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As filed with the Securities and Exchange Commission on January 15, 1999.
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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I-LINK INCORPORATED
(Exact name of registrant as specified in its charter)
(formerly Medcross, Inc.)
FLORIDA 59-2291344
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13751 S. WADSWORTH PARK DRIVE, SUITE 200, DRAPER, UT 84020
TELEPHONE (801) 576-5000, FACSIMILE (801) 576-4295
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
JOHN W. EDWARDS, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
I-LINK INCORPORATED
13751 S. WADSWORTH PARK DRIVE, SUITE 200, DRAPER, UT 84020
(801) 576-5000, FACSIMILE (801) 576-4295
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
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Ralph V. De Martino, Esquire David Hardy, Esquire
De Martino Finkelstein Rosen & Virga Hardy & Allen
1818 N Street, N.W., Suite 400 60 East South Temple, Suite 2200
Washington, DC 20036-2492 Salt Lake City, UT 84111
Phone (202) 659-0494, Facsimile (202) 659-1290 Phone (801) 364-6660, Facsimile (801) 364-6664
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
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,
check the following box. [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to item 11(a)(1) of
this Form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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Rights to purchase Series N Preferred Stock 20,000 --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Series N Preferred Stock 20,000 $1,000.00 $20,000,000 $5,900.00
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Total $5,900.00
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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 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE> 2
PROSPECTUS
20,000 SHARES OF SERIES N PREFERRED STOCK
[Logo of I-LINK INCORPORATED]
We are offering subscription rights to purchase an aggregate of 1,000
shares of Series N Convertible Preferred Stock ("Series N Stock" or "Series N
Shares") to the holders of our common and preferred stock. You will receive one
subscription right for each 1,491 shares of our common stock held, as common
stock or as preferred stock on an as-converted basis, as of the close of
business on [record date], 1999 (the "Record Date"). No fractional subscription
rights will be issued. Each subscription right entitles you to purchase one
share of Series N Stock.
BASIC TERMS OF THE SERIES N STOCK
- Will be paid dividends on an as-converted basis equal to the common stock
- Votes with the common stock on an as-converted basis
- Is senior to all other preferred common stock of I-Link, except that the
Series N Stock will in all rights be equal to the already outstanding
Series F Stock
- Is convertible into I-Link common stock at any time
- Has a conversion price of $[____], adjustable downward to as low as $1.25
per share
Our common stock is listed on the Nasdaq SmallCap Market ("Nasdaq") under
the symbol "ILNK." On January 12, 1999 the closing sale price of the common
stock as reported by Nasdaq was $2.7188.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND DILUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is [_____________], 1999
<PAGE> 3
AVAILABLE INFORMATION
I-Link is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith, files reports, proxy statements and other information (the "Exchange
Act Filings") with the Securities and Exchange Commission (the "Commission").
I-Link's Exchange Act Filings may be inspected and copied at the public
reference facilities of the Commission located at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549; and at the Commission's regional
offices at Citicorp Center, 500 West Madison Street, Room 1400, Chicago, IL
60661, and at 7 World Trade Center, 13th Floor, New York, NY 10048. Copies of
such material may also be obtained upon request and payment of the appropriate
fee from the Public Reference Section of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549.
I-Link has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-2 (together with any amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Rights and the Series N Shares issuable upon the exercise of
the Rights. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information about I-Link and the
securities described herein, reference is made to the Registration Statement and
to the exhibits filed therewith. The statements contained in this Prospectus
with respect to the contents of any agreement or other document referred to
herein are not necessarily complete and, in each instance, reference is made to
a copy of such agreement or document as filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by reference to
the provisions of the relevant documents. The Registration Statement, including
the exhibits thereto, can be copied or inspected as set forth in the preceding
paragraph. In addition, the Commission maintains a website on the Internet that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's website is www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
There is hereby incorporated in this Prospectus by reference I-Link's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, I-Link's
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998 and I-Link's Current Report on Form 8-K
filed on December 18, 1998, all heretofore filed with the Commission pursuant to
the Exchange Act, to which reference is hereby made.
All documents filed by I-Link pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the securities offered hereby, shall be deemed to
be incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents.
I-Link will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of any
information which has been incorporated by reference herein (not including
exhibits to the information incorporated by reference unless the exhibits are
themselves specifically incorporated by reference). Such requests should be made
to I-Link Incorporated, 13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah
84020, Attention: Corporate Secretary.
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
Prospectus. It is not complete and may not contain all of the information that
you should consider before investing in the Series N Stock. It should be read in
conjunction with the more detailed information and financial statements and
notes appearing elsewhere in this Prospectus. Each prospective investor is urged
to read this Prospectus carefully, and in its entirety.
Certain statements included in this Prospectus under the heading "Risk
Factors," in addition to certain statements contained elsewhere in this
Prospectus or incorporated herein by reference, that are not statements of fact
are "forward-looking statements" within the meaning of the private Securities
Litigation Reform Act of 1995, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from future results expressed or
implied by any forward-looking statements. Such forward-looking statements can
be identified by the use of forward-looking terminology such as "may," "will,"
"should," "expect," "intend," "estimate" or "continue" or the negative thereof
or comparable terminology. The matters set forth under the caption "Risk
Factors" in the Prospectus constitute cautionary statements identifying
important factors with respect to such forward-looking statements. Undue
reliance should not be placed on these forward-looking statements, which speak
only as of the date of this Prospectus, and I-Link undertakes no obligation to
update these forward-looking statements.
GENERAL
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I-Link................... I-Link Incorporated (formerly Medcross, Inc.),
incorporated in the State of Florida in 1983,
acquired I-Link Communications ("ILC"), an
FCC-licensed long distance carrier, in January 1997.
As a result of this merger we initiated
telecommunications services activities, which
principally consist of the use of our private
intranet and network switching and transmission
facilities to develop, sell and deliver enhanced
communications products and services.
In 1997, we launched a network marketing program for
our products and services through a subsidiary
company, I-Link Worldwide, L.L.C. We acquired
MiBridge, Inc. ("MiBridge") in August 1997 and in
the first quarter of 1998 formed the subsidiary
ViaNet Technologies, Ltd. ("ViaNet") (headquartered
in Ramat Hasharon, Israel) to advance our research
and development capabilities. We employ proprietary
technology acquired and developed by our
subsidiaries I-Link Systems, Inc., ViaNet and
MiBridge to provide unique communications solutions.
We market our telecommunications services primarily
through independent representatives to residential
and small business subscribers throughout the United
States. Our telecommunication services operations
began primarily with the acquisition of ILC.
Our corporate offices are located at 13751 S.
Wadsworth Park Drive, Suite 200, Draper, Utah 84020;
telephone (801) 576-5000.
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THE RIGHTS OFFERING
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Rights................... You will receive one subscription right (a "Right")
for each 1,491 shares of common stock you hold of
record and one Right for each 1,491 shares of common
stock that your preferred stock is convertible into,
on an as-converted basis (including accrued and
unpaid dividends) as of the Record Date. The number
of rights distributed by I-Link to each holder of
common and preferred stock will be rounded [up/down]
to the nearest whole number. [In effect, this means
that if you have fewer than 1,491 shares of common
stock you will receive no Rights.] The distribution
of the Rights and the issuance of Series N Stock
upon the exercise of the Rights or pursuant to the
Oversubscription Privilege are referred to as the
"Rights Offering." See "The Rights Offering - The
Rights and Subscription Privileges."
Record Date.............. [record date], 1999.
Expiration Date.......... [expiration date], 1999, 5:00 p.m., New York City
local time (the "Expiration Date").
Nontransferability of
Rights................... The Rights will not be transferable.
Basic Subscription You will be entitled to purchase one share of
Privilege................ Series N Stock for each of your Rights (the "Basic
Subscription Privilege.")
Oversubscription If you do not purchase any or all of the Series N
Privilege................ Stock that you are entitled to pursuant to your
Basic Subscription Privilege, Winter Harbor may
choose to subscribe, at the Subscription Price, for
any shares of Series N Stock you or others hold
Rights to, but do not purchase (the
"Oversubscription Privilege"). See "The Rights
Offering - Subscription Privileges -
Oversubscription Privilege."
Subscription Price....... $1,000 per share of Series N Stock pursuant to the
Basic Subscription Privilege or the Oversubscription
Privilege. See "The Rights Offering - Determination
of Subscription Price."
Procedure for Exercising To exercise your Rights, you should complete the
Rights................... subscription certificate and forward it, along with
payment of the Subscription Price for the number of
Series N Shares you would like to purchase, to the
Rights Agent for receipt on or prior to the
Expiration Date. If you plan to mail the
Subscription Certificate, we recommend that you use
insured, registered mail. See "The Rights Offering -
Exercise of Rights."
No Revocation............ YOU MAY NOT REVOKE YOUR SUBSCRIPTION AFTER THE
RIGHTS AGENT RECEIVES YOUR SUBSCRIPTION CERTIFICATE.
SEE "THE RIGHTS OFFERING - NO REVOCATION."
Amendments and We reserve the right to amend the terms and
Termination ............. conditions of the Rights Offering.
We may terminate the Rights Offering at any time
prior to delivery of the Series N Shares. See "The
Rights Offering - Amendments and Termination."
Persons Holding Shares, If you hold shares of common or preferred stock
or Wishing to Exercise through a broker, dealer, commercial bank, trust
Rights Through Others.... company or other nominee and would prefer to have
those institutions act on your behalf with respect
to the Rights, you should contact the appropriate
institution or nominee and inform them of your
wishes. See "The Rights Offering - Exercise of
Rights."
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Rights Agent............. American Stock Transfer & Trust Company. See "The
Rights Offering - Rights Agent."
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TERMS OF THE SERIES N STOCK
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Conversion............... The Series N Stock may be converted into common
stock at the option of the holder. The rate of
conversion is determined by dividing $1,000 by the
Series N Conversion Price. The Series N Conversion
Price is set at $[____], but may be reduced under
certain circumstances, including when other
securities are issued or sold by I-Link for a price
lower than $[____], or when there is a stock split,
reverse stock split or stock dividend, or if there
were to be a merger or reorganization of I-Link. In
those cases, the Series N Conversion Price would be
adjusted to the lowest price calculated by any of
these methods:
- 110% of the average trading price of I-Link's
common stock for any 20 day period
- any price at which common stock or common stock
equivalents are issued (whether by conversion,
exercise or otherwise and whether or not they
were outstanding on November 23, 1998) and
- the exercise price or conversion rate of any new
options, warrants, preferred stock or other
convertible security that we issue after
November 23, 1998.
The conversion price will never be reduced below
$1.25 per share. The lower the conversion price, the
more shares of common stock each holder of the
Series N Stock will receive upon conversion.
Dividends................ The Series N Stock will be entitled to receive
dividends on an as-converted basis equal to the
common stock, if dividends are paid on common stock.
Subordination............ If I-Link were to be liquidated, the Series N Stock
would be senior to all other series of preferred
stock or common stock, except that it will be equal
to the already outstanding Series F Stock.
Voting................... The Series N Stock will vote along with the common
stock, on an as-converted basis, on all matters
which are submitted to a vote of the stockholders.
There could be exceptions to this rule, as provided
by law or by I-Link's articles of incorporation or
by-laws.
