. Recently, a significant customer of the Company has become
seriously in arrears in its payment for international long distance services.
The Company is currently pursuing the recovery of the monies owed; however,
there can be no assurances that the Company will be successful nor that this
will be the only customer that defaults on monies owed to the Company.
POTENTIAL ACQUISITIONS. The Company may in the future pursue acquisitions
of complementary services, products, technologies or businesses. Future
acquisitions may result in potentially dilutive issuances of equity securities,
the incurrence of additional debt, the write-off of software development costs,
and the amortization of expenses related to goodwill and other intangible
assets, all of which could have a material adverse effect on the Company's
business, operating results and financial condition. Future acquisitions would
involve numerous additional risks, including those related to the assimilation
of the operations, services, products and personnel of the acquired company, the
diversion of management's attention from other business concerns, the entry into
markets in which the Company has little or no direct prior experience and the
potential loss of key employees of the acquired company. The Company currently
has no binding agreements or understandings with regard to any potential
acquisitions
NEED FOR ADDITIONAL FINANCING. The Company has significant cash
requirements in connection with its business. To date, the Company has been
unable to generate sufficient revenues to recover its costs. See "--Limited
Operating History" and "--Previous Losses" above. In addition to its working
capital requirements, the Company must fund the production and marketing of its
products prior to the time the products are made available for sale and generate
revenues. The Company's potential receipt of revenues from product sales are
subject to substantial contingencies, and there can be no assurances concerning
the timing and amount of future revenues from product sales. Additionally, the
Company may not receive payment from its customers until a period after products
are sold to end-users. The Company does not currently have any commitments to
provide financing and there can be no assurance that it will be able to obtain
such financing on favorable terms when needed.
The Company may be required to seek additional financing in the event of
delays, cost overruns or unanticipated expenses associated with a company in an
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early stage of development, or in the event the Company does not realize
anticipated revenues. In addition, the Company may require additional financing
in the future to further expand its product offerings or to make strategic
acquisitions. There can be no assurance that such additional financing will be
available, or that, if available, such financing will be obtainable on terms
favorable to the Company or its Stockholders. The Company currently has no
commitment for any such financing and in the event such necessary financing is
not obtained, the Company's operations will be materially adversely affected and
the Company will have to cease or substantially reduce operations. Any
additional equity financings may be dilutive to stockholders, and debt
financings, if available, may involve restrictive covenants, including limiting
the Company's ability to incur additional debt.
The Company has received a "going concern" notice from its independent
auditors questioning the Company's ability to maintain its solvency without a
dramatic change in its current fiscal outlook, such as a substantial cash
infusion, the recording of profits or a merger with a more financially stable
organization, which may be required in order to ensure the Company's survival.
There can be no assurance that the Company will be successful in improving its
financial condition, and to the extent it is unsuccessful it may become
insolvent, forcing it to suspend or even cease its operations. See "--Potential
Inability to Continue as a Going Concern" above.
NASDAQ LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock is
currently listed on the Nasdaq SmallCap Market ("Nasdaq"). Under the rules for
continued inclusion in the Nasdaq system, the Company is required to maintain at
least $2,000,000 in net tangible assets or $35,000,000 in market capitalization,
two market-makers, a public float of at least 500,000 shares and a minimum bid
price of $1.00 per share, as well as satisfy certain corporate governance
criteria. The Company's failure to meet one or more of the financial or
corporate governance criteria to which it is subject could result in its Common
Stock being delisted from Nasdaq. Upon notice of a deficiency in one or more of
the Nasdaq listing and maintenance requirements, the Company would be given a
period of between 10 to 90 days (depending upon the criteria) to comply with the
maintenance standards. See " -- Risk of Delisting" above.
RISK OF LOW-PRICED STOCK. If the Company's securities were delisted from
Nasdaq (See "--Risk of Delisting" above), they could become subject to Rule
15g-9 under the Exchange Act, which imposes additional sales practice
requirements on broker-dealers which sell such securities to persons other than
established customers and "accredited investors" (generally, individuals with
net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or
$300,000 together with their spouses). For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, such rule may adversely affect the ability of broker-dealers
to sell the Company's securities and may adversely affect the ability of the
Company's stockholders to make resales of the Common Stock.
PENNY STOCK REGULATIONS. The Commission adopted regulations which generally
define a "penny stock" to be any non-Nasdaq equity security that has a market
price (as therein defined) of less than $5.00 per share or with an exercise
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price of less than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any such transaction, of a disclosure schedule prepared by the SEC
relating to the penny stock market. Disclosure is also required to be made about
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or meet
certain minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, the Company would remain subject to Section 15(b)(6) of the
Exchange Act, which gives the SEC the authority to prohibit any person that is
engaged in unlawful conduct while participating in a distribution of a penny
stock from associating with a broker-dealer or participating in a distribution
of a penny stock, if the SEC finds that such a restriction would be in the
public interest.
