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As filed with the Securities and Exchange Commission on July 21, 2000.
Registration No. 333-62833
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1
ON FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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I-LINK INCORPORATED
(Exact name of registrant as specified in its charter)
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 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:
Ralph V. De Martino, Esquire David E. Hardy, Esquire
De Martino Finkelstein Rosen & Virga Hardy & Allen
1818 N Street, N.W., Suite 400 818 South Temple
Washington, DC 20036-2492 Salt Lake City, UT 84102
Phone (202) 659-0494, Phone (801) 364-6660,
Facsimile (202) 659-1290 Facsimile (801) 364-6664
------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended ("Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
(COVER CONTINUED OVERLEAF)
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
BE REGISTERED REGISTERED SHARE (1) PRICE (1)
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<S> <C> <C> <C> <C>
Common Stock, $.007 par value (2)(4) 124,588 $4.75 $591,793 $156.23
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Common Stock, $.007 par value (3)(4) 23,474 $4.75 $111,502 29.44
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Total (5) $185.67
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933. The closing bid
price of the common stock on Nasdaq on July 20, 2000 was $4.75.
(2) To be issued as payment of dividends accrued and payable to holders of
record of Class C Preferred Stock as of February 22, 2000.
(3) Estimated. To be issued as payment of dividends which may become payable
through and including September 6, 2001 if and when declared by the board
of directors.
(4) Pursuant to Rule 416, this Registration Statement also covers such
additional number of shares of common stock as may be issuable pursuant to
anti-dilution provisions of the Class C Preferred Stock.
(5) Fee previously paid.
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.
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PROSPECTUS
[LOGO]
148,062 SHARES OF COMMON STOCK ISSUABLE AS DIVIDENDS PAYABLE
AND TO BECOME PAYABLE ON CLASS C PREFERRED STOCK
This Prospectus relates to the distribution and resale of 124,588
shares of common stock, par value $.007 per share ("common stock") issuable
as dividends accrued and payable, and up to approximately 23,474 shares of
common stock issuable as dividends to become payable through September 6,
2001 (referred to as the Dividend Shares or Securities) to holders of shares
of Class C Convertible Preferred Stock previously issued by I-Link
Incorporated, a Florida corporation. The holders of the Class C Preferred
Stock are entitled to cumulative preferential dividends, when, as and if
declared by the board of directors, on a quarterly basis on November 15,
February 15, May 15 and August 15 each year in an amount equal to 8% per
annum of the liquidation preference per share of $60.00. Dividends may be
paid to the holders of the Class C Preferred Stock, at the option of I-Link,
in Dividend Shares (based upon the last sale price of a share of common stock
for the five trading days preceding the record date for a particular
dividend), provided that such Dividend Shares are covered by an effective
registration statement. February 22, 2000 was the Record Date for the payment
of dividends accrued through February 15, 2000; such payment will be made in
Dividend Shares as soon as possible after the Dividend Shares are registered.
See "Description of Securities." On July 5, 2000 the closing sale price of
I-Link's common stock as reported by the Nasdaq SmallCap Market ("Nasdaq")
was $5.25.
So long as the Registration Statement of which this prospectus is a
part is effective and the disclosure set forth herein is current, the holders
of Dividend Shares (selling securityholders) may sell their shares publicly.
The Securities offered by this Prospectus may be sold from time to time by
the selling securityholders. The distribution of the Securities by the
selling securityholders may be effected in one or more transactions that may
take place on the over-the-counter market including ordinary broker's
transactions, privately negotiated transactions or through sales to one or
more dealers for resale of such securities as principals at market prices
prevailing at the time of sale at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling
securityholders related to sales of such securities.
I-Link will not receive any of the proceeds from the resale of the
Dividend Shares by the selling securityholders. All costs incurred in the
registration of the Securities offered hereby have been borne by I-Link. See
"Use of Proceeds."
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND
DILUTION. SEE "RISK FACTORS."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is July ___, 2000.
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AVAILABLE INFORMATION
I-Link Incorporated (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 including annual and quarterly reports on Forms 10-K
and 10-Q (File No. 0-17973) (the "Exchange Act Filings") with the Securities
and Exchange Commission (the "Commission"). I-Link filed with the Commission
in Washington, D.C. a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the securities
described herein. This Prospectus 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, and I-Link's Exchange Act Filings may be inspected at: (i) the
public reference facilities of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and (ii) the offices
of the Commission located at Citicorp Center, 500 West Madison Street, Room
1400, Chicago, Illinois 60661, and (iii) the offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 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, D.C.
20549. 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 http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
There is hereby incorporated in this Prospectus by reference
I-Link's most recent Annual Report on Form 10-K and I-Link's most recent
Quarterly Reports on Form 10-Q filed with the SEC 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
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made to I-Link Incorporated, 13751 S. Wadsworth Park Drive, Suite 200,
Draper, Utah 84020, Attention: David E. Hardy, Esq.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to,
and should be read in conjunction with, the more detailed information and
financial statements and notes thereto appearing elsewhere in this
Prospectus. Each prospective investor is urged to read this Prospectus in its
entirety.
