SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNET COMMERCE CORPORATION
________________________________________________
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials: N/A
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration
statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
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(4) Date Filed: N/A
INTERNET COMMERCE CORPORATION
805 THIRD AVENUE
NEW YORK, NY 10022
--------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH ___, 1999
--------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders (the "Special Meeting") of Internet Commerce
Corporation, a Delaware corporation(the "Company"), will be held
at the offices of the Company, located at 805 Third Avenue, New
York, NY 10022, Ninth Floor, on March __, 1999, commencing at
10:00 A.M., local time, for the following purpose:
1. As required by the rules of The Nasdaq Stock Market, Inc.,
to approve the potential issuance of shares of the Company's
Class A Common Stock, $.01 par value per share, representing
19.9% or more of the issued and outstanding shares in connection
with the private placement of the Company's Series A Convertible
Preferred Stock and the sale of 100,000 shares of Class A Common
Stock to an individual investor.
2. To transact such other business as may properly be brought
before the Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
January 5, 1999, as the record date for the Special Meeting or
any adjournments thereof. Only stockholders of record on the
stock transfer books of the Company at the close of business on
that date are entitled to notice of, and to vote at, the Special
Meeting.
By Order of the Board of
Directors
/s/ Walter M. Psztur
Secretary
Dated: February __, 1999
New York, New York
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING,
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE THAT IS PROVIDED, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
INTERNET COMMERCE CORPORATION
805 THIRD AVENUE
NEW YORK, NY 10022
-------------------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
-------------------------------
March __, 1999
INTRODUCTION
This Proxy Statement is being mailed to stockholders on or
about February ___, 1999, in connection with the solicitation of
proxies by the Board of Directors of Internet Commerce
Corporation, a Delaware corporation ("ICC" or the "Company"), to
be used at the Special Meeting of Stockholders of the Company
(the "Special Meeting") to be held on February __, 1999.
Accompanying this Proxy Statement is a Notice of Special Meeting
of Stockholders and a form of proxy for such meeting.
SOLICITATION
All proxies which are properly completed, signed, dated and
returned to the Company in time will be voted in accordance with
the instructions thereon. The persons named as proxies are
officers of the Company. Proxies may be revoked by any
stockholder upon written notice to the Secretary of the Company
prior to the exercise thereof and stockholders who are present at
the Special Meeting may withdraw their proxies and vote in person
if they so desire.
The expense of preparing, assembling, printing and mailing
the form of proxy and the material used in the solicitation of
proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, the Company may
utilize the services of some of its officers and regular
employees to solicit proxies personally and by telephone,
facsimile and other electronic communication. The Company has
requested banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy materials to their
principals and to request authority for the execution of proxies
and will reimburse such persons for their services in doing so.
The cost of such additional solicitation incurred otherwise than
by use of the mails is estimated not to exceed $5,000.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on
January 5, 1999 the "Record Date", as the record date for the
determination of stockholders who are entitled to notice of and
to vote at the Special Meeting and any adjournments thereof. At
the close of business on the Record Date, the Company had issued
and outstanding and voting as a class 1,303,694 shares of Class A
Common Stock, $.01 par value per share (the "Class A Common
Stock"), entitled to one vote per share, and 194,397 shares of
Class B Common Stock, $.01 par value per share (the "Class B
Common Stock"), entitled to six votes per share. In addition,
although scheduled to be redeemed by the Company as of March 31,
1999, the Company also has 572,854 shares of Class E-1 Common
Stock, $.01 par value per share, and Class E-2 Common Stock, $.01
par value per share (together, the "Redeemable Common Stock"),
entitled to one vote per share, which vote as a class with the
Class A and Class B Common Stock through such date. The Class A
Common Stock, Class B Common Stock and the Redemmable Common
Stock are sometimes referred to herein as the "Common Stock." A
majority of the outstanding shares of the Common Stock entitled
to vote at the Special Meeting is required to establish a quorum
at the Special Meeting.
Common Stock representing a majority of the outstanding
voting shares of the Company is required to approve the proposal.
Shares of Common Stock represented by proxies that are properly
executed, duly returned and not revoked will be voted in
accordance with the instructions contained therein. If no
specification is indicated in the proxy, the shares of Common
Stock represented thereby will be voted to approve the potential
issuance of shares of Class A Common Stock representing 19.9% or
more of the issued and outstanding shares of such Common Stock in
connection with the private placement of the Company's Series A
Convertible Preferred Stock and the sale of 100,000 shares of
Class A Common Stock to an individual investor (the "Share
Issuance Proposal") and (ii) for any other matter that may
properly be brought before the Special Meeting in accordance with
the judgment of the person or persons voting the proxies.