If the Company's securities were subject to the existing or proposed rules
on penny stocks, the market liquidity for the Company's securities could be
severely adversely affected.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities will be received
directly by the Selling Shareholders. No proceeds will be received by the
Company from the sale of the Offered Securities, although the Company will
receive up to an aggregate of $318,250.00 of gross proceeds upon exercise of
outstanding warrants to purchase 265,000 shares of Common Stock, all of which
are included in the Offered Securities. The Company intends to use such
proceeds, if any, for its general corporate purposes.
DETERMINATION OF OFFERING PRICE
This Prospectus may be used from time to time by the Selling Shareholders
to sell the Offered Securities. The offering price of such Common Stock will be
determined by the Selling Shareholders and such sales may be made or in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions.
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SELLING SHAREHOLDERS
The following table provides certain information with respect to the Common
Stock beneficially owned by each Selling Shareholder as of August 31, 1998.
Except as set forth below, none of such Selling Shareholders has had a material
relationship with the Company other than as a result of ownership of the
securities of the Company. The Offered Securities may be offered from time to
time by the Selling Shareholders named below or their nominees, and this
Prospectus may be required to be delivered by persons who may be deemed to be
underwriters in connection with the offer or sale of such securities. Because
(i) the Selling Shareholders may offer all or some of the Offered Securities
held by them pursuant to offerings contemplated by this Prospectus, (ii) the
Offered Securities are not necessarily being underwritten on a firm commitment
basis and (iii) the Selling Shareholders may purchase additional shares of
Common Stock or Common Stock equivalents from time to time, the Company cannot
accurately estimate the amount of shares of Common Stock to be held by the
Selling Shareholders after completion of the offerings contemplated by this
Prospectus. The following table assumes that each Selling Shareholder will sell
all Offered Securities, which may not be the case.
[THE REST OF THIS PAGE LEFT BLANK INTENTIONALLY]
22
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering Number of After the Offering
------------------------- Shares -------------------------
Percent of Offered Percent of
Total Shares --------- Total Shares
Name Number Outstanding Number Outstanding
- ---- ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
Pro Futures Special Equities Fund,
L.P. ................................ 2,750,000(1) 13.9% 2,750,000(1) 0 0%
Berkshire International ............... 150,000(2) * 150,000(2) 0 0%
Mike Abraham .......................... 31,329 * 31,329 0 0%
John J. and Diane Banks ............... 10,000 * 10,000 0 0%
Diane Banks ........................... 7,832 * 7,832 0 0%
William Dale .......................... 148,812 * 148,812 0 0%
Mildred Geiss ......................... 62,657 * 62,657 0 0%
Michael Jay Green ..................... 7,832 * 7,832 0 0%
David Spring .......................... 7,832 * 7,832 0 0%
Morgan E. North ....................... 78,322 * 78,322 0 0%
Paul E. Ruecker ....................... 10,000 * 10,000 0 0%
Herman O. Haenert ..................... 15,664 * 15,664 0 0%
Gerald Quinn .......................... 1,337,230(3) 7.5% 333,593 1,003,637(3) 5.6%
Robert Caylor ......................... 175,714(4) 1% 175,714(4) 0 0%
Frances and Barbara Prevedello ........ 309,238(5) 1.8% 309,238(5) 0 0%
Maureen Pocock ........................ 215,667(6) 1.3% 215,667(6) 0 0%
Andrew Pocock ......................... 92,429(7) * 92,429(7) 0 0%
CTC,Inc ............................... 30,000(8) * 30,000(8) 0 0%
Vikram Grover ......................... 20,000(9) * 20,000(9) 0 0%
--------- ---------
Total 4,456,921 4,456,921
</TABLE>
- -----------------
* Less than 1%
(1) Represents aggregate number of common shares reserved for issuance to the
Selling Shareholder upon exercise of convertible preferred shares. Actual
number of common shares to be offered by the Selling Shareholder upon
conversion will be determined in accordance with the Certificate of
Designation.
(2) All of these shares are issuable to the Selling Shareholder upon exercise
of outstanding Warrants, at a price of $1.75 per share.
(3) Includes 800,000 shares issuable upon exercise of outstanding options.
(4) Includes 25,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.44 per share.
(5) Includes 20,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.46 per share.