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact included in this
Prospectus or incorporated by reference, including, without limitation, the
statements under "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis" and "Business" are forward-looking statements.
Although I-Link believes that the expectations reflected in such
forward-looking statements are reasonable at this time, it can give no
assurance that such expectations will prove to have been correct.
THE COMPANY
I-Link is an integrated voice and data communications company
focused on simplifying the delivery of "Unified Communication." Unified
Communication is the integration of traditional telecommunications with new
data IP (Internet Protocol) communications systems with the effect of
simplifying communications, increasing communication capabilities and
lowering overall communication costs. Unified Communication platforms
integrate telecommunication, mobile communication, paging, voice-over-IP
(VoIP) and Internet technologies. Through its wholly owned subsidiaries
I-Link Communications, Inc. (I-Link Communications), and I-Link Systems,
Inc., I-Link provides enhanced telecommunications services on a wholesale and
retail basis. Through its wholly-owned subsidiaries MiBridge, Inc.
(MiBridge), and ViaNet Technologies Ltd. (ViaNet), I-Link undertakes the
research and development of new telecommunications services, products, and
technologies, and the licensing of certain of these products and technologies
to other telecommunications companies. I-Link is a leader in the delivery of
unified communications as a result of six core technology offerings: I-Link's
Intranet, Softswitch Plus-TM-, GateLink-TM-, V-Link-TM-, Indavo-TM-, and
I-Link TalkFree-TM-.
I-Link's corporate offices are located at 13751 S. Wadsworth Park
Drive, Suite 200, Draper, Utah 84020; telephone (801) 576-5000.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE
A HIGH DEGREE OF RISK. SUCH SECURITIES SHOULD BE PURCHASED ONLY BY
PROSPECTIVE INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
THEREFORE, EACH PROSPECTIVE INVESTOR SHOULD, PRIOR TO PURCHASE, CONSIDER VERY
CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF THE OTHER INFORMATION
SET FORTH ELSEWHERE HEREIN AND INCORPORATED BY REFERENCE HEREIN AND IN THE
INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND THE NOTES THERETO.
ONGOING CAPITAL REQUIREMENTS; NEED TO RAISE ADDITIONAL FINANCING
The conduct of I-Link's business and the continued implementation of
its business plans and operations has required and will continue to require
the availability of substantial amounts of capital. I-Link anticipates that
revenues generated from its continuing operations will not be sufficient to
fund its business through 2000. I-Link has entered into additional financing
arrangements as described below in order to obtain the additional funds
required for its continuing operations in 2000:
1. On May 9, 2000, I-Link and Red Cube Group, a leading
international provider of Internet Protocol (IP) Telephony and enhanced
Web-based communications services, announced an alliance to offer global,
enhanced IP communications to the customers of each of the two companies. Red
Cube Group, upon signing of the agreement, paid I-Link $10,000,000 that
consisted of a $7,500,000 licensing fee and $2,500,000 in prepaid consulting
fees. I-Link and Red Cube Group were obligated to use their best commercially
reasonable effort to complete certain milestones defined in the agreement and
to negotiate in good faith to enter into a revenue sharing agreement by June
23, 2000, which date was extended to July 7, 2000. On June 30, 2000 the
Company completed Milestone #1 as required under the agreement and signed a
revenue sharing agreement. Completion of Milestone #1 and the signing of the
revenue sharing agreement, both as prescribed under the agreement, obligates
Red Cube to pay to I-Link an additional $10,000,000 prior to July 30, 2000
for future services and removes any potential obligations that I-Link might
have had to repay any of the $20,000,000 received or to be received from Red
Cube.
2. On February 25, 2000, I-Link obtained lease financing
arrangements for certain network equipment in an amount up to $5,000,000.
3. The April 15, 2000 due date of I-Link's existing obligation to
Winter Harbor in the amount of $7,768,000 (and accrued interest of $1,847,848
through June 30, 2000), was extended to April 15, 2001.
While I-Link believes that the aforementioned sources of funds will
be sufficient to fund its operations in 2000, I-Link anticipates that
additional funds will be necessary after such time to fund its operations and
finance the planned expansion of I-Link's business communications services,
product development and manufacturing, and to discharge the
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financial obligations of I-Link. The availability of such funds will depend
on prevailing market conditions, interest rates, and the financial position
and results of operations of I-Link. There can be no assurance that such
funds will be available or if available that they will be on terms and
conditions favorable to I-Link. Furthermore, I-Link may need to raise funds
prior to the end of 2000 if, for example, I-Link accelerates the expansion of
our network and services, pursues acquisitions or experiences operating
losses that exceed our current expectations.
SIGNIFICANT DILUTION TO CURRENT SHAREHOLDERS
"Dilution" refers to the reduction in the voting effect and
proportionate ownership interest of a given number of shares of common stock
as the total number of shares increases. Holders of I-Link common stock have
suffered significant dilution as a result of equity and debt financings and
will suffer further dilution in the event that holders of I-Link's
outstanding convertible securities, including shares of Class C preferred
stock, Series M preferred stock and Series N preferred stock elect to convert
their preferred shares to common stock. The exercise of warrants and options,
including options granted under I-Link's stock option plans and employment
agreements, will result in additional dilution.