For purposes of determining the presence of a quorum for
transacting business at the Special Meeting, abstentions and
broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from
the beneficial owner or other persons entitled to vote shares on
a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that
are present but that have not been voted. Broker non-votes will
have no effect on the Share Issuance Proposal. Abstentions may
be specified on the Share Issuance Proposal, will be counted as
present and will have the effect of a vote against the Share
Issuance Proposal.
Certain stockholders, including current and former officers
and directors of the Company, who in the aggregate own or control
shares of Common Stock representing more than a majority of the
voting power of the Common Stock have indicated that they would
vote in favor of the proposal. Accordingly, the approval of the
Share Issuance Proposal is assured.
SECURITY OWNERSHIP OF PRINCIPAL
HOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of
Common Stock owned beneficially as of the Record Date by each
principal holder, director, each executive officer and all
directors and executive officers as a group. Other than as
disclosed in the following table and accompanying footnotes, the
directors, the named executive officers, and the directors and
executive officers as a group did not own any other equity
securities of the Company. Unless otherwise noted, each
individual has sole voting and investment power over the shares
indicated in the table. Fractional shares are rounded to the
nearest whole number.
<TABLE>
<CAPTION>
Class A Class B Reedemable
Common Stock (2) Common Stock Common Stock (3)
---------------- ---------------- ---------------- % Vote of
Name and Address Number Number Number of all
of Beneficial Owner (1) of shares % of shares % of shares % classes
- --------------------------- --------- ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard J. Berman (2)(6)(7) 166,667 5.2 - - - - 3.4
Arthur R. Medici (2) 200,000 6.2 14,000 7.2 54,000 9.4 6.8
Michele Golden (2)(5) 423,172 13.1 - - - - 8.5
Michael Cassidy (2)(5) 282,114 8.7 - - - - 5.7
Dominic Bassani (8) 400,000 12.4 - - - - 8.0
Charles C. Johnston (2) 39,447 1.2 - - - - *
Peter Ruel (2)(8) 100,000 3.1 - - - - 2.0
Donald Gordon (2) 23,334 * - - - - *
David Hubbard (2) 83,346 2.6 - - - - 1.7
Walter M. Psztur (2) 53,048 1.6 - - - - 1.1
All executive officers
and directors as a
group (10 persons) 1,771,128 54.8 14,000 7.2 54,000 9.4 38.4 (9)
Voting Trust (4) - - 169,033 87.0 236,326 41.3 25.1 (10)
* Represents less than 1%
</TABLE>
- -------------------------------------------------------------------------------
(1) Except as otherwise noted, the address of each benefical
owner is in care of the Company at its principal office at
805 Third Avenue, Ninth Floor, New York, New York 10022.
(2) The executive officers and directors as a group hold a total
of 897,523 immediately exercisable options to purchase Class
A Common Stock. All of which are "in the money" at option
prices ranging from approximately $.26 to $3.88, which are
included in the table above. Mr. Berman holds 116,667 of
these options, Mr. Medici holds 200,000, Ms. Golden holds
234,517, Mr. Cassidy holds 156,344, Mr. Johnston holds
30,267, Mr. Gordon holds 23,334, Mr. Hubbard holds 83,346
and Mr. Psztur holds 53,048.
(3) The Redeemable Common Stock includes shares of both Class
E-1 Common Stock and Class E-2 Common Stock. As of July 31,
1998, the Class E Common Stock was no longer convertible
into shares of Class A Common Stock. The Redeemable Common
Stock will continue to retain its voting power until March
31, 1999, when all of such shares will be redeemed pursuant
to their terms.
(4) Substantially all of the Class B Common Stock and Redeemable
Common Stock beneficially owned by Thomas H. Lipscomb,
Alan N. Alpern, and Michael T. Brooks constituting 20.6%,
2.0% and 15.8% of the vote of all classes of common stock
of the Company, respectively, have been deposited in the
Voting Trust or are subject to an irrevocable proxy until
February 2000, except in the case of Mr. Brook's shares
which are subject to the Company's option to purchase his
Class B Common Stock at any time. Pursuant to the Voting
Trust and irrevocable proxy, the shares will be voted at
the direction of a majority of the Company's non-management
directors and Mr. Berman and Arthur R. Medici former
President and current Director of the Company, subject to
certain exceptions, including the dissolution or liquidation
of the Company, certain mergers and sale of all or
substantially all of the Company's assets. The shares
deposited in the voting trust or irrevocable proxy will be
released from the voting trust and irrevocable proxy on the
sale of the shares by the beneficiary owner thereof.