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OTHER INFORMATION
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Use of Proceeds.......... Approximately $3,322,000 of the proceeds will be
used to repay debt I-Link owes to Winter Harbor,
since Series N Shares purchased by Winter Harbor
under its Basic Subscription Privilege will be paid
for by canceling the appropriate amount of
outstanding debt. If Winter Harbor exercises its
Oversubscription Privilege, it will pay cash. All
cash proceeds from the Rights Offering will be
applied to working capital purposes. For more
information about the uses of the proceeds and the
debt that I-Link owes to Winter Harbor, see "Use Of
Proceeds."
Agreement Between I-Link Winter Harbor is obligated to exercise its Basic
and Winter Harbor as to Subscription Privilege, which means it will purchase
Subscription Privileges.. approximately 3,322 Series N Shares. When it does
that, the amount of the Bridge Loan that I-Link owes
to Winter Harbor will be reduced by $3,322,000. In
addition, Winter Harbor may, if it chooses, purchase
any Series N Shares which are not subscribed for by
others, by exercising its Oversubscription
Privilege. Additional Series N Shares purchased by
Winter Harbor under the Oversubscription Privilege
will be paid for in cash.
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Risk Factors............. For a discussion of the high degree of risk involved
in investing in the Series N Shares, see "Risk
Factors."
</TABLE>
SELECTED FINANCIAL INFORMATION
The following selected financial information is not complete and should
be read together with the detailed information and financial statements,
including the notes thereto, incorporated herein by reference. The information
at September 30, 1997 and 1998 and for the nine month periods ended September
30, 1997 and 1998 is derived from unaudited financial information, but, in the
opinion of management, reflects all adjustments (which consist only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations at such dates and for the periods then ended.
The financial position and results of operations at September 30, 1998 and for
the nine months ended September 30, 1998 may not be indicative of such financial
data for the entire fiscal year.
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Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
---------------------------------------------------- -------------------
(in thousands, except for per share data and other operating data)
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Statement of Operations Data:
Revenues:
Telecommunications Services..... - - $ - $ - $11,081 7,120 13,937
Marketing Services.............. - - - - 2,637 1,623 3,634
Other........................... - - - 170 347 140 987
--------------------------------------------------------------------------
Total revenues................ - - - 170 14,065 8,883 18,558
Loss from continuing operations... - - - (22,164) (28,668) 18,651 21,116
Basic and diluted net loss from
continuing operations............ - - (0.07) (6.40) (10.07) (1.79) (1.87)
<CAPTION>
Year Ended December 31, As of September 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
---------------------------------------------------- -------------------
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Balance Sheet Data:
Working capital................... $ - $ - $ - $ 1,306 $(2,955) 4,313 8,983
Property and Equipment............ - - - 1,576 3,552 4,524 5,913
Net assets of discontinued
operations....................... 3,148 2,461 2,125 1,668 595 595 -
Total assets...................... 3,148 2,461 2,125 9,865 24,253 24,253 25,880
Long term obligations............. 525 525 670 237 1,922 1,854 -
Shareholders' equity (deficit).... 2,623 1,936 1,455 6,299 12,549 11,995 (1,974)
</TABLE>
In January 1997 with the acquisition of I-Link Communications (formerly
Family Telecommunications, Inc.), an FCC-licensed long distance carrier, we
began our I-Link telecommunications services operations. Also, on March 23,
1998, our Board of Directors approved a plan to discontinue the operations of
our Medical Imaging Division. The net assets from the Medical Imaging Division
are presented separately in the above table.
RISK FACTORS
THE SECURITIES DESCRIBED HEREIN ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. YOU SHOULD ONLY PURCHASE THESE SECURITIES IF YOU CAN AFFORD TO
LOSE YOUR ENTIRE INVESTMENT. THEREFORE, PRIOR TO PURCHASE, YOU SHOULD CONSIDER
VERY
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CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF THE OTHER INFORMATION
SET FORTH ELSEWHERE IN THIS PROSPECTUS.
OPERATIONAL RISKS
ONGOING CAPITAL REQUIREMENTS; NEED TO RAISE ADDITIONAL FINANCING
I-Link's operations and the continued implementation of its business
plans will continue to require the availability of substantial amounts of
capital. While I-Link currently has no material commitments for capital or other
expenditures, other than as set forth in this Prospectus, it is I-Link's
intention to continue to implement the growth of our business and expand our
operations. We anticipate that revenues generated in 1999 from our continuing
operations will not be sufficient to fund our ongoing operations, including the
continued expansion of our private telecommunications network facilities and
anticipated growth in our subscriber base. To provide a portion of the required
capital, I-Link has entered into three financing arrangements as follows: (1)
during the first six months of 1998, I-Link obtained an aggregate of $7,768,000
in debt financing from Winter Harbor, L.L.C. ("Winter Harbor"); (2) in July
1998, I-Link entered into an agreement with JNC Opportunity Fund Ltd. ("JNC")
for the sale of a new series of preferred stock in consideration of $10,000,000
(net proceeds received of $9,470,000); and (3) in November 1998, I-Link reached
an agreement with Winter Harbor for a three-part-financing plan for: (a) bridge
loans of up to $8,000,000; (b) a standby letter of credit of up to $3,000,000;
and (c) this Rights Offering. Beyond these arrangements, additional funds will
be necessary from public or private financing markets to fund continued
operations, to successfully integrate and finance the planned expansion of our
business communications services, and to discharge our financial obligations.
RELIANCE ON KEY PERSONNEL
Our operations and prospects depend in large part on the continued
efforts and employment of our senior management. Our officers are primarily
responsible for I-Link's management and make recommendations to the Board of
Directors which exercises final authority over business decisions. While I-Link
has entered into employment agreements with senior management, the loss of the
services of any of the officers or directors could be detrimental to I-Link, as
there is no assurance that we would be able to secure adequate replacements for
these individuals.
Furthermore, the future performance of I-Link and its subsidiaries ILC,
ViaNet and MiBridge depends in significant part on their ability to attract and
retain key technical, systems and sales personnel, most of whom are not bound by
an employment agreement. Competition for such personnel is intense and there can
be no assurance that I-Link will be able to retain its key technical, systems
and sales personnel or that it will be able to attract highly qualified
personnel in the future.
FAILURE TO MEET SPRINT MINIMUM PURCHASE REQUIREMENTS; CONTINGENT LIABILITIES
In December 1997 I-Link signed a two-year negotiated contract with Sprint
Communications Company for the supply of inbound and outbound telephone services
with volume discounts in return for monthly minimum purchase requirements of up
to $1,200,000 per month. In November 1998 we amended the agreement with Sprint
to extend it for an additional six months (through May 2000), and to provide for
smaller monthly minimum purchase requirements (reduced to $550,000 per month
from now through the end of the agreement term). Our failure to achieve the
minimum usage obligations will require that we make payments to Sprint to make
up the difference.
NEW AND UNCERTAIN BUSINESS
As a new business we are vulnerable to the risks associated with early
stage companies, including but not limited to limited infrastructure, managerial
resources, capitalization and market share. There can be no assurance that we
will be able to successfully compete with larger, more mature, better
capitalized enterprises.
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In order to realize subscriber growth, I-Link must be able to replace
terminating subscribers and attract additional subscribers. However, the sales
and marketing expenses and other costs associated with attracting new
subscribers are substantial. Accordingly, our ability to improve operating
margins will depend in part on the ability to retain subscribers. We plan to
invest significant resources in the telecommunications infrastructure, customer
support resources, sales and marketing expenses and subscriber acquisition
costs. There can be no assurance that our future efforts in this area will
improve subscriber retention. Since the market for our services is new and the
utility of available services is not well understood by new and potential
subscribers, it is not possible to predict future subscriber retention rates.
GROWTH STRATEGY AND ACQUISITION ACTIVITIES
Our ability to achieve planned levels of growth and the timing of that
growth will be materially impacted by our ability to acquire business
communication companies and related businesses. I-Link intends to acquire such
additional companies with cash and equity securities such as common stock or
preferred stock, and/or debt instruments. To the extent that I-Link issues
equity securities in connection with acquisitions, the equity interest of our
current stockholders will be diluted. There can be no assurance, however, of our
ability to acquire such additional companies, to use our securities in
connection with such purchases, or to access the necessary capital resources to
purchase such companies. Although we believe that our acquisition strategy will
make it attractive to acquisition candidates, there can be no assurance that the
acquisition program will be successfully implemented.
POTENTIAL LIABILITY IN CONNECTION WITH ACQUISITIONS
I-Link could become subject to liabilities arising from any acquisition
which it has effected or may hereafter effect, if I-Link assumes unknown or
contingent liabilities, or if such liabilities are imposed on I-Link under
theories of successor liability. Any such liability could have a material
adverse effect on our financial condition and results of our operations.
NETWORK MARKETING SALES PROGRAM
We have targeted all residential and small-business telecommunications
users through the establishment of a network marketing sales program, providing
individuals the opportunity to earn commissions on the sale of I-Link products.
We formally launched our network marketing sales program in June 1997. A
significant portion of I-Link's current subscriber base was recruited through
the network marketing sales program and future subscription growth depends in
part on continued exploitation of this sales channel.
CERTAIN RELATED PARTY TRANSACTIONS
During the first and second quarters of 1998 I-Link obtained an aggregate
of $7,768,000 in interim debt financing from Winter Harbor. As consideration for
Winter Harbor's commitment to make the loan, I-Link agreed to issue 6,740,000
warrants to purchase I-Link common stock at exercise prices ranging from $5.50
to $7.20. The warrants have exercise periods of 7.5 years from issuance. I-Link
also agreed to extend the exercise period on all warrants previously issued to
Winter Harbor (for another 10,800,000 shares of common stock) to seven and
one-half years. Pursuant to the terms of that loan agreement with Winter Harbor,
the initial borrowings of $5,768,000 were payable upon demand by Winter Harbor
no earlier than May 15, 1998, and were collateralized by essentially all of the
assets of I-Link subsidiaries. Because the loan was not repaid by May 15, 1998,
the total loan, including additional borrowings of $2,000,000 obtained in the
second quarter, continues on a demand basis with interest accruing at prime plus
four percent. Additionally, Winter Harbor has the right to elect at any time
until the loan is repaid to convert the unpaid balance of the loan into
additional shares of I-Link Series M Preferred Stock, reduce the exercise price
of the 6,740,000 Loan Warrants to $2.50 per share, and receive an additional
5,000,000 warrants to purchase common stock of I-Link at an exercise price of
$2.50 per share.
In June 1998, JNC Opportunity Fund Ltd. ("JNC") purchased 1,000 shares of
Series F Stock for cash consideration of $10,000,000. Each share of Series F
Stock has a stated value of $10,000 plus any accrued unpaid dividends, and may
be converted at any time. As of [record date], each of the 1,000 outstanding
shares of
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<PAGE> 10
Series F Stock may be converted into approximately 4,701 shares of Common Stock.
If all outstanding shares of Series F Stock were converted on that date, I-Link
would issue 4,701,457 shares of Common Stock therefor (without giving effect to
the limitations contained in the terms of the Series F Stock). The Series F
Conversion Price in effect on a conversion date shall be the lesser of (a) $3.76
and (b) 81% of the average of the three lowest per share market values during
the twenty-two trading day period immediately preceding the applicable
conversion date; provided, however, that the Series F Conversion Price shall not
be less than $2.50 (the "Floor Price"). (However, in the event the market price
remains below $2.50 for five consecutive trading days, the Floor Price will be
re-set to the lower rate, provided, that after such initial reset, if any,
subsequent resets of the Floor Price may occur and shall be based upon the then
most recent reset price, and provided, further, that the Floor Price shall not
be less than $1.25.)