As of July 5, 2000, there were, including preferred stock, options
and warrants outstanding which may be converted into or exercised for
approximately 71,768,000 shares of common stock, which is nearly three times
the current number of shares outstanding. If all of these securities were
exercised or converted, the 71,768,000 new shares of common stock to be
issued would represent nearly 72% of the then-outstanding shares of common
stock. Such exercise or conversion would result in significant dilution for
holders of I-Link common stock. The potential of all of these shares of
common stock being issued and then sold into the market, or the anticipation
of those sales occurring, may also 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.
RELIANCE ON KEY PERSONNEL
I-Link's operations are dependent upon the continued efforts and
employment of its senior management. The officers of I-Link have the
principal responsibility for management of I-Link and are responsible for
making 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.
Furthermore, the future performance of I-Link depends in significant
part upon its 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.
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EXPECTATION OF GROWTH
I-Link plans to expand I-Link's real-time IP ("RTIP network")
network, which expansion will require additional capital expenditures. There
is no assurance that such capital will be available or that it will be
available on terms favorable to I-Link. Moreover, I-Link's ability to
effectively achieve growth will require it to implement and improve
operational, financial and management information systems and to train,
motivate and manage employees, as well as to successfully market its products
and services. These demands require the addition of new management personnel
and the development of additional expertise by existing management. Failure
to enhance customer support resources adequately to support increases in
subscribers, or to adequately expand and enhance telecommunications
infrastructure, may adversely affect I-Link's ability to successfully conduct
I-Link's business in the future. There can be no assurance that customer
support or other resources will be sufficient to achieve future growth or
that I-Link will be able to implement in whole or in part its planned
expansion. Any failure to do so could have a material adverse effect on
I-Link's future operating results.
I-LINK BUSINESS COMPETITION
The market for telecommunications services is extremely competitive.
I-Link believes that its ability to compete successfully will depend upon a
number of factors, including the pricing policies of competitors and
suppliers; the capacity, reliability, availability and security of I-Link's
RTIP network; I-Link's market presence and channel development; the timing of
I-Link's introductions of new products and services; I-Link's ease of access
to and navigation of the Internet or other such Data Communication Networks;
I-Link's ability in the future to support existing and emerging industry
standards; I-Link's ability to balance network demand with the fixed expenses
associated with network capacity; and industry and general economic trends.
While I-Link believes there is currently no competitor in the North
American market providing the same type of capabilities in the same manner
that I-Link will offer using the I-Link RTIP network, 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, as well as
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 those of 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. These entities also enjoy
certain competitive advantages such extensive nationwide networks, name
recognition, operating histories, and substantial advertising resources. In
addition, there may be other businesses that are attempting to introduce
products similar to I-Link's 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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DEPENDENCE ON SUPPLIERS
I-Link relies on other companies to provide data communications
capacity via leased telecommunications lines and services to and from
geographic areas I-Link's own network does not cover. Significant portions of
the leased telecommunications lines and services used by I-Link are currently
primarily provided by Sprint, MCI WorldCom, Global Crossing, Level 3 and
other regional companies. If any of the above suppliers are unable or
unwilling to provide or expand their current levels of service to I-Link in
the future, I-Link's operations could be materially adversely affected.
Although leased telecommunications lines are available from several
alternative suppliers, there can be no assurance that I-Link could obtain
substitute services from other providers at reasonable or comparable prices
or in a timely fashion. I-Link is also subject to risks relating to potential
disruptions in such telecommunications services. No assurance can be given
that significant interruptions of telecommunications services to I-Link will
not occur in the future. Changes in tariffs, regulations, or policies by any
of I-Link's telecommunications providers may adversely affect I-Link's
ability to continue to offer long-distance service on what it considers to be
commercially reasonable or profitable terms.
I-Link is also dependent on certain third party suppliers of
hardware components. Although I-Link currently attempts to maintain a minimum
of two vendors for each required product, certain components used by I-Link
in providing networking services are currently acquired from only one source.
I-Link may from time to time experience delays in the receipt of 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
I-Link's ability to integrate, conduct and implement expansion of I-Link's
business.
SOFTWARE AND SERVICE DEVELOPMENT; TECHNOLOGICAL CHANGE
I-Link's success is highly dependent upon its ability to develop
new software and services that meet changing customer requirements. The
market for I-Link's services is characterized by rapidly changing technology,
evolving industry standards, emerging competition and frequent new software
and service introductions. There can be no assurance that I-Link can
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 I-Link's
software, services or technologies noncompetitive or obsolete in the future.
I-Link's pursuit of technological advances may require substantial time and
expense, and there can be no assurance that I-Link will succeed in adapting
the services currently provided by it to alternate access devices and
conduits.