(6) Includes 14,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.46 per share.
(7) Includes 6,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.46 per share.
(8) Includes 30,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.625 per share.
(9) Includes 20,000 shares issuable to the Selling Shareholder upon exercise of
outstanding Warrants, at a price of $0.38 per share.
23
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time by the Selling
Shareholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made in the over-the-counter market, in negotiated
transactions, a combination of such methods of sale, or otherwise. The Offered
Securities may be sold by one or more of the following: (a) a block trade in
which the broker-dealer so engaged will attempt to sell the Offered Securities
as agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its account pursuant to this Prospectus; (c) an
exchange distribution in accordance with the rules of such exchange; and (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, broker-dealers engaged by the Selling
Shareholders may arrange for other broker-dealers to participate in the resales.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
In connection with distributions of the Offered Securities or otherwise,
the Selling Shareholders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may engage
in short sales of the Offered Securities in the course of hedging the positions
they assume with Selling Shareholders. The Selling Shareholders may also sell
Offered Securities short and redeliver the Offered Securities to close out such
short positions. The Selling Shareholders may also enter into option or other
transactions with broker-dealers which require the delivery to the broker-dealer
of the Offered Securities, which the broker-dealer may resell or otherwise
transfer pursuant to this Prospectus. The Selling Shareholders may also loan or
pledge Offered Securities to a broker-dealer and the broker-dealer may sell the
Offered Securities so loaned or, upon a default, the broker-dealer may effect
sales of the pledged Offered Securities pursuant to this Prospectus.
Selling Shareholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents for
the Selling Shareholders or to broker-dealers who may purchase securities as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or a combination of such
methods of sale. Such broker-dealers, if any, may receive compensation in the
form of discounts, concessions or commissions from the Selling Shareholders
and/or the purchasers for whom such broker-dealers act as agents or to whom they
may sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions). In addition, any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus.
Under the applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Shareholders' Warrants may not
simultaneously engage in market-making activities with respect to any securities
of the Company for a period of up to five business days prior to the
commencement of such distribution. In addition, each Selling Shareholders
desiring to sell Warrants will be subject to the applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
24
<PAGE>
limitation, Regulation M, which provisions may limit the timing of the purchases
and sales of shares of the Company's securities by such Selling Shareholders.
The Selling Shareholders and broker-dealers, if any, acting in connection
with such sales might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commission received by them and any
profit on the resale of the securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
All costs, expenses and fees in connection with the registration of the
shares will be borne by the Company. Commissions and discounts, if any,
attributable to the sales of the Offered Securities will be borne by the Selling
Shareholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Company and the Selling
Shareholders have agreed to indemnify each other, and certain additional persons
including broker-dealers or agents, against certain liabilities in connection
with the offering of the Offered Securities, including liabilities arising under
the Securities Act. Additionally, the Company has adopted provisions in its
Articles of Incorporation and Bylaws that eliminate, to the fullest extent
available under Nevada law, the personal liability of its officers and directors
to the Company or its stockholders, including liabilities under the Securities
Act. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
EXPERTS
The financial statements of the Company as of August 31, 1997, and for each
of the years in the three-year period ended August 31, 1997, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of Addison, Roberts & Ludwig, P.C., independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for the
Company by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona.
25
<PAGE>
====================================== ======================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR ANY
RELATED PROSPECTUS SUPPLEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER WAVETECH INTERNATIONAL, INC.
THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS AND RELATED PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY RELATED
PROSPECTUS SUPPLEMENT NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------- ---------------------------
PROSPECTUS
---------------------------
TABLE OF CONTENTS
Page
Available Information............. 2
Incorporation of Certain
Documents by Reference.......... 3 4,456,921 Shares
Prospectus Summary................ 4 of Common Stock
Risk Factors...................... 9
Use of Proceeds................... 22
Determination of Offering Price... 22
Selling Shareholders.............. 23
Plan of Distribution.............. 25
Experts........................... 26
Legal Matters..................... 26
Material Changes ................. 26
====================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting compensation, are as
follows:
SEC registration fee........................................$ 328.70
Legal fees and disbursements................................$ 2,500.00
Accounting fees and disbursements...........................$ 2,500.00
Blue Sky fees and expenses..................................$ 0.00
Transfer Agent Fees.........................................$ 250.00
Miscellaneous...............................................$ 422.30
----------
Total..................................................$ 6,000.00
The foregoing expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XV of the Company's Bylaws, provides as follows: The corporation
shall indemnify each of its directors and officers who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he is or was a director or officer of the Company or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Except as provided herein below, any such indemnification shall be made by
the Company only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth above. Such
determination shall be made: (a) by the Board of Directors by a majority vote of
a quorum of directors who were or are not parties to such action, suit or
proceeding, or (b) by the shareholders.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
II-1
<PAGE>
final disposition of such action or proceeding, if authorized by the Board of
Directors and upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Company.