In November 1998, I-Link reached an agreement in principal for a new
financing arrangement with Winter Harbor. Under the terms of the new financing
arrangement, Winter Harbor will provide to I-Link a new bridge loan facility of
up to $8,000,000. The maturity date for the bridge loan facility is October 31,
1999. The bridge loan will be junior to I-Link's existing debt to Winter Harbor
and shall be on an equal basis with the balance of I-Link's general obligations.
The bridge loan will be secured by the assets of I-Link via a second priority
lien that will be junior to the existing first lien granted by I-Link to Winter
Harbor. Amounts drawn against the bridge loan will bear interest at rates that
increase from quarter to quarter until the maturity date. The initial interest
rate will be the Wall Street Journal prime rate plus four points. The rate will
increase by one point every succeeding three-month period subject to a maximum
rate equal to the Wall Street Journal prime rate plus seven points. To date,
I-Link has drawn $4,241,712 against the bridge loan and owes Winter Harbor an
additional $600,000 in accumulated interest and legal fees related to the prior
Winter Harbor financing. For each ten dollars of bridge loan drawn, I-Link will
issue to Winter Harbor a warrant to purchase one share of common stock, at an
exercise price of $2.78 per share, which price is adjustable, subject to a
minimum exercise price of $1.25 per share. The warrants shall have a maturity
date of 7.5 years from the date of issue, and will have demand and piggyback
registration rights. If I-Link elects not to repay all amounts drawn down on the
bridge loan by March 15, 1999, it must, in lieu thereof, issue additional
warrants to Winter Harbor, so that the total number of warrants issued would
increase to one warrant for each one dollar outstanding. I-Link is required to
obtain stockholder approval pursuant to the maintenance criteria of the Nasdaq
Stock Market in connection with such an election not to repay all amounts drawn
down on the bridge loan by March 15, 1999.
Additionally, Winter Harbor assisted I-Link in obtaining a standby letter
of credit in the amount of $3,000,000, by acting as the account party thereto,
to secure additional capital leases of equipment and telephone lines relative to
the proposed expansion of I-Link's telecommunications network. For such
assistance, I-Link will pay Winter Harbor a facility fee of 1% per annum on the
portion of the letter of credit that is not used, and issue to Winter Harbor
warrants to purchase 300,000 shares of common stock on the same terms as the
bridge loan warrants. In the event that (i) I-Link elects not to repay all
amounts drawn down on the bridge loan by March 15, 1999 or (ii) the standby
letter of credit is drawn upon, then Winter Harbor will receive similar warrants
to purchase an additional 2,700,000 shares of common stock.
The foregoing description is subject to the negotiation of the definitive
agreements and is subject to the final agreements, copies of which will be
appended as exhibits to one of I-Link's periodic reports hereafter filed by
I-Link under the Securities Exchange Act of 1934 following negotiation and
execution of the agreements.
AUTHORIZATION OF PREFERRED STOCK
Our Amended and Restated Articles of Incorporation, as further amended
(the "Articles of Incorporation"), authorize the issuance of up to 10,000,000
shares of preferred stock with such rights and preferences as may be determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
may, without stockholder approval, issue shares of preferred stock with
dividend, liquidation, conversion, voting or other rights which are senior to
the Series N Shares or which could adversely affect the voting power or other
rights of the holders of outstanding shares of preferred stock or common stock.
In addition, the issuance of additional shares of preferred stock may have the
effect of rendering more difficult, or discouraging, an acquisition of I-Link or
changes in control of I-Link. To date, a total of 502,000 shares of
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<PAGE> 11
preferred stock have been designated in eight series, of which an aggregate
49,411 shares in three series are outstanding. Although I-Link does not have any
current plans to issue any additional series or shares of preferred stock,
except for the preferred stock to be issued in the Rights Offering, there can be
no assurance that I-Link will not do so in the future. See "Risk Factors --
Future Issuances of Stock by I-Link; Potential Anti-Takeover Effect," and "Risk
Factors -- Certain Provisions of Articles of Incorporation and Bylaws."
CLASSIFICATION OF THE BOARD OF DIRECTORS
Our Board of Directors is classified into three classes. Members of each
class serve for staggered three year terms, with members of one class coming up
for election each year. The classification of the Board of Directors may make it
difficult for shareholders to effect a change in management.
VOTING CONTROL
Winter Harbor owns 4,400 shares of Series M Preferred Stock, which are
convertible at any time into 4,400,000 shares of common stock, and it holds
$7,768,000 in promissory notes issued in 1998 which are convertible into 3,107.2
shares of Series M Preferred Stock, which in turn would be convertible at any
time into 3,107,200 shares of common stock. Winter Harbor also holds warrants,
exercisable at any time, for the purchase of up to 28,540,000 shares of common
stock. In addition, should Winter Harbor elect to convert its $7,768,000 in
promissory notes into additional shares of Series M Preferred Stock, it is
entitled to receive additional warrants to purchase 5,000,000 shares of common
stock. Upon the conversion of the Series M Preferred Stock, conversion of the
convertible promissory notes and the exercise of all of its warrants, securities
then held by Winter Harbor (an aggregate of 41,047,200 shares) would represent
68.4% of the then outstanding voting securities of I-Link. In addition, Winter
Harbor will have the Right to purchase any Series N Shares which are not
subscribed for by others in the Rights Offering. See "The Rights Offering" and
"Description of Securities." Mr. Keenan serves on the Board of Directors as the
designee of Winter Harbor. As a group, the officers and directors of I-Link may
be deemed to beneficially own an aggregate of 3,500,896 shares, or approximately
15.6% of the outstanding voting securities. By virtue of their ownership of
I-Link's issued and outstanding common stock, the officers and directors of
I-Link have the ability to influence the election of directors and,
consequently, influence I-Link's business and affairs.
INDUSTRY RISKS
I-LINK BUSINESS COMPETITION
The market for telecommunications services is extremely competitive. We
believe that our ability to compete successfully depends on a number of factors,
including the pricing policies of competitors and suppliers; the capacity,
reliability, availability and security of I-Link's Intranet infrastructure;
market presence and channel development; the timing of introductions of new
products and services into the industry; ease of access to and navigation of the
Internet or other such Data Communication Networks; our future ability to
support existing and emerging industry standards; our ability to balance network
demand with the fixed expenses associated with network capacity; and industry
and general economic trends.
While we believe that no competitor in North America currently provides
capabilities in a manner comparable with the I-Link Intranet, there are many
companies that offer business communications services, and therefore compete
with I-Link at some level. These range from large telecommunications companies
and carriers such as AT&T, MCI WorldCom and Sprint, to smaller, regional
resellers of telephone line access. These companies and others, including
manufacturers of hardware and software used in the business communications
industry, could in the future develop products and services that could compete
with I-Link on a more direct basis. These entities are far better capitalized
than I-Link and control significant market share in their respective industry
segments. In addition, other businesses may be attempting to introduce products
similar to those used by I-Link for the transmission of business information
over the Internet. There is no assurance that I-Link will be able to
successfully compete with these market participants.
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POTENTIAL ADVERSE EFFECTS OF RATE CHANGES
Currently, the total charged to our customers for various long distance
telecommunications services is comparatively less than the rates charged by a
primary seller of such services. Our ability to undersell primary sellers arises
as a result of the volume discount offered to I-Link in accordance with the
terms of its contract with Sprint. We believe that lower rates are essential to
our ability to attract and retain customers. Therefore, narrowing of the
difference between our rates and the cost of the bulk-rate long distance
telecommunications services we purchase for resale to our customers could have a
significant adverse effect. We will be pressed to the extent this differential
decreases, to maintain and attract new customers.
COMPETITION IN THE SWITCHED NETWORK MARKET
Other long distance providers make up our competition in the switched
network market. Due to the number of regional and local carriers, the number of
competitors varies by geographic region. However, our principal competitors are
the big four carriers, AT&T, MCI WorldCom, Sprint, and local regional Bell
companies. The majority of our potential customers are, already customers of one
of these carriers, which control the majority of the U.S. market. These carriers
have established pervasive nationwide networks, name recognition, operating
histories, and substantial advertising resources. There can be no assurance of
our ability to successfully compete with such carriers.
DEPENDENCE ON SUPPLIERS
I-Link relies on other companies for data communications capacity via
leased telecommunications lines. A significant portion of these leased
telecommunications lines are currently provided by Sprint, US West, Pacific
Telesis, Southwest Bell, and IXC. Further, we use Sprint as our primary supplier
of inbound and outbound telephone services in geographic areas our own network
does not cover. If any of Sprint, US West, Pacific Telesis, Southwest Bell, and
IXC are unable or unwilling to provide or expand their current levels of service
to us in the future, our operations could be materially adversely affected.
Although leased telecommunications lines are available from several alternative
suppliers, there can be no assurance of our being able to obtain substitute
services from other providers at reasonable or comparable prices or in a timely
fashion. We are also subject to risks relating to potential disruptions in these
telecommunications services. No assurance can be given that significant
interruptions of telecommunications services will not occur in the future.
Changes in tariffs, regulations, or policies by any of our telecommunications
providers may adversely affect our ability to continue to offer long distance
service on what we consider to be commercially reasonable or profitable terms.
We are also dependent on certain third party suppliers of hardware
components. Although we currently are attempting to maintain a minimum of two
vendors for each required product, certain components used in providing our
networking services are currently acquired from only one source. We may from
time to time experience delays receiving certain hardware components. A failure
by a supplier to deliver quality products on a timely basis, or the inability to
develop alternative sources if and as required, could result in delays which
could materially adversely affect our ability to integrate, conduct and
implement business expansion.
CUSTOMER ATTRITION
We believe that a high level of customer attrition is common in the
direct dial, long distance industry. I-Link does not have a long history of
operations and accordingly, the level of customer attrition experienced to date
may not be indicative of future attrition levels. In addition, there can be no
assurance that any steps taken by I-Link to counter increased customer attrition
will be successful.
GOVERNMENT REGULATION
Certain of I-Link's operations are subject to regulation by the Federal
Communications Commission ("FCC") under the Communications Act of 1934, as
amended (the "Communications Act"). In addition, certain
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of our businesses are subject to regulation by state public utility or public
service commissions. Changes in the regulation of, or the enactment or changes
in interpretation of legislation affecting, our operations could have a material
adverse effect on I-Link and the value of the common stock. Recently, the
Federal Government enacted the Telecommunications Act of 1996 (the
"Telecommunications Act"), which, among other things, allows the Regional Bell
Operating Companies ("RBOCs") and others to enter the long distance business.
Entry of the RBOCs or other entities, such as electric utilities and cable
television companies, into the long distance business may have a negative impact
on I-Link or its customers. We anticipate that certain of such entrants will be
strong competitors because, among other reasons, they may enjoy one or more of
the following advantages: they may (i) be well capitalized; (ii) already have
substantial end user customer bases; or (iii) enjoy cost advantages relating to
local loops and access charges. The introduction of additional strong
competitors into the switched long distance business would mean that I-Link
would face substantially increased competition. This could have a material
adverse effect on I-Link and the value of the common stock. In addition, the
Telecommunications Act provides that state proceedings may in certain instances
determine access charges I-Link is required to pay to the local exchange
carriers. No assurance can be given that such proceedings will not result in
increases in such rates. Such increases could have a material adverse effect on
I-Link or its customers, and on the value of the common stock.