LACK OF CERTAIN PATENT PROTECTION
I-Link currently holds two 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
the Internet. To the extent any technology included in such products is
patentable, there can be no assurance that any patent will be issued or that
such patents will be effective to protect I-Link's products from duplication
by other developers. In
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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.
Competitors in both the United States and foreign countries, many of
which have substantially greater resources and have made substantial
investments in competing technologies, may have applied for or obtained, or
may in the future apply for and obtain, patents that will prevent, limit or
otherwise interfere with I-Link's ability to sell its services. I-Link has
not conducted an independent review of patents issued to third parties.
Although I-Link believes that its products do not infringe on the patents or
other proprietary rights of third parties, there can be no assurance that
other parties will not assert infringement claims against I-Link or that such
claims will not be successful. An adverse outcome in the defense of a patent
suit could subject I-Link to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require I-Link
to cease selling its services.
DEPENDENCE ON RTIP NETWORK
Key to the quality of I-Link services and the future success of
I-Link is the capacity, reliability and security of its RTIP network to
support the services. I-Link must expand and adapt the RTIP network 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 RTIP network will require substantial financial, operational and
management resources. There can be no assurance that I-Link will be able to
expand or adapt the RTIP network 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 of I-Link to expand the RTIP
network, as needed, on a timely basis or to adapt to changing subscriber
requirements or evolving industry standards could have a material adverse
effect on I-Link's overall business, financial condition and results of
operations in the future.
SUBSCRIBER GROWTH AND RETENTION; RELIANCE ON WHOLESALE CUSTOMERS
I-Link is a growing business enterprise that is subject to all of
the risks that present themselves to early stage companies, including but not
limited to limited infrastructure, managerial resources, capitalization and
market share. There can be no assurance that I-Link will be able to
successfully compete with larger, more mature, better capitalized enterprises.
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 subscriber acquisition costs associated
with attracting new subscribers are substantial. Accordingly, I-Link's
ability to improve operating margins will depend in part on the ability to
retain subscribers. I-Link plans 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 I-Link's future efforts in this area will improve subscriber
retention.
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On February 15, 2000 I-Link signed a strategic marketing and channel
agreement with Big Planet, a wholly owned subsidiary of Nu Skin Enterprises,
Inc. Under terms of the agreement, I-Link's independent network marketing
sales force transitioned to Big Planet. I-Link will continue to sell its
products to Big Planet on a wholesale basis. While I-Link believes this
relationship will have a positive strategic and overall financial impact on
I-Link, it also increases risk to I-Link due to the immediate concentration
of sales to the residential market to primarily one customer (Big Planet).
Should Big Planet discontinue marketing I-Link's products, up to 90% of
I-Link's existing telecommunications revenues may cease.
POTENTIAL ADVERSE EFFECTS OF RATE CHANGES
I-Link bills its customers for the long-distance telecommunications
services used by such customers. The per-minute charge to each customer for
long-distance telecommunications services is generally less than the customer
would pay to traditional long-distance carriers for similar long-distance
services. I-Link's ability to undersell such traditional long-distance
carriers arises as a result of (1) the cost efficiencies inherent in IP
telecommunications technology, with respect to long-distance calls carried on
I-Link's RTIP network, and (2) the volume discounts offered to I-Link in
accordance with the terms of its contracts with traditional switched network
carriers, with respect to calls or portions of calls carried over the
traditional switched networks where required to complete long-distance calls
to or from geographical areas not serviced by I-Link's RTIP network. I-Link
believes I-Link's lower long-distance charges are an important factor in its
ability to attract and retain customers. Therefore, a narrowing of the
differential between the rates charged to I-Link's customers and the cost of
the bulk-rate long-distance telecommunications services purchased by I-Link
for resale to such customers would have a significant adverse effect on
I-Link. To the extent this differential decreases, the savings I-Link is able
to obtain for its customers could decrease and I-Link could lose customers
and face increased difficulty in attracting new customers, and I-Link's
operating results could also be adversely affected.
FAILURE TO MEET MINIMUM PURCHASE REQUIREMENTS UNDER PURCHASE COMMITMENTS
I-Link has an agreement with a national carrier to lease local
access spans. The agreement includes minimum usage commitments of $2,160,000
per year for the two years beginning July 2000. If I-Link were to terminate
the agreement early, it would be required to pay 25 percent of any remaining
second and third year minimum monthly usage requirements.
In December 1999, I-Link entered into an agreement with a national
carrier to provide long-distance capacity in order to provide long-distance
telecommunications services to I-Link's customers who reside in areas not yet
serviced by I-Link's dedicated telecommunications network. The eighteen-month
agreement includes minimum monthly usage commitments of $250,000 beginning in
the sixth month of the agreement. Either party may terminate the agreement
with 90 days notice.