To the extent that a director or officer has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to above, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees ) actually and reasonably incurred
by him in connection therewith, without any further determination that he has
met the applicable standard of conduct set forth above.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 16. EXHIBITS.
Number Description Method of Filing
------ ----------- ----------------
5 Opinion of Squire, Sanders & Dempsey L.L.P. *
23 Consent of Addison, Roberts & Ludwig, P.C. *
24 Power of Attorney See Signature Page
- -----------------
* Filed herewith
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities 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
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in the volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(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 paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities 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.
(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.
(4) In the event that a claim for indemnification against liabilities
arising under the Securities Act (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
II-3
<PAGE>
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 is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company, the Company has been informed that in the
opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
(5) That, for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the
registration statement relating to the securities offered hereby, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Wavetech
International, Inc. 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 to
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tucson and State of
Arizona on September 30, 1998.
WAVETECH INTERNATIONAL, INC.
a Nevada corporation
By /s/ Gerald I. Quinn
-------------------------------------
Gerald I. Quinn
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints Gerald I. Quinn and Lydia M. Montoya, and each 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 Form S-3 Registration Statement and to file the same with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting such 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 and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or each of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this report on
Form S-3 Registration Statement has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dated indicated:
Signature Title Date
- --------- ----- ----
/s/ Gerald I. Quinn President, Chief Executive September 30, 1998
- --------------------------- Officer and Director
Gerald I. Quinn (Principal Executive
Officer)
/s/ Lydia M. Montoya Chief Financial Officer September 30, 1998
- --------------------------- (Principal Financial and
Lydia M. Montoya Accounting Officer)
S-1
<PAGE>
/s/ Richard P. Freeman Director September 30, 1998
- ---------------------------
Richard P. Freeman
/s/ John P. Clements Director September 30, 1998
- ---------------------------
John P. Clements
S-2
SQUIRE, SANDERS & DEMPSEY
L.L.P.
Counsellors at Law
Two Renaissance Squire
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Telephone (602) 528-4000
Telecopier (602) 253-8129
September 30, 1998
VIA EDGAR
U.S. Shares and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
RE: Wavetech International, Inc.
Dear Ladies and Gentlemen:
This firm is counsel for Wavetech International, Inc., a Nevada corporation
(the "Company"). As such, we are familiar with the Articles of Incorporation, as
amended, and Bylaws of the Company, as well as resolutions adopted by its Board
of Directors authorizing the issuance and sale of an aggregate of 4,456,921
shares of the Company's $.001 par value Common Stock (collectively, the
"Shares"), currently outstanding or issuable upon exercise of outstanding
warrants and conversion of 600 shares of the Company's Series A Preferred Stock
(such warrants and Preferred Stock referred to as the "Convertible Securities"),
which are the subject of a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended. We have acted as
counsel for the Company with respect to certain matters in connection with the
registration for resale of the Shares and in preparation of the required filings
with the Securities and Exchange Commission. In addition, we have examined such
documents and undertaken such further inquiry as we consider necessary for
rendering the opinions hereinafter set forth below:
Based upon the foregoing, it is our opinion that the Shares, are, or will
be upon issuance in accordance with the respective terms of the Convertible
Securities, validly issued, fully paid and nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" in
the Prospectus , which is part of the Registration Statement, and we hereby
consent to the use of our name in such Registration Statement. We further
<PAGE>
U.S. Shares and Exchange Commission September 30, 1998
Page 2
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and with the state regulatory agencies in such states as may require
such filing in connection with the registration of the Shares for offer and Sale
in such states.
Respectfully Submitted,
/s/ Squire, Sanders & Dempsey L.L.P.
SQUIRE, SANDERS & DEMPSEY L.L.P.
Copy: Gerald I. Quinn
Lydia Montoya
Christopher D. Johnson, Esq.
EXHIBIT 23
[LETTERHEAD OF ADDISON, ROBERTS & LUDWIG, P.C.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated August 31, 1998, which appears in the
annual report on Form 10-KSB, as amended, of Wavetech International, Inc. for
the year ended August 31, 1997.
/s/ Addison, Roberts & Ludwig, P.C.
-----------------------------------
Addison, Roberts & Ludwig, P.C.
Tucson, Arizona
September 29, 1998