I-Link Communication's ("ILC") activities are regulated by the public
utility commissions of the various states in which I-Link operates. Also,
decisions by the FCC with respect to the permissible business activities or
pricing practices may have an adverse impact on ILC's operations. ILC could be
subject to complaints seeking damages and other relief filed by parties claiming
to be harmed by ILC's failure to file tariffs. Moreover, any significant change
in regulations by state governmental agencies could significantly increase ILC's
costs or otherwise have an adverse impact on ILC's activities and on its
expansion efforts. The FCC has recently taken or is currently considering action
on various proposals, including proposals relating to interstate access
transport services, public filing of rates, proprietary calling cards and billed
party preference. Additionally, legislation has recently been enacted in
Congress further liberalizing the telecommunications industry, specifically by
permitting the Bell Operating Companies (BOCs) to provide service in the long
distance market and allowing the long distance carriers such as AT&T, MCI
WorldCom, and I-Link into the local markets. Although safeguards have been
inserted into the legislation to ensure fair competition, there can be no
assurance that the entry of the BOCs into the long distance market will not have
a material adverse effect on I-Link's business.
GOVERNMENT REGULATION OF INTERNET-RELATED BUSINESS
I-Link has been moving its customers off the facilities of existing long
distance carriers, and has increased its reliance on its own proprietary
Internet protocol network (the "I-Link Intranet") for transmission in the hope
of enjoying minimal federal regulation under current rules. Historically, the
FCC has not regulated companies that provide the software and hardware for
Internet telephony or other Internet data functions, as common carriers or
telecommunications service providers. Moreover, in May 1997 the FCC concluded
that information and enhanced service providers are not required to contribute
to federal universal service funding mechanisms. Notwithstanding the current
state of the rules, the FCC's potential jurisdiction over the Internet is broad
because the Internet relies on wire and radio communications facilities and
services over which the FCC has long-standing authority. The FCC's framework for
"enhanced services" confirms that the FCC has authority to regulate
computer-enriched services, but provides that carrier-type regulation would not
serve the public interest. Only recently has this general approach been
questioned within the industry.
EXPOSURE TO TORT LIABILITY IN MEDICAL INDUSTRY
I-Link's discontinued medical division operated medical equipment used to
perform procedures on or diagnose disease in patients. I-Link is exposed to tort
liability in the events of claims of harm to patients due to the negligence of
I-Link, its agents, or employees. I-Link currently maintains professional
liability insurance coverage in the amount of $1,000,000, and I-Link also
maintains an umbrella policy covering, among other things, workers'
compensation, general, and automobile liability in an amount of $9,000,000 in
coverage. Any claim could have a material adverse effect on I-Link. In addition,
there is no assurance that I-Link will be able to continue to maintain such
insurance coverage in the future. I-Link acts as general partner of a limited
partnership
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controlled by I-Link that directly owns, controls and operates I-Link's
discontinued medical facilities. As such, I-Link is exposed to general liability
for torts committed by such partnership and its agents and employees and for
contracts entered into by those partnerships.
MARKET-RELATED RISKS
TERMS OF THE SERIES N STOCK; SUBSTANTIAL DILUTION WHEN SERIES N STOCK IS
CONVERTED
The Series N Stock will be paid dividends on an as-converted basis equal
to I-Link common stock, when and if common stock dividends are paid. The Series
N Stock is senior in all rights to other preferred common stock of I-Link,
except that the Series N Stock will be equal to the previously issued Series F
Preferred Stock. The Series N Stock may be converted into common stock at the
option of the holder. The rate of conversion is determined by dividing $1,000 by
the conversion price ("Series N Conversion Price"). The Series N Conversion
Price is set at $[____], but may be reduced under certain circumstances,
including when other securities are issued or sold by I-Link for a price lower
than $[____] or when there is a stock split, reverse stock split or stock
dividend, or if there were to be a merger or reorganization of I-Link. In those
cases, the Series N Conversion Price would be adjusted to the lowest price
calculated by any of these methods: (i) $[____], (ii) 110% of the average
trading price of common stock for any 20 day period, (iii) any price at which
common stock or common stock equivalents are issued by I-Link (whether by
conversion, exercise or otherwise and whether or not any such security is
outstanding on November 23, 1998), or (iv) the exercise price or conversion rate
of any new options, warrants, preferred stock or other convertible security of
I-Link issued after November 23, 1998. Events which will prompt an adjustment of
the Series N Conversion Price include the issuance by I-Link of other securities
at a price lower than $[____] per share, or a stock split, reverse stock split
or stock dividend, or a merger or acquisition of I-Link. However, the Series N
Conversion Price will never be less than $1.25 per share. The Series N Stock
will vote with the common stock on an as-converted basis on all matters which
are submitted to a vote of the stockholders, except if Florida law or by
I-Link's Articles of Incorporation or By-laws direct otherwise.
TERMS OF SERIES F STOCK; MARKET PRICE CONVERSION MECHANISM; SUBSTANTIAL
DILUTION UPON CONVERSION
There are 1,000 shares of Series F Preferred Stock ("Series F Stock")
designated, all of which were issued on July 28, 1998. As of January 8, 1999,
the adjustable conversion price equaled $2.033, which is the figure determined
to be the lower of $3.76 or 81% of the average of the three lowest per share
market values during the twenty-two trading day period immediately preceding the
applicable conversion date. Since the conversion terms of the Series F Stock
are determined partly in relation to a discount to the market price of I-Link's
common stock, the result is that the lower the common stock market price is at
the time of conversion, the more shares of common stock will be issued. As of
January 8, 1999, 40 shares of Series F Stock had been converted to common stock
and 960 Series F Shares remained outstanding. If all the outstanding shares of
Series F Stock were converted using the conversion price in effect on that
date, 4,722,085 shares of common stock would be issued, which would represent
19.9% of the then outstanding shares. The factors determining the conversion
price of the Series F Stock are subject to further downward adjustment, subject
to a minimum conversion price of $1.25. To the extent the holders of the
Series F Stock convert and then sell their shares of common stock, the price of
common stock may decrease even further due to the additional shares in the
market, allowing the holders to convert additional Series F Stock into greater
amounts of common stock, providing the potential to depress the price of common
stock even further. Dividends on the Series F Stock may, at the option of
I-Link, be paid in shares of common stock. Consequently, lower market prices
of common stock would mean higher amounts of common stock being issued as
dividends, or being issued upon conversion of Series F Stock, resulting in
substantial dilution to the interests of other holders of common stock. As
illustration, the following table shows the number of shares of common stock
issuable upon conversion of Series F Stock and as payment of dividends based
upon a range of conversion prices. The information in the table assumes a
discount rate of 81%; the discount rate is used to determine both conversion
rates and dividend payments when dividends are paid in shares of common stock.
As used in the table, "Market Price of Common Stock" means the amount derived
by taking the average of the three lowest per share market values during the
twenty-two trading day period immediately preceding an applicable conversion
date. Pursuant to the terms of the Series F Stock, as of January 8, 1999 the
highest the Conversion Price can be is $3.76 and the lowest the Conversion
Price can be is $1.25.
<TABLE>
<CAPTION>
Common Shares
Issuable Upon Common Shares Issuable
Market Price of Conversion of All Upon Payment of
Common Stock Conversion Price Series F Stock Quarterly Dividend
- ------------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C>
$4.64 or greater $3.76 2,553,191 33,245
$3.09 $2.50 3,840,000 50,000
$1.54 or lower $1.25 7,680,000 100,000
</TABLE>
The terms of the Series F Stock provide that a holder of Series F Stock
may not convert shares of or receive dividends on Series F Stock to the extent
such conversion or dividend would result in the holder of Series F Stock
beneficially owning, in the aggregate, in excess of 4.999% of the then issued
and outstanding shares of common stock following such conversion; provided,
however, that such percentage limitation may be waived (as to conversions) by
the holder of the Series F Stock upon 75 days written notice to I-Link. It
should be noted that this limitation applies only to the number of shares of
common stock held at any one time, and does not prevent the holder of Series F
Stock from converting and selling some of its holdings, then, subject to the
limitation just described, converting additional holdings. Further, the Series
F Stock may be converted at any time, and will be automatically converted on
July 28, 2001.
The Series F Stock is subject to specific provisions that would prevent
any issuance of common shares upon conversion or upon payment of dividends, and
in certain cases, 100,000 shares covered by a warrant held by JNC, at a price
below the market or book value of the common stock if and to the extent that
such shares of common stock would equal or exceed in the aggregate 20% of the
number of shares of common stock outstanding on July 28, 1998 (the date of
initial issuance of the Series F Stock) absent shareholder approval as
contemplated by the Nasdaq Stock Market Non-Quantitative Designation Criteria.
Should the holder of Series F Stock elect to convert Series F Stock on terms
that would require shareholder approval, and such shareholder approval has not
been obtained, then, with respect to the issuance of such additional shares of
common stock in excess of the 20% threshold (the "Excess Shares"), I-Link may
be obligated to either (a) use its best efforts to obtain shareholder approval
of the issuance of the Excess Shares within 60 days of receiving request
therefor, (b) issue the Excess Shares and accrued dividends thereunder at a
conversion price equal to the closing sale price of the common stock on July
28, 1998 and pay to the converting holder of Series F Stock an amount in cash
equal to the product of the conversion price on the applicable conversion date
and the number of Excess Shares that would have been issuable but for the
application of the 20% limitation provision, or (c) redeem from the converting
holder of Series F Stock the shares of Series F Stock relating to the Excess
Shares.
SIGNIFICANT DILUTION TO CURRENT SHAREHOLDERS
Holders of I-Link common stock will suffer significant dilution in the
event that holders of I-Link's outstanding convertible securities, including
outstanding shares of Class C Preferred Stock, Series F Preferred Stock and
Series M Preferred Stock, warrants and options, convert their holdings.. The
exercise of warrants and options, including options granted pursuant to I-Link's
stock option and purchase plans and employment agreements by their holders may
result in additional dilution.
Currently there are shares of preferred stock, options and warrants
outstanding which may be converted to, or exercised for, up to 57,757,463 shares
of common stock. That number represents approximately 305% of the current number
of shares outstanding. If all of these securities were exercised or converted,
the 57,757,463 new shares of common stock to be issued would represent 75.3% of
the then-outstanding number of shares of common stock. The potential of these
underlying shares of common stock being issued and then sold into the market, or
the anticipation of such sales occurring, may result in a decrease in the market
price of I-Link's common stock, and may make it more difficult for I-Link to
attract additional equity financing. See "Description of Securities" and "Risk
Factors - Future Issuances of Stock by I-Link; Potential Anti-Takeover Effect."
DIVIDENDS
I-Link has not paid any dividends on any of its outstanding securities to
date, except to the extent that accrued dividends have been calculated and added
to the value of the shares of Series F Preferred Stock which have been converted
to date. Other than as set forth herein, I-Link does not anticipate paying any
cash dividends on its securities in the foreseeable future. I-Link currently
intends to retain all working capital and earnings, if any, to finance the
operations of its businesses and to expand its businesses. I-Link's future cash
flow and legal capital may be insufficient to enable payment of cash dividends.