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DEPENDENCE UPON THIRD PARTY TRANSMISSION FACILITIES
The future profitability of I-Link is based upon its ability to
transmit its 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. I-Link owns only a limited portion of the
transmission facilities needed to complete all of its customers' long
distance telephone calls. Accordingly, I-Link is vulnerable to changes in its
lease arrangements and I-Link's direct dial long distance telephone business
and the profitability thereof is dependent upon its ability to enter into
cost effective lease arrangements, both long and short term, with
facilities-based-carriers for the transmission of calls. While I-Link
believes that it has ample access to transmission facilities at attractive
rates and expects to continue to have such access, there can be no assurance
that leased capacity will continue to be available at cost-effective rates.
EQUIPMENT FAILURES; NATURAL DISASTER
Although I-Link carries "commercial property/business interruption"
insurance, such insurance does not include coverage of certain natural
disasters. A major equipment failure or a natural disaster affecting any one
of I-Link's switching facilities could have a material adverse effect on
I-Link's operations.
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 of I-Link's
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, I-Link's 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. I-Link anticipates 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.
11
<PAGE>
I-Link Communication's 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 I-Link Communication's
operations. I-Link Communications could be subject to complaints seeking
damages and other relief filed by parties claiming to be harmed by I-Link
Communication's failure to file tariffs. Moreover, any significant change in
regulations by state governmental agencies could significantly increase
I-Link Communication's costs or otherwise have an adverse impact on I-Link
Communication'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 a proprietary
Internet protocol network 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 had
long-standing authority. The FCC's framework for "enhanced services" confirms
that the FCC has authority to regulate computer-enriched services.
WINTER HARBOR HAS POTENTIAL VOTING CONTROL OVER I-LINK
If Winter Harbor exercises all of its warrants, including the
warrants potentially available under its promissory notes, converts its
Series M preferred stock and Series N preferred stock to common stock, it has
the potential to own approximately 53,635,069 shares, or 66%, of I-Link's
then-outstanding common stock. These include:
- approximately 7,799,331 shares of common stock from the conversion of
4,400 shares of Series M preferred stock;
- approximately 7,085,096 issuable upon conversion of 14,404 shares of
Series N preferred stock;
12
<PAGE>
- up to 28,540,000 shares of common stock underlying warrants which are
exercisable at any time;
- approximately 5,210,642 shares of common stock issuable upon
conversion of Series M preferred stock that Winter Harbor would be
entitled to receive should it elect to convert certain debt; and
- approximately 5,000,000 shares of common stock issuable upon exercise
of warrants Winter Harbor would be entitled to receive should it
convert its promissory notes to common stock.
Thus Winter Harbor could at any time obtain sufficient voting power
to take control of I-Link. One of I-Link's Directors, Mr. Keenan, serves on
the board of directors as the designee of Winter Harbor. See "Description of
Securities."
DIVIDENDS
I-Link must be current on dividends for it's Series C and M
preferred stock in order to pay any dividends to common stock holders.
Preferred stock dividends in the amount of $351,868 and $489 were paid in
1999 and 1998, respectively, in common stock (non-cash) on the converted
shares of Series F redeemable preferred stock. As of June 30, 2000, dividends
in arrears (undeclared) on Series C and M preferred stock were approximately
$590,000 and $3,735,000, respectively. On February 22, 2000, I-Link's board
of directors set a record date for payment of accrued dividends on the Series
C preferred stock of $563,781 to stockholders of record on February 22, 2000,
to be paid in shares (124,588) of I-Link's common stock within ten business
days of the date such shares of common stock become subject to an effective
registration statement under the Securities Act of 1933, as amended. This
prospectus forms a part of that registration statement. I-Link has not paid
and does not anticipate that it will pay dividends on its common stock in the
foreseeable future.
AUTHORIZATION OF PREFERRED STOCK
I-Link's 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, $10.00 par value per share (the
"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 shares of common stock offered hereby 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 521,000 shares of Preferred Stock have been designated in
eight series, of which an aggregate 36,121 shares in three series remain
outstanding. Although I-Link does not currently intend to issue any
additional shares of Preferred Stock, there can be no assurance that I-Link
will not do so in the future.
13
<PAGE>
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. As
of July 5, 2000, there were 27,653,558 shares of common stock issued and
outstanding; 16,499 shares of Class C Preferred Stock issued and outstanding;
4,400 shares of Series M Preferred Stock issued and outstanding; and 15,222
shares of Series N Preferred Stock issued and outstanding. Although there are
no present plans, agreements or undertakings with respect to I-Link's
issuance of any shares of stock or related convertible securities other than
as described herein, 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 control of I-Link.
Such issuance could also dilute the public ownership of I-Link. 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, a stockholder's 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. See "Description of
Securities."
EXPOSURE TO TORT LIABILITY IN MEDICAL INDUSTRY
I-Link directly and indirectly controls two business entities that
operated I-Link's discontinued medical facilities. As such, I-Link is exposed
to general liability for contracts entered into by those businesses and for
torts committed by its agents and employees during its period of operations.
I-Link's discontinued medical operations operated medical equipment used to
perform procedures on or diagnose disease in patients. I-Link is exposed to
tort liability in the event of harm to patients due to the negligence of
I-Link, its agents, and employees. I-Link currently maintains professional
liability insurance coverage in the amount of $1,000,000. 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. There is no assurance that I-Link will be able to continue to
maintain such insurance coverage in the future.
CONTINUED NASDAQ LISTING
The 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
given 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.
STATEMENTS INCLUDED IN THIS PROSPECTUS UNDER THE HEADING "RISK
FACTORS," IN ADDITION TO STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE, THAT ARE NOT
14
<PAGE>
STATEMENTS OF FACT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AND ARE THUS PROSPECTIVE.
THE 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.
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
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.
USE OF PROCEEDS
The Securities subject hereto are issuable as dividends on
previously issued shares of Class C Preferred Stock. Consequently, I-Link
will not receive any of the proceeds from the sales of the Dividend Shares.
PLAN OF DISTRIBUTION
The Securities subject hereto are being distributed by I-Link as
payment of dividends payable and to become payable upon Class C Preferred
Stock. Consequently, the holders of such Securities will receive the proceeds
from any resale of such securities pursuant to this Prospectus. The
Securities may be sold from time to time by the holders thereof or by
pledgees, transferees, or other successors in interest, on Nasdaq (or such
other exchange on which the securities are listed at the time of sale) at
prices and terms then prevailing or related to the then current market price,
delivered in satisfaction of previously incurred indebtedness or other
contractual obligations, or sold directly to purchasers in privately
negotiated transactions by and subject to the discretion of the holders of
Dividend Shares. They may from time to time offer their respective securities
for sale by one or more of the following methods, without limitation: (a)
block trades in which the broker or dealer so engaged will attempt to sell
the Registered Securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus, (c) an exchange distribution in
accordance with the rules of the applicable exchange, (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers, (e)
privately negotiated transactions, (f) short sales, (g) a combination of any
such methods of sale and (h) any other method permitted pursuant to
applicable law.
<TABLE>
<S> <C>
Common Stock Outstanding Prior to Offering 27,653,558 (1)
Common Stock Outstanding After Offering 27,801,620 (2)
Nasdaq Symbol ILNK
</TABLE>
------------
(1) As of July 5, 2000. Does not include: (a) 395,976 shares of common
stock issuable upon conversion of the outstanding Class C Preferred
Stock; (b) 124,588 shares of common stock proposed to be distributed
15
<PAGE>
on or before September 1, 2000 as payment of dividends due on Class C
Preferred Stock and up to approximately 23,474 shares of common stock
to be distributed as dividends to become payable on Class C Preferred
Stock through September 6, 2001; (c) options to purchase 17,207,877
shares of common stock granted by I-Link; (d) 46,549,973 shares of
common stock issuable upon exercise of warrants, conversion of the
Series M Preferred Stock and conversion of certain convertible
promissory notes issued to Winter Harbor, LLC; or (e) approximately
7,487,457 shares of common stock issuable upon conversion of the Series
N Preferred Stock or as payment of dividends thereon.
(2) Includes 124,588 shares of common stock proposed to be distributed on
or before September 1, 2000 as payment of dividends due on Class C
Preferred Stock and up to approximately 23,474 shares of common stock
which may be distributed as dividends to become payable on Class C
Preferred Stock through September 6, 2001, if and when declared. Does
not include: (a) 395,976 shares of common stock issuable upon
conversion of the outstanding Class C Preferred Stock; (b) options to
purchase 17,207,877 shares of common stock granted by I-Link; (c)
46,549,973 shares of common stock issuable upon exercise of warrants,
conversion of the Series M Preferred Stock and conversion of certain
convertible promissory notes issued to Winter Harbor, LLC; or (d)
approximately 7,487,457 shares of common stock issuable upon conversion
of the Series N Preferred Stock or as payment of dividends thereon.
In order to comply with the applicable securities laws, if any, of
certain states, the Securities will be offered or sold in such states through
registered or licensed brokers or dealers in those states. In addition, in
certain states, such securities may not be offered or sold unless they have
been registered or qualified for sale in such states or an exemption from
such registration or qualification requirement is available and is complied
with.
I-Link has paid all of the expenses incident to the registration of
the foregoing securities (including registration pursuant to the securities
laws of certain states) other than commissions, expenses, reimbursements and
discounts of underwriters, dealers or agents, if any.
SELLING SECURITYHOLDERS
The following table sets forth the beneficial ownership of I-Link
securities as of February 22, 2000, the record date of the distribution of
the Dividend Shares by each person who is a selling securityholder.