As of [record date], 1999, the aggregate amount
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of undeclared and unpaid cumulative dividends for each class of I-Link's
preferred stock, and the number of shares of common stock which could be issued
in lieu of such cash dividends, is as follows:
<TABLE>
<CAPTION>
Number of Shares of Common
Class of Security Dividend Payable Stock Issuable as Dividends
-------------------------- -------------------- -------------------------------
<S> <C> <C>
Class C Preferred $[______] [_______]
Series F Preferred $[______] [_______]
Series M Preferred $[______] n/a
</TABLE>
Dividends on the Class C Preferred Stock will be payable when declared by
the Board of Directors, to the extent permissible under the Florida Business
Corporation Act, to the holders of the Class C Preferred Stock in cash or, at
the option of I-Link as determined by the Board of Directors, in shares of
common stock. Dividends may be paid in shares of common stock only if such
shares have been registered under the Securities Act. In connection with the
Winter Harbor equity investment in I-Link, we have I-Link issued an aggregate of
4,400 shares of Series M Preferred Stock. The Series M Preferred Stock will be
entitled to receive cumulative dividends in the amount of 10% per annum.
FUTURE ISSUANCES OF STOCK BY I-LINK; POTENTIAL ANTI-TAKEOVER EFFECT
I-Link has authorized capital stock of [150,000,000] shares of common
stock, $.007 par value per share and 10,000,000 shares of preferred stock,
$10.00 par value per share. As of [record date], 1999, there were 18,959,431
shares of common stock issued and outstanding; 44,051 shares of Class C
Preferred Stock issued and outstanding; 4,400 shares of Series M Preferred Stock
issued and outstanding; and 960 shares of Series F Preferred Stock issued and
outstanding. Although, other than as disclosed herein, there are no present
plans, agreements or undertakings with respect to I-Link's issuance of any
shares of stock or related convertible securities, the issuance of any of such
securities by I-Link could have anti-takeover effects insofar as such securities
could be used as a method of discouraging, delaying or preventing a change in
I-Link's control. Such issuance could also dilute I-Link's publicly held
ownership. Inasmuch as I-Link may, in the future, issue authorized shares of
common stock or preferred stock without prior stockholder approval, there may be
substantial dilution to the interests of I-Link's stockholders. The issuance of
additional shares of common stock may have the effect of rendering more
difficult or discouraging an acquisition or change in control of I-Link. In
addition, your pro rata ownership interest in I-Link may be reduced to the
extent of the issuance and/or exercise of any options or warrants relating to
the common stock or preferred stock.
Class C Preferred Stock. Each outstanding share of Class C Preferred
Stock may be converted into 24 shares of common stock. Any shares of Class C
Preferred Stock still outstanding on September 6, 2001 shall convert to common
stock automatically at a conversion rate determined by dividing $60.00 by the
lower of (a) $2.50 or (b) 50% of the average closing bid price of the common
stock for the ten trading days immediately preceding September 6, 2001. As of
[record date], 1999, if all outstanding shares of Class C Preferred Stock were
converted, I-Link would issue 1,057,224 shares of common stock therefor.
Series F Preferred Stock. The Series F Preferred Stock has a stated value
of $10,000 per share plus any accrued unpaid dividends, and may be converted at
any time. As of [record date], 1999, each of the 960 outstanding shares of
Series F Preferred Stock may be converted into approximately 4,920 shares of
common stock. If all outstanding shares of Series F Preferred Stock were
converted on that date, I-Link would issue 4,722,085 shares of common stock
therefor without giving effect to the limitations contained in the terms of the
Series F Preferred Stock. The "Series F Conversion Price" in effect on a
conversion date shall be the lesser of (a) $3.76 and (b) 81% of the average of
the three lowest per share market values during the twenty-two trading day
period immediately preceding the applicable conversion date; provided, however,
that the Series F Conversion Price shall not be less than $2.50 (the "Floor
Price"). In the event the market price remains below $2.50 for five consecutive
trading days, the Floor Price will be re-set to the lower rate, provided,
however, that after such initial reset, if any, subsequent resets of the Floor
Price may occur and shall be based upon the then most recent reset price, and
provided, further, that the Floor Price shall not be less than $1.25. (The
stated conversion factors give effect to certain liquidated damages clauses set
forth in the terms of the Series F Preferred
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Stock.) Any shares of Series F Preferred Stock still outstanding on July 28,
2001 shall convert to common stock automatically at the Series F Conversion
Price then in effect.
Series M Preferred Stock. The Series M Preferred Stock has a conversion
value of $2,750 per share plus any accrued unpaid dividends, and is convertible
into shares of common stock at $2.75 per share of common stock, which price may
be adjusted downward in the event of certain dilutive transactions such as stock
splits, dividends or reclassifications, mergers and reorganizations. Each
outstanding share of Series M Preferred Stock may be converted into 2,750 shares
of common stock. If all outstanding shares of Series M Preferred Stock were
converted on [record date], 1999, I-Link would issue 4,400,000 shares of common
stock therefor, and an additional 552,109 shares of common stock as payment for
accrued but unpaid dividends. On October 10, 2002, all shares of Series M
Preferred Stock still outstanding shall be converted to common stock
automatically, at the lower of (a) $2.75 per share of common stock, subject to
adjustment, or (b) 50% of the average closing bid price of the common stock in
the ten trading days preceding October 10, 2002.
Winter Harbor Convertible Debt. Winter Harbor, the holder of the Series M
Preferred Stock, may elect at any time to convert up to $7,768,000 of I-Link
debt into an additional 3,107.2 shares of Series M Preferred Stock (as of
[record date], 1999). Such additional shares of Series M Preferred Stock would
be convertible into 3,107,200 shares of common stock, on the same terms as
outlined in the previous paragraph. I-Link and Winter Harbor have also agreed
that any debt owed to Winter Harbor may be converted into equity through Winter
Harbor's purchase of Series N Shares in the Rights Offering. Winter Harbor is
obligated to purchase at least $3,322,000 worth of Series N Shares, thus
reducing I-Link's debt to Winter Harbor by at least that amount.
Winter Harbor Warrants. As of [record date], 1999, Winter Harbor held
warrants, exercisable at any time, for the purchase of up to 28,540,000 shares
of common stock (includes the additional 9,900,000 warrants which would be
issued to Winter Harbor on March 15, 1999 in the event that the Bridge Loan is
not repaid by that date). In addition, Winter Harbor could elect to convert up
to $7,768,000 in debt into additional shares of Series M Preferred Stock, and if
it does it is entitled to receive additional warrants to purchase 5,000,000
shares of common stock. The exercise prices of all of these warrants varied at
the time of their respective issuances, however, all are subject to adjustment
downward to equal the market price of common stock in the event the common stock
market price is below the original exercise price at the time of exercise. All
but 11,000,000 of Winter Harbor's warrants are subject to an exercise price
lower limit of $2.75 per share.
Other Outstanding Options and Warrants. I-Link has issued options and
warrants to purchase an aggregate of 10,554,942 shares of common stock to
employees and others, at exercise prices ranging from $0.88 to $8.63.
FUTURE SALES OF STOCK BY STOCKHOLDERS
As of [record date], 1999, 3,760,282 shares of common stock issued and
outstanding were "restricted securities" as that term is defined under the
Securities Act and in the future may only be sold in compliance with Rule 144
promulgated under the Securities Act or pursuant to an effective registration
statement. Rule 144 provides, in essence, that a person (including a group of
persons whose shares are aggregated) who has satisfied a one-year holding period
for such restricted securities may sell within any three-month period, under
certain circumstances, an amount of restricted securities which does not exceed
the greater of 1% of that class of I-Link's outstanding securities or the
average weekly trading volume of that class of securities during the four
calendar weeks prior to such sale. In addition, pursuant to Rule 144, persons
who are not affiliated with I-Link and who have held their restricted securities
for at least two years are not subject to the quantity limitations or the manner
of sale restrictions of the rule. As of the date hereof, substantially all of
I-Link's restricted securities are available for resale pursuant to Rule 144 or
pursuant to a currently effective registration statement (separate from the
registration statement of which this Prospectus forms a part), which will allow
such shares to be resold into the market.
In the event that the shares of common stock which are not currently
salable become salable by means of registration, eligibility for sale under Rule
144 or otherwise and the holders of such securities elect to sell such
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<PAGE> 17
securities in the public market, there is likely to be a negative effect on the
market price of I-Link's securities and on the ability of I-Link to obtain
additional equity financing. In addition, to the extent that such securities
enter the market, the value of I-Link's securities in the over-the counter
market may be reduced. No predictions can be made as to the effect, if any, that
sales of such securities (or the availability of such securities for sale) will
have on the market price of any of such securities which may prevail from time
to time. Nevertheless, the foregoing could adversely affect such prevailing
market prices.
CONTINUED NASDAQ LISTING
Our common stock is traded on the Nasdaq SmallCap Market tier of The
Nasdaq Stock Market ("Nasdaq") under the symbol "ILNK." While the common stock
is currently listed for quotation on Nasdaq, there can be no assurance that
I-Link will be able to continue to satisfy the requirements for maintaining
quotation on Nasdaq or that such quotation will otherwise continue. If, for any
reason, the common stock becomes ineligible for continued listing and quotation,
holders of I-Link's securities may have difficulty selling their securities
should they desire to do so.
Under applicable Nasdaq rules, in order to qualify for continued listing
on Nasdaq, a company must have, among other things: (1) net tangible assets of
at least $2,000,000 or market capitalization of at least $35,000,000 or net
income in two of the previous three years of at least $500,000; (2) 500,000 or
more publicly trading shares (not counting shares held by affiliates of I-Link);
(3) market value of public float of at least $1,000,000; (4) minimum bid price
of $1.00; (5) not fewer than two marketmakers; and (6) not fewer than 300
shareholders. Although I-Link was able initially to satisfy the requirements for
listing of its securities on Nasdaq, I-Link may be unable to continue to satisfy
the requirements for maintaining quotation of its securities thereon, and
trading, if any, in I-Link's securities would be conducted in the
over-the-counter market in what are commonly referred to as the "pink sheets" of
the National Quotation Bureau, Inc. or on the NASD OTC Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of or to
obtain accurate quotations as to the price of such securities.
"PENNY STOCK" REGULATIONS
The Commission has adopted regulations which define a "penny stock" to be
any equity security that has a market price (as defined) of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a disclosure schedule prepared by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities, and information on the limited market in penny stocks. In addition,
the broker-dealer must obtain a written acknowledgement from the customer that
such disclosure information was provided and must retain such acknowledgement
for at least three years. Further, monthly statements must be sent to the
customer disclosing current price information for the penny stock held in the
account. While many Nasdaq-listed securities would otherwise be covered by the
definition of penny stock, transactions in a Nasdaq-listed security would be
exempt from all but the sole marketmaker provision for: (i) issuers who have
$2,000,000 in tangible assets ($6,000,000 if the issuer has not been in
continuous operation for three years); (ii) transactions in which the customer
is an institutional accredited investor; and (iii) transactions that are not
recommended by the broker-dealer. In addition, transactions in a Nasdaq-listed
security directly with a Nasdaq marketmaker for such securities would be subject
only to the disclosure with respect to commissions to be paid to the
broker-dealer and the registered representative. The foregoing rules may
materially adversely affect the liquidity for the market of I-Link's securities.
Such rules may also affect the ability of broker-dealers to sell I-Link's
securities and may impede the ability of holders of I-Link's securities to sell
such securities in the secondary market.