<TABLE>
<CAPTION>
SECURITIES
BEING PERCENT OF OUTSTANDING
OFFERED COMMON STOCK OWNED
---------------- -------------------------------
DIVIDEND SHARES
ISSUABLE ON PRIOR TO AFTER
NAME OF BENEFICIAL OWNER CLASS C SHARES CLASS C SHARES(1) OFFERING OFFERING (2)
------------------------ -------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Steve M. Barnett 1,500 5,549 * 0
Richard L. Bazelon &
Eileen A. Bazelon 1,500 5,549 * 0
Richard G. David 1,625 6,012 * 0
Kenneth R. Falchuk 1,500 5,549 * 0
Hercules Systems, Inc. 750 2,775 * 0
Joseph Ingarra 812 3,004 * 0
William Joe Jackson &
Ann Street Jackson 1,987 7,351 * 0
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SECURITIES
BEING PERCENT OF OUTSTANDING
OFFERED COMMON STOCK OWNED
---------------- -------------------------------
DIVIDEND SHARES
ISSUABLE ON PRIOR TO AFTER
NAME OF BENEFICIAL OWNER CLASS C SHARES CLASS C SHARES(1) OFFERING OFFERING (2)
------------------------ -------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Leslie Group, Inc. (3) 3,000 11,099 * 0
Mario Marsillo, Jr. 500 1,850 * 0
Ronald Piasecki 7,500 27,747 * 0
Leonard M. Schiller 812 3,004 * 0
Phillip J. Schiller 812 3,004 * 0
SJG Management, Inc. 375 1,387 * 0
George L. Smith 750 2,775 * 0
Theodore Stern &
Elizabeth Stern 3,000 11,098 * 0
Joel A.Stone 2,250 8,324 * 0
Joyce N. Westmoreland 1,250 4,624 * 0
Joseph Wong 754 2,789 * 0
David H. Zises 1,500 5,549 * 0
Kenneth J. Zises 1,500 5,549 * 0
</TABLE>
-----------
* Less than one percent.
(1) Excludes 23,474 Dividend Shares which may become payable through
September 6, 2001, if and when declared by the board of directors.
(2) Unless otherwise indicated, assumes the exercise and/or sale of the
entirety of the securities being offered by the noted shareholder.
(3) The named securityholder was controlled by Mr. Joseph Cohen, deceased,
formerly a director of I-Link.
Shares of common stock covered by this prospectus may be reoffered
and resold from time to time through brokers in the over-the-counter market
or otherwise at prices acceptable to the selling securityholders. To I-Link's
knowledge, no specific brokers or dealers have been designated by any selling
securityholder nor has any agreement been entered into in respect of
brokerage commissions or for the exclusive sale of any securities which may
be offered pursuant to this prospectus. Alternatively, the selling
securityholder may from time to time offer the shares through underwriters,
dealers, or agents, which may receive compensation in the form of
underwriting discounts, concessions, or commissions from the selling
securityholders and/or the purchasers of the shares from whom they may act as
agents. The selling securityholder and any underwriters, dealers, or agents
that participate in the distribution of the shares may be deemed
"underwriters" under the Securities Act and any profit on the sale of the
shares by them and any discounts, commissions, or concessions received by any
such underwriters, dealers, or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
Under applicable rules and regulations promulgated under the
Exchange Act, any person engaged in a distribution of securities may not
simultaneously bid for or purchase securities of the same class for a period
of two business days prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the selling securityholders
17
<PAGE>
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, including without limitation Rule 10b-5 and
Regulation M, in connection with transactions in the shares during the
effectiveness of the registration statement of which this prospectus is a
part. All of the foregoing may affect the marketability of the shares.
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 July 5, 2000 there were 27,653,558
shares of common stock issued and outstanding and approximately 615 holders
of record of the common stock, and approximately 18,900 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. 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.
CLASS C PREFERRED STOCK
There are 240,000 shares of Class C Preferred Stock designated, of
which 16,499 shares are issued and outstanding as of July 5, 2000.
DIVIDENDS. The holders of the Class C Preferred Stock are entitled
to cumulative preferential dividends, when, as and if declared by the board
of directors, on a quarterly basis on November 15, February 15, May 15 and
August 15 each year in an amount equal to 8% per annum of the liquidation
preference per share of $60.00. Dividends will be paid, 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 ("Dividend Shares") based
upon the last sale price of a share of common stock for the five trading days
preceding the record date for a particular dividend, provided that the
Dividend Shares are covered by an effective registration statement. A
holder's right to receive any dividends ceases upon conversion of Class C
Preferred Stock into common stock. Except as otherwise provided by law,
shares of Class C Preferred Stock have no voting rights.
18
<PAGE>
CONVERSION RIGHTS. Unless previously redeemed, the Class C Preferred
Stock is convertible into shares of I-Link's common stock, at any time
commencing November 21, 1996, at the option of the holder, into such number
of shares of I-Link's common stock as shall equal $60 divided by the lower of
(i) $2.50, or (ii) the closing bid price for any five consecutive trading
days during the period commencing on September 6, 1996 and ending on March 5,
1998 (previously defined as the "Conversion Price"), subject to certain
adjustments for (a) the sale or issuance of common stock by I-Link at a price
less than the Conversion Price (except for shares issuable upon exercise or
conversion of securities outstanding or issuable by I-Link as of the date
hereof), (b) in the event I-Link's registration statement relating to the
Conversion Shares is not declared effective within twelve months after
September 6, 1996, the Conversion Price shall be subject to a reduction of
ten percent for each 90 day delay in the effective date of such registration
statement, or (c) in the event the closing bid price is less than $2.50 for
five consecutive trading days during the period from September 6, 1996 to the
date eighteen months thereafter (the "Adjustment Period"), the Conversion
Price shall be reduced to the lower of the then current Conversion Price or
the lowest of the average closing bid price for five consecutive trading days
during the Adjustment Period. In no event shall the Conversion Price be
adjusted below $1.25 on account of the adjustments described in (a), (b) or
(c); however, the Conversion Price is subject to adjustment under certain
other circumstances. As of February 22, 2000 (the Record Date), 33,677 shares
of Class C Preferred Stock remained outstanding.