DILUTIVE IMPACT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
The holders of outstanding options, warrants and convertible securities
have the opportunity to profit from a rise in the market price of the common
stock, if any, without assuming the risk of ownership, with a resulting dilution
in the interest of other shareholders. I-Link may find it more difficult to
raise additional equity
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<PAGE> 18
capital if it should be needed for the business of I-Link while such options and
warrants are outstanding. At any time at which the holders thereof might be
expected to exercise them, I-Link would probably be able to obtain additional
capital on terms more favorable than those provided by such options and
warrants. The holders of such options and warrants have the right to require
registration under the Securities Act of the shares of common stock that are
issuable upon exercise of such options and warrants and have certain demand
and/or "piggy-back" registration rights. The cost to I-Link of effecting any
such registration may be substantial. See "Dilution."
TECHNOLOGICAL RISKS
SOFTWARE AND SERVICE DEVELOPMENT; TECHNOLOGICAL CHANGE
Our success is highly dependent upon our ability to develop new software
and services that meet changing customer requirements. The market for our
services is characterized by rapidly changing technology, evolving industry
standards, emerging competition and frequent new software and service
introductions. There can be no assurance of our ability to successfully identify
new service opportunities and develop and bring new software and services to the
market in a timely manner, or that software, services or technologies developed
by others will not render our software, services or technologies noncompetitive
or obsolete in the future. Our pursuit of technological advances may require
substantial time and expense, and there can be no assurance that we will succeed
in adapting our current services to alternate access devices and conduits.
DEPENDENCE ON NETWORK INFRASTRUCTURE; RISK OF SYSTEM FAILURE; SECURITY RISKS
Key to the quality of our services and the future success is the
capacity, reliability and security of our network infrastructure to support the
services. We must expand and adapt network infrastructure as the number of users
and the amount of information they wish to transfer increases and to meet
changing customer requirements. The expansion and adaptation of the network
infrastructure will require substantial financial, operational and management
resources. There can be no assurance, however, that I-Link will be able to
expand or adapt the network infrastructure to meet additional demand or
subscribers' changing requirements on a timely basis, at a commercially
reasonable cost, or at all, or that I-Link will be able to deploy successfully
the contemplated network expansion. Any failure to expand the network
infrastructure, as needed, on a timely basis or to adapt to changing subscriber
requirements or evolving industry standards could have a material adverse effect
on our overall business, financial condition and results of operations in the
future.
TECHNOLOGICAL CHANGE AND NEW SERVICES
The telecommunications services industry has been characterized by steady
technological change, frequent new service introductions and evolving industry
standards. Our future success will depend, in part, on our ability to anticipate
such changes and to offer on a timely basis market responsive services that meet
these evolving industry standards. There can be no assurance that we will have
sufficient resources to introduce new services that will satisfy an expanded
range of customer needs.
DEPENDENCE UPON THIRD PARTY TRANSMISSION FACILITIES
Our future profitability is based upon our ability to transmit our
customers' long distance telephone calls on a cost effective basis over
transmission facilities leased from facilities based long distance carriers that
compete with I-Link. We own only a limited portion of the transmission
facilities needed to complete all of our customers long distance telephone
calls. Accordingly, we are vulnerable to changes in our lease arrangements and
our direct dial long distance telephone business, and the profitability thereof
is dependent upon our ability to enter into cost effective lease arrangements,
both long and short term, with facilities based carriers for the transmission of
calls. While we believe that we have ample access to transmission facilities at
attractive rates and expect to continue to have such access, there can be no
assurance that leased capacity will continue to be available at cost-effective
rates.
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<PAGE> 19
YEAR 2000 ISSUES
The "Year 2000" issue results from computer programs and embedded
computer chips that do not differentiate between the 1900 century and the 2000
century because they are written using two digit rather than four digit dates to
define the applicable year. If not corrected, many computer applications and
date-sensitive devices could fail or produce erroneous results when processing
data involving dates after December 31, 1999. The Year 2000 issue affects
virtually all companies and organizations, including I-Link. I-Link formed a
Year 2000 team whose responsibility it is to evaluate its information technology
(IT) systems as well as its non-IT devices (such as building security, heating
and air-conditioning, safety devices and other devices containing embedded
electronic circuits). Both IT systems and non-IT devices are subject to failure
due to the Year 2000 issue.
We are in the "inventory and assessment" phases of its Year 2000 project
with regard to its state of readiness related to IT and non-IT devices and
issues related to third parties with which we have material relationships. While
we have our own communications network to carry some of our traffic, our system
(as it is for all telecommunications companies) is completely dependent upon
origination or termination of that traffic on significant third party vendors
such as Sprint (I-Link's primary underlying carrier) and LECs (local exchange
carriers) such as U.S. West. We are watching closely the progress of these
significant third party vendors. In the event our third party vendors do not
become Year 2000 compliant, we would need to switch vendors or face a
significant negative impact on our ability to deliver telecommunication
services. The inability to deliver these services would have a substantial
negative impact on I-Link and its results of operations, liquidity and financial
position.
Upon completion of the inventory and assessment phases of the Year 2000
project, we will explore alternative solutions and develop contingency plans for
handling critical areas in the event a remedy is not identified or is
unsuccessful. Such plans have not yet been developed, but we intend to develop
them as necessary to address each area of the Year 2000 risk. Completion of the
Year 2000 project, including contingency plans, is expected by September 30,
1999.
Costs. We are using both internal and external resources to identify,
correct or reprogram, and test our systems for minimizing Year 2000 consequences
and expect to incur consulting and other expenses related to infrastructure and
facilities enhancements necessary to prepare our systems for the Year 2000. To
date, I-Link has spent approximately $25,000 on these costs, but the total
expense of modifications and conversions is not known at this time; however, at
this time it is not expected to be material to our financial position, results
of operations or cash flows and will be expensed as incurred. Funds related to
Year 2000 expenditures are expected to come from operations.
Risks. The failure to correct a material Year 2000 problem could result
in an interruption to or a failure of normal business activities or operations.
Such failures could materially and adversely affect I-Link's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party suppliers, we are unable to determine at this
time whether the consequences of Year 2000 failure will have a materiel impact
on our results of operation, liquidity or financial condition. Our Year 2000
project to inventory and assess Year 2000 issues and implement plans to fix
identified Year 2000 issues is expected to significantly reduce I-Link's level
of uncertainty about the Year 2000 problems and, in particular, about the Year
2000 compliance and readiness of its major suppliers such as Sprint. We believe
that, with the implementation of its enhanced services billing platform (which
is being designed to be Year 2000 compliant) and completion of the Year 2000
project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
LACK OF CERTAIN PATENT PROTECTION
I-Link currently holds three patents for voice and data compression and
conferencing, and has filed additional patent applications for various
technologies including its technology for fax and voice communications over an
internet environment. To the extent any technology included in such products is
patentable, there can be
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no assurance that any patent will in fact be issued or that such patents will be
effective to protect I-Link's products from duplication by other developers. In
addition, there can be no assurance that I-Link will be able to afford the
expense of any litigation that may be necessary to enforce its right under any
patent.
USE OF PROCEEDS
The net proceeds available from the Rights Offering will be approximately
$19,930,000. Approximately $3,322,000 of the net proceeds will be used to repay
certain principal and accrued interest due to Winter Harbor under either of the
following loans, represented by various promissory notes (the "Winter Harbor
Notes"):
<TABLE>
<CAPTION>
PRINCIPAL EFFECTIVE
AMOUNT OF NOTE INTEREST RATE MATURITY DATE
---------------------------- ----------------------- -----------------------
<S> <C> <C>
$7,768,000 prime plus 4% on demand
$4,241,712 prime plus 4% 10/31/99
</TABLE>
I-Link used the proceeds from the Winter Harbor Notes to meet current
cash flow and working capital needs, which included purchases of equipment used
for the expansion of I-Link's own long distance network. The remainder of the
net proceeds of the Rights Offering (up to $16,608,000) will be used for general
working capital purposes of I-Link.
DETERMINATION OF OFFERING PRICE
The Subscription Price of the Rights was determined arbitrarily by I-Link
in negotiation with Winter Harbor, and is not necessarily related to the assets,
book value or net worth of I-Link or any other established criteria of value,
and may not be indicative of the fair value of the securities offered.
DILUTION
Common stockholders will suffer significant dilution in the event that
any of I-Link's outstanding convertible securities, including outstanding shares
of Class C Preferred Stock, Series F Preferred Stock and Series M Preferred
Stock, warrants and options are converted by the holders thereof. See
"Description of Securities." Additional dilution may result in the event of the
exercise of warrants and options, including options granted pursuant to I-Link's
stock option and purchase plans and employment agreements.
Currently the following securities are outstanding, which may be
converted to, or exercised for, shares of common stock. See also "Risk Factors -
Future Issuances of Stock by I-Link; Potential Anti-Takeover Effect."
- 44,051 shares of Class C Preferred Stock, convertible into to
1,057,224 shares of common stock
- 960 shares of Series F Preferred Stock convertible into 4,722,085
shares of common stock
- 4,400 shares of Series M Preferred Stock, convertible into 4,400,000
shares of common stock
- $7,768,000 of Winter Harbor Convertible Debt, convertible into
3,107,200 shares of common stock
- Winter Harbor Warrants, exercisable for 28,540,000 shares of common
stock (includes the issuance of 9,900,000 warrants assuming the
non-repayment of Bridge Loan debt by March 15, 1999)
- Winter Harbor Warrants (contingent on debt conversion) exercisable
for 5,000,000 shares of common stock
- Other Options and Warrants, exercisable for 10,554,942 shares of
common stock
If all of the above securities were exercised or converted, a total of
57,757,463 shares of common stock would be issued. That number represents
approximately 305% of the current number of shares outstanding, and would
represent 75.3% of the common stock outstanding after all 57,757,463 shares were
issued. The potential of these underlying shares of common stock being issued
and then sold into the market, or the perception that such sales may occur, may
result in a decrease in the market price of I-Link's common stock, and may make
it more difficult for I-Link to receive additional equity financing.
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<PAGE> 21
THE RIGHTS OFFERING
THE RIGHTS
I-Link is distributing to each record holder, at no cost to the record
holder, nontransferable Rights to purchase Series N Stock. One Right will be
distributed for each 1,491 shares of common stock currently held, and for each
1,491 shares of common stock that the preferred stock is convertible into
(including accrued dividends), as of the Record Date. The Rights will be
evidenced by nontransferable subscription certificates (the "Subscription
Certificates").
No fractional Rights or cash in lieu thereof will be issued or paid, and
the number of Rights distributed to each holder of common or preferred stock
will be rounded up to the nearest whole number. No Subscription Certificate may
be divided in such a way as to permit the holders of common or preferred stock
to receive a greater number of Rights than the number to which such Subscription
Certificate entitles its holder, except that a depository, bank, trust company
and securities broker or dealer holding shares of common stock on the Record
Date for more than one beneficial owner may, upon proper showing to the Rights
Agent, exchange its Subscription Certificate to obtain a Subscription
Certificate for the number of Rights to which all such beneficial owners in the
aggregate would have been entitled had each been a holder on the Record Date.
I-Link reserves the right to refuse to issue any such Subscription Certificate
if such issuance would be inconsistent with the principle that each beneficial
owner's holdings will be rounded up to the nearest whole Right.
Because the number of Rights distributed to each record holder will be
rounded [up/down] to the nearest whole number, beneficial owners of common stock
who are also the record holders of such shares might receive [more/fewer] Rights
under certain circumstances than beneficial owners of common stock who are not
the record holder of their shares and who do not obtain (or cause the record
owner of their shares of common stock to obtain) a separate Subscription
Certificate with respect to the shares beneficially owned by them, including
shares held in an investment advisory or similar account. To the extent that
record holders of common stock or beneficial owners of common stock who obtain a
separate Subscription Certificate receive more Rights, they will be able to
subscribe for an additional Series N Shares pursuant to the Basic Subscription
Privilege.
EXPIRATION DATE
The Rights will expire at 5:00 p.m., New York City local time, on
[expiration date], 1999. After the Expiration Date, unexercised Rights will be
null and void. I-Link will not be obligated to honor any purported exercise of
Rights received by the Rights Agent after the Expiration Date, regardless of
when the documents relating to such exercise were sent. Winter Harbor has the
option to oversubscribe for any rights not exercised by the remaining
shareholders. Winter Harbor is the only party with an Oversubscription
Privilege. See "Subscription Privileges - Oversubscription Privilege" below.
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege
Each Right will entitle the holder thereof to receive, upon payment of
the Subscription Price, one share of Series N Stock (the "Basic Subscription
Privilege"). Certificates representing the Series N Shares purchased pursuant to
the Basic Subscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date.
Banks, brokers and other nominee Rights Holders who exercise the Basic
Subscription Privilege on behalf of beneficial owners of Rights will be required
to certify to the Rights Agent and I-Link, in connection with the subscription
pursuant to the Basic Subscription Privilege, as to the aggregate number of
Rights that have been exercised and the amount of Series N Shares that is being
subscribed for pursuant to the Basic Subscription Privilege by each beneficial
owner of Rights on whose behalf such nominee holder is acting.
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<PAGE> 22
Oversubscription Privilege
Winter Harbor is the only party with an Oversubscription Privilege.
Additional Series N Shares will be available for subscription by Winter Harbor
pursuant to the Oversubscription Privilege only to the extent that any Series N
Shares are not purchased through the Basic Subscription Privilege. Certificates
representing the Series N Shares purchased pursuant to the Oversubscription
Privilege will be delivered to Winter Harbor as soon as practicable after the
Expiration Date.
SUBSCRIPTION PRICE
The Subscription Price is $1,000 per share of Series N Stock purchased
pursuant to the Basic Subscription Privilege or the Oversubscription Privilege.
Winter Harbor will cancel a portion of the indebtedness represented by the
Winter Harbor Notes as payment of the Subscription Price. See "--Exercise of
Rights."
EXERCISE OF RIGHTS
Rights may be exercised by delivering to American Stock Transfer & Trust
Company (the "Rights Agent"), on or prior to the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with any
required signature guaranties, together with payment in full of the Subscription
Price for the Series N Shares purchased pursuant to the Basic Subscription
Privilege. Such payment in full must be by check or bank draft drawn upon a U.S.
bank or postal, telegraphic or express money order payable to American Stock
Transfer & Trust Company as Rights Agent, along with the Subscription
Certificate, to American Stock Transfer & Trust Company for cancellation by
I-Link (or any combination thereof). The Subscription Price will be deemed to
have been received by the Rights Agent only upon (i) clearance of any
uncertified check or (ii) receipt by the Rights Agent of any certified check or
bank draft drawn upon a U.S. bank or of any postal, telegraphic or express money
order. IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID
THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAY TO CLEAR. ACCORDINGLY, RIGHTS
HOLDERS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL
CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE AND ARE URGED TO
CONSIDER PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
If by mail: American Stock Transfer & Trust Company
-------------------------------
-------------------------------
-------------------------------
If by overnight courier
or hand delivery: American Stock Transfer & Trust Company
-------------------------------
-------------------------------
-------------------------------
If an exercising Rights Holder does not indicate the number of Rights
being exercised, or does not forward full payment of the aggregate Subscription
Price for the number of Rights that the Rights Holder indicates are being
exercised, then the Rights Holder will be deemed to have exercised the Basic
Subscription Privilege with respect to the maximum number of Rights that may be
exercised for the aggregate Subscription Price payment delivered by the Rights
Holder.
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<PAGE> 23
Unless a Subscription Certificate provides that the Series N Shares to be
issued pursuant to the exercise of Rights represented thereby are to be
delivered to the holder of such Rights, signatures on such Subscription
Certificate must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program, the Stock Exchange Medallion Program or the American
Stock Exchange, Inc. Medallion Signature Program.
Persons who hold shares of common stock for the account of others, such
as brokers, trustees or depositaries for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Right should complete Subscription Certificates and submit them to the Rights
Agent with the proper payment. In addition, beneficial owners of Rights held
through such a holder should contact the holder and request the holder to effect
transactions in accordance with the beneficial owners' instructions.
The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES OR
PAYMENTS TO I-LINK.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE RIGHTS AGENT WILL BE AT THE ELECTION AND RISK OF THE
RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE RIGHTS AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK CITY
LOCAL TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE
AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE
FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by I-Link in its sole discretion.
I-Link, in its sole discretion, may also waive any defect or irregularity, or
permit a defect or irregularity to be corrected within such time as it may
determine, or reject the purported exercise of any Right. Subscriptions will not
be deemed to have been received or accepted until all irregularities have been
waived or cured within such time as I-Link determines in its sole discretion.
Neither I-Link nor the Rights Agent will be under any duty to give notification
of any defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of the Prospectus should be
directed to the Rights Agent, American Stock Transfer & Trust Company at one of
its addresses set forth under "Rights Agent." The telephone number of the Rights
Agent is [____________].
NO REVOCATION
ONCE A RIGHTS HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE, SUCH
EXERCISE OR SUBSCRIPTION MAY NOT BE REVOKED BY SUCH RIGHTS HOLDER.
RIGHTS OF SUBSCRIBERS
Subscribers have no rights as stockholders of I-Link with respect to the
shares of common stock into which the Series N Shares are convertible until
shares of common stock are issued upon conversion of the Series N Shares.
PROCEDURES FOR DTC PARTICIPANTS
I-Link anticipates that the exercise of Basic Subscription Privileges
(but not the Oversubscription Privilege) may be effected through the facilities
of the Depository Trust Company ("DTC").
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<PAGE> 24
AMENDMENTS AND TERMINATION
I-Link reserves the right to amend the terms and conditions of the Rights
Offering, whether the amended terms are more or less favorable to Rights
Holders. If I-Link amends the terms of the Rights Offering, the Registration
Statement of which this Prospectus forms a part will be amended, and a new
definitive Prospectus will be distributed to all Rights Holders who have
theretofore exercised Rights and to holders of record of unexercised Rights on
the date I-Link amends such terms. In addition, all Rights Holders who have
theretofore exercised Rights, or who exercise Rights within four business days
after the mailing of the new definitive Prospectus, shall be provided with a
form of Consent to Amended Rights Offering Terms ("Consent"), on which they can
confirm their exercise of Rights and their subscriptions under the terms of the
Rights Offering as amended by I-Link; any Rights Holder who has theretofore
exercised any Rights, or who exercises Rights within four business days after
the mailing of the new definitive Prospectus, and who does not return such
Consent within ten business days after the mailing of such Consent by I-Link
will be deemed to have canceled his or her exercise of Rights, and the full
amount of the Subscription Price theretofore paid by such Rights Holder will be
returned promptly by mail, without interest or deduction. Any completed
Subscription Certificate received by the Rights Agent five or more business days
after the date of the amendment will be deemed to constitute the consent of the
Rights Holder who completed such Subscription Certificate to the amended terms.
I-Link reserves the right at any time prior to delivery of the Series N
Shares purchased in the Rights Offering to terminate the Rights Offering. Such
termination would be effected by I-Link by giving oral or written notice of such
termination to the Rights Agent and making 25 28 a public announcement thereof.
If the Rights Offering is so terminated, the Subscription Price will be promptly
returned by mail to exercising Rights Holders, without interest or deduction.
I-Link will have no obligation to a Rights Holder, whether such purchase was
made through the Rights Agent or otherwise, in the event that the Rights
Offering is terminated.
DETERMINATION OF SUBSCRIPTION PRICE
The Subscription Price was determined by I-Link, based on I-Link's
objective of achieving the maximum net proceeds obtainable from the Rights
Offering while providing the common and preferred stock holders with an
opportunity to make an additional investment in I-Link, thus avoiding a dilution
of their ownership position in I-Link.
RIGHTS AGENT
I-Link has appointed American Stock Transfer & Trust Company as Rights
Agent for the Rights Offering. The Rights Agent's address, which is the address
to which the Subscription Certificates and payment of the Subscription Price
must be delivered, is:
If by mail: American Stock Transfer & Trust Company
-------------------------------
-------------------------------
-------------------------------
If by overnight courier
or hand delivery: American Stock Transfer & Trust Company
-------------------------------
-------------------------------
-------------------------------
The Rights Agent's telephone number is [_______________], and the
facsimile number is [___________].
22
<PAGE> 25
I-Link will pay the fees and expenses of the Rights Agent and has also
agreed to indemnify the Rights Agent from certain liability which it may incur
in connection with the Rights Offering. I-Link has been informed by the Rights
Agent that it is a bank within the meaning of Section 3(a)(6) of the Exchange
Act.
OBLIGATIONS AND INTENTIONS OF WINTER HARBOR, L.L.C.
Winter Harbor is obligated to exercise its Basic Subscription Privileges
in full. In addition, Winter Harbor has advised I-Link that it intends (but it
has no obligation) to subscribe for any or all of the Series N Shares that it is
entitled to purchase pursuant to the Oversubscription Privilege. As of [record
date], 1999, Winter Harbor owned beneficially 41,047,200 shares of common stock,
all of which would be issuable upon conversion of the Series M Shares, certain
debt, and the warrants that Winter Harbor holds. Such amount of common stock
would, if all were issued, equal approximately 68.5% of the outstanding common
stock.
NO BOARD RECOMMENDATION
An investment in the Series N Stock must be made pursuant to each Rights
Holder's evaluation of his, her or its best interests. ACCORDINGLY, THE BOARD
DOES NOT MAKE ANY RECOMMENDATION TO ANY RIGHTS HOLDER OR PROSPECTIVE INVESTOR
REGARDING THE EXERCISE OF HIS, HER OR ITS RIGHTS.
DESCRIPTION OF SECURITIES
COMMON STOCK
I-Link is currently authorized to issue 150,000,000 shares of common
stock, par value $.007 per share. As of the Record Date, 1999, there were
18,959,431 shares of common stock issued and outstanding and approximately 420
holders of record of the common stock, and approximately 7,100 beneficial
owners. Each share of common stock entitles the holder thereof to one vote on
each matter submitted to the stockholders of I-Link for a vote thereon. The
holders of common stock: (i) have equal ratable rights to dividends from funds
legally available therefor when, as and if declared by the Board of Directors;
(ii) are entitled to share ratably in all of the assets of I-Link available for
distribution to holders of common stock upon liquidation, dissolution or winding
up of the affairs of I-Link; (iii) do not have preemptive, subscription or
conversion rights, or redemption or sinking fund provisions applicable thereto;
and (iv) as noted above, are entitled to one non-cumulative vote per share on
all matters submitted to stockholders for a vote at any meeting of stockholders.