AUTOMATIC CONVERSION. Unless previously redeemed, the Class C
Preferred Stock shall be automatically converted into the Conversion Shares
on September 6, 2001 at a Conversion Price equal to the lower of the then
current Conversion Price or 50% of the average closing bid price of I-Link's
common stock for the ten (10) trading days immediately preceding the fifth
anniversary of the Final Closing.
REDEMPTION. The Class C Preferred Stock is redeemable at any time
prior to September 6, 2000, at the option of I-Link, as determined by the
board of directors, on not less than thirty (30) nor more than sixty (60)
days written notice to registered holders at a redemption price equal to $60
per share plus accrued and unpaid dividends, provided (i) the Conversion
Shares are covered by an effective registration statement; and (ii) during
the immediately preceding thirty (30) consecutive trading days ending within
fifteen (15) days of the date of the notice of redemption, the closing bid
price of I-Link's common stock is not less than $8.00 per share.
The Class C Preferred Stock is redeemable at any time after
September 6, 2000, at the option of I-Link, on not less than thirty (30) nor
more than sixty (60) days written notice to registered holders at a
redemption price equal to $90 plus accrued and unpaid dividends, provided the
Conversion Shares are covered by an effective registration statement or the
Conversion Shares are otherwise exempt from registration.
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.
19
<PAGE>
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 the 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 the proposing 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,
the 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 those reports, no new business proposed by
a stockholder (acting in that capacity) shall be acted upon at an 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.
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 financial statements incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1999, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
20
<PAGE>
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
PAGE
Available Information................................. 2
Documents Incorporated by Reference................... 2
Prospectus Summary.................................... 3
The Company........................................... 3
Risk Factors.......................................... 4
Use of Proceeds....................................... 14
Plan of Distribution.................................. 14
Selling Securityholders............................... 15
Description of Securities............................. 17
Interests of Named Experts and Counsel................ 19
Legal Matters......................................... 19
Experts............................................... 20
148,062 SHARES OF COMMON STOCK ISSUABLE AS DIVIDENDS
[LOGO]
--------------
PROSPECTUS
--------------
_________, 2000
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses to be incurred by I-Link 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........................... $ 186
Printing and Engraving Expenses................ 10,000
Registrant's Counsel Fees and Expenses......... 15,000
Accountant's Fees and Expenses................. 5,000
Miscellaneous Expenses......................... 814
---------
Estimated Total................................ $31,000
========
</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.
I-Link's Bylaws provide that I-Link shall indemnify any such person
to the fullest extent provided by law and empowers I-Link to purchase and
maintain insurance on behalf of any such person.
I-Link previously entered into indemnification agreements with
certain officers and directors of I-Link 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
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an officer and/or a director of I-Link; 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 I-LINK
PURSUANT TO THE FOREGOING PROVISIONS, I-LINK 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.
ITEM 16. EXHIBITS.
5.1 Opinion of Counsel, filed herewith.
23.1 Consent of PricewaterhouseCoopers LLP, filed herewith.
23.2 Consent of Counsel, included in Exhibit 5.1 filed herewith.
ITEM 17. UNDERTAKINGS
I-Link 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.
I-Link hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of I-Link'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
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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.
(c) INCORPORATED ANNUAL AND QUARTERLY REPORTS
I-Link 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 I-Link pursuant to the foregoing provisions, or otherwise, I-Link
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 I-Link of expenses incurred or paid by
a director, officer, or controlling person of I-Link 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, I-Link 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, I-Link
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Draper, Utah, on July 19, 2000.
I-LINK INCORPORATED
By: /s/ John W. Edwards
---------------------------------------
John W. Edwards, Chairman of the Board,
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 July 19, 2000
------------------------------------- and Chief Executive Officer
John W. Edwards
/s/ Dror Nahumi President July 19, 2000
-------------------------------------
Dror Nahumi
/s/ John M. Ames Chief Operating Officer and July 19, 2000
------------------------------------- Acting Chief Financial Officer
John M. Ames
/s/ David E. Hardy Secretary July 19, 2000
-------------------------------------
David E. Hardy
/s/ Henry Y.L. Toh Director July 19, 2000
-------------------------------------
Henry Y.L. Toh
/s/ Thomas A. Keenan Director July 19, 2000
-----------------------------------
Thomas A. Keenan
------------------------------------- Director
David R. Bradford
/s/ Hal B. Heaton Director July 19, 2000
------------------------------------
Hal B. Heaton
</TABLE>