Prior to any payment of dividends to the holders of common stock, all accrued
and unpaid dividends on any outstanding shares of preferred stock must be paid.
Other than as set forth herein, I-Link anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the operations of its
businesses. The payment of dividends in the future will depend upon, among other
things, the capital requirements and the operating and financial conditions of
I-Link.
PREFERRED STOCK
The Articles of Incorporation authorize the issuance of up to 10,000,000
shares of preferred stock, $10.00 par value per share. The Board of Directors is
authorized to issue shares of preferred stock from time to time in one or more
series and, subject to the limitations contained in the Articles of
Incorporation and any limitations prescribed by law, to establish and designate
any such series and to fix the number of shares and the relative conversion
rights, voting rights and terms of redemption (including sinking fund
provisions) and liquidation preferences. New issuances of shares of preferred
stock with voting rights can affect the voting rights of the holders of
outstanding shares of preferred stock and common stock by increasing the number
of outstanding shares having voting rights, and by the creation of class or
series voting rights. Furthermore, additional issuances of shares of preferred
stock with conversion rights can have the effect of increasing the number of
shares of common stock outstanding up to the amount of common stock authorized
by the Articles of Incorporation and can also, under certain circumstances, have
the effect of delaying or preventing a change in control of I-Link and/or
otherwise adversely affect the rights of holders of outstanding shares of
preferred stock and common stock. To
23
<PAGE> 26
the extent permitted by the Articles of Incorporation, such shares of preferred
stock may have preferences over the common stock (and other series of preferred
stock) with respect to dividends and liquidation rights. As of [record date],
1999, 240,000 shares of preferred stock had been designated Class C Preferred
Stock (of which 44,051 are issued and outstanding); 29,000 shares of preferred
stock had been designated Series M Preferred Stock (of which 4,400 are
outstanding); and 1,000 shares of preferred stock had been designated Series F
Preferred Stock (of which 960 are outstanding).
SERIES N STOCK
The Series N Stock will be paid dividends on an as-converted basis equal
to I-Link common stock, when and if common stock dividends are paid. The Series
N Stock is senior in all rights to other preferred common stock of I-Link,
except that the Series N Stock will be equal to the previously issued Series F
Preferred Stock. The Series N Stock can be converted into common stock at any
time at a conversion price ("Series N Conversion Price") of $[____]. That price
may be reduced under certain circumstances to the lowest of (i) $[____], (ii)
110% of the average trading price of common stock for any 20 day period, (iii)
any price at which common stock or common stock equivalents are issued by I-Link
(whether by conversion, exercise or otherwise and whether or not any such
security is outstanding on November 23, 1998), and (iv) the exercise price or
conversion rate of any new options, warrants, preferred stock or other
convertible security of I-Link issued after November 23, 1998. However, the
Series N Conversion Price will never be less than $1.25 per share. The Series N
Stock will vote with the common stock on an as-converted basis on all matters
which are submitted to a vote of the stockholders, except if Florida law or by
I-Link's Articles of Incorporation or By-laws direct otherwise.
ANTI-TAKEOVER MEASURES
The Articles of Incorporation and Bylaws contain provisions that could
discourage potential takeover attempts and prevent shareholders from changing
I-Link's management. The Articles of Incorporation provide for a classified
Board of Directors and that vacancies on the Board of Directors shall be filled
only by a majority of the remaining directors then in office.
In addition, the Bylaws provide, among other things, that no proposal by
a stockholder shall be presented for vote at a special or annual meeting of
stockholders unless such stockholder shall, not later than the close of business
on the fifth day following the date on which notice of the meeting is first
given to stockholders, provide the Board of Directors or the Secretary of I-Link
with written notice of intention to present a proposal for action at the
forthcoming meeting of stockholders, which notice shall include the name and
address of such stockholder, the number of voting securities he or she holds of
record and which he or she holds beneficially, the text of the proposal to be
presented at the meeting and a statement in support of the proposal. Any
stockholder may make any other proposal at an annual meeting or special meeting
of stockholders and the same may be discussed and considered, but unless stated
in writing and filed with the Board of Directors or the Secretary prior to the
date set forth above, such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the stockholders taking place sixty
days or more thereafter. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors,
and committees; but in connection with such reports, no new business proposed by
a stockholder (acting in such capacity) shall be acted upon at such annual
meeting unless stated and filed as described above.
TRANSFER AGENT
American Stock Transfer & Trust Company, New York, New York is the
Registrar and Transfer Agent for I-Link's common stock, and will act as Rights
Agent.
PLAN OF DISTRIBUTION
The Series N Shares offered pursuant to the Rights Offering are being
offered by I-Link directly to its holders of common stock and its holders of
Series N Shares. I-Link estimates that its expenses in connection with the
Rights Offering will be $[________].
24
<PAGE> 27
I-Link will pay the fees and expenses of American Stock Transfer & Trust
Company, as Rights Agent, and has also agreed to indemnify the Rights Agent from
any liability which it may incur in connection with the Rights Offering,
including liabilities under the Securities Act.
Rights Holders who desire to purchase Series N Shares in the Rights
Offering are urged to complete, date and sign the Subscription Certificate
accompanying this Prospectus and return it to the Rights Agent on or before the
Expiration Date of the Rights Offering, together with payment in full of the
aggregate Subscription Price. See "The Rights Offering - Exercise of Rights."
Subscription Rights are nontransferable. See "Prospectus Summary Terms of the
Rights - Nontransferability of Rights." Any questions concerning the procedure
for subscribing for the purchase of Series N Notes should be directed to the
Rights Agent.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named herein has or is to receive in connection with
this offering any interest, direct or indirect, in I-Link or any of its
subsidiaries, nor was any such party connected with I-Link or any of its
subsidiaries as a promoter, underwriter, voting trustee, director, officer or
employee.
LEGAL MATTERS
Certain legal matters in connection with the registration of the
securities offered hereby will be passed upon for I-Link by De Martino
Finkelstein Rosen & Virga, Washington, D.C.
EXPERTS
The consolidated balance sheets of I-Link Incorporated and Subsidiaries
as of December 31, 1997 and 1996, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997 incorporated in this prospectus by
reference have been included herein in reliance on the reports of
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.), independent
accountants, given the authority of that firm as experts in accounting and
auditing.
25
<PAGE> 28
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF I-LINK OR THE FACTS HEREIN
SET FORTH SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information......................................................[xx]
Documents Incorporated by Reference........................................[xx]
Prospectus Summary.........................................................[xx]
General..............................................................[xx]
The Rights Offering..................................................[xx]
Terms of the Series N Stock..........................................[xx]
Other Information....................................................[xx]
Selected Financial Information.......................................[xx]
Risk Factors...............................................................[xx]
Use of Proceeds............................................................[xx]
Determination of Offering Price............................................[xx]
Dilution...................................................................[xx]
The Rights Offering........................................................[xx]
Description of Securities..................................................[xx]
Plan of Distribution.......................................................[xx]
Interests of Named Experts and Counsel.....................................[xx]
Legal Matters............................................................. [xx]
Experts....................................................................[xx]
</TABLE>
20,000 SHARES OF SERIES N STOCK
I-LINK
INCORPORATED
----------
PROSPECTUS
----------
_____________, 1999
<PAGE> 29
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses to be incurred by the Company in connection with
the registration of the securities subject of this registration statement, other
than underwriting discounts and commissions, are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee................................. $ 5,900
Printing and Engraving Expenses...................... 7,500
Registrant's Counsel Fees and Expenses............... 20,000
Accountant's Fees and Expenses....................... 10,000
Rights Agent Fees and Expenses....................... 15,000
Miscellaneous Expenses............................... 11,600
--------
Estimated Total...................................... $ 70,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 607.0850 of the Florida Business Corporation Act empowers a
corporation to indemnify any person who was or is a party to a proceeding by
reason of the fact that he was or is an officer, director, employee or agent of
the corporation against liability incurred in connection with such proceeding.
Such person must have acted in good faith and in a manner reasonably believed to
be in or not opposed to, the best interests of the corporation. With respect to
any criminal proceeding, such person must have had no reasonable cause to
believe his conduct was unlawful. Any such indemnification may only be made upon
a determination by the corporation that such indemnification is proper because
the person met the applicable standard of conduct.
The Florida Business Corporation Act provides further that the
indemnification permitted thereunder is not exclusive; provided, however,
indemnification is not permitted to be made on behalf of any such person if a
judgment or final adjudication establishes (i) a violation of the criminal law
unless such person had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful; (ii) such person derived
an improper personal benefit from the transaction; (iii) as to any director such
proceeding arose from an unlawful distribution under Section 607.0834; or (iv)
willful misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by the corporation or a shareholder.
The Company's Bylaws provide that the Company shall indemnify any such
person to the fullest extent provided by law and empowers the Company to
purchase and maintain insurance on behalf of any such person.
The Company previously entered into indemnification agreements with
certain officers and directors of the Company for indemnification against
expenses (including attorneys' fees, through all proceedings, trials, and
appeals), judgments, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending, or contemplated action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
arising from any actual or alleged breach of duty, neglect, effort, or other
action taken or omitted, solely in the capacity as an officer and/or a director
of the Company; provided that no indemnification will be made in respect of any
acts or omissions (a) involving gross negligence or willful misconduct, (b)
involving libel or slander, or (c) based upon or attributable to gaining,
directly or indirectly, any profit or advantage to which he was not legally
entitled.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT MAY
BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT
TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS THEREFORE UNENFORCEABLE.
II-1
<PAGE> 30
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
3.1 Amended and Restated Articles of Incorporation, as further
amended, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, File
Number 0-17973.
3.8* Articles of Amendment to the Company's Amended and Restated
Articles of Incorporation, establishing the terms of Series N
Preferred Stock.
4.14* Form of Rights Certificate.
5.1* Opinion of Counsel.
10.37* Form of Rights Agent Agreement.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Counsel, included in Exhibit 5.1.
99.1* Form of Subscription Certificate.
99.2* Form of Instructions to Rights Holders.
99.3* Form of Guaranteed Delivery Procedures and Instructions.
</TABLE>
- ---------------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(a) Rule 415 Offering.
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement 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;
(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.
(b) Subsequent Exchange Act Documents Incorporated by Reference.
The Company hereby undertakes 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 Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 31
(c) Incorporated Annual and Quarterly Reports
The Company hereby undertakes to deliver or cause to be delivered with
the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are note set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(d) Indemnification.
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer, or controlling person of the Company in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Draper, Utah, on January 15, 1999.
I-LINK INCORPORATED
By: /s/ John W. Edwards
-------------------
John W. Edwards, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John W. Edwards Chairman of the Board, President and January 15, 1999
- -------------------------------- Chief Executive Officer
John W. Edwards
/s/ Karl S. Ryser, Jr. Treasurer, Chief Financial Officer January 15, 1999
- -------------------------------- and Chief Accounting Officer
Karl S. Ryser, Jr.
/s/ David E. Hardy Secretary January 15, 1999
- --------------------------------
David E. Hardy
/s/ Henry Y.L. Toh Director January 15, 1999
- --------------------------------
Henry Y.L. Toh
/s/ Thomas A. Keenan Director January 15, 1999
- --------------------------------
Thomas A. Keenan
/s/ Joseph A. Cohen Director January 15, 1999
- --------------------------------
Joseph A. Cohen
Director
- --------------------------------
David Bradford
</TABLE>