(5) Mr. Cassidy and Ms. Golden received Class A Common Stock
pursuant to the Merger of ICCSUB into the Compnay effective
September 25, 1998.
(6) As part of his employment agreement, Mr. Berman will have
38,750 shares of Class A Common Stock issuable to him in March
1999. These shares are included in the chart above.
(7) As a Bridge Note Investor, Mr. Berman holds 15,000
immediately exercisable bridge warrants to purchase 15,000 shares
of Class A Common Stock. The exercise price of the bridge
warrants is $2.50. These shares are included in the chart above.
(8) Mr. Bassani, former interim Chief Operating Officer of the
Company and current consultant to the Board of Directors, holds
400,000 immediately exercisable warrants to purchase 400,000
shares of Class A Common Stock. Mr. Ruel, a director of the
Company, holds 100,000 immediately exercisable warrants to
purchase 100,000 shares of Class A Common Stock. The exercise
price of these warrants is $2.50. These shares are included in
the chart above.
(9) The % vote of all classes as of the record date for, all
executive officers and directors as a group was 9.3 %.
(10) The % vote of all classes as of the record date for, the
voting trust was 41.1 %.
Voting Trust
Thomas H. Lipscomb (former Chairman of the Board and
President of the Company), and Alan N. Alpern (former Chief
Financial Officer of the Company) have deposited substantially
all of the shares of Common Stock beneficially owned by them and
other members of their families, which includes Class B Common
Stock and Redeemable Common Stock into a voting trust (the
"Voting Trust") until February 18, 2000. As of May 1, 1998,
123,739 shares of Class B Common Stock were forfeited pursuant to
an Escrow Agreement dated as of September 11, 1992, as amended
September 20, 1994 (the "Escrow Agreement"), and such shares were
delivered by the Escrow Agent to the Company which holds the
shares in treasury. As of June 19, 1998, Michael T. Brooks
agreed to deposit 80,000 shares of Class B Common Stock into the
Voting Trust. Accordingly, as of January 5, 1999 the shares in
the Voting Trust represent 41.1% of the total voting power of the
Company. The shares of Common Stock held in the Voting Trust
will be voted at the direction of a majority of the
non-management directors of the Company and Richard J. Berman,
the Chief Executive Officer of the Company and Arthur R. Medici,
former President and current Director of the Company. The Voting
Trust and the disproportionate vote afforded the Class B Common
Stock could serve to impede or prevent a change of control of the
Company. As a result, potential purchasers may be discouraged
from seeking to acquire control of the Company through the
purchase of Class A Common Stock, which could have a depressive
effect on the price of the Company's securities. On January 25,
1999, Mr. Alpern notified the Voting Trustees that he will
withdraw 4,174 B shares from the Voting Trust effective February
24, 1999.
MARKET FOR THE COMPANY'S SECURITIES
AND STOCKHOLDER MATTERS
The Company's Units, Class A Common Stock, Class A Warrants
and Class B Warrants are quoted on the Nasdaq SmallCap Market of
The Nasdaq Stock Market, Inc. "Nasdaq" under the symbols ICCSU,
ICCSA, ICCSW and ICCSZ, respectively. The following table sets
forth the high and low closing bid prices of the Company's
securities for the periods indicated. These quotations represent
prices between dealers in securities, do not include retail
mark-ups, mark-downs or commissions and do not necessarily
represent actual transactions. The prices have been adjusted to
reflect a 1 for 5 reverse stock split which became effective as
of September 25, 1998. The Company's securities commenced
trading on January 18, 1995.
Fiscal Years Ended July 31
1997 1998
--------------------- ---------------------
High Low High Low
-------- -------- -------- --------
Units
1st Quarter $48.750 $40.000 $25.000 $ 8.125
2nd Quarter 47.500 15.000 18.125 5.625
3rd Quarter 45.000 25.000 11.250 2.190
4th Quarter 40.625 13.125 4.375 0.625
Class A Common Stock
1st Quarter 28.125 15.000 13.750 5.000
2nd Quarter 23.750 10.313 10.000 4.845
3rd Quarter 21.015 11.565 10.000 1.875
4th Quarter 20.625 6.250 4.690 0.938
Class A Warrants
1st Quarter 14.688 7.500 8.750 0.625
2nd Quarter 17.500 3.125 4.375 0.940
3rd Quarter 15.315 6.250 2.345 0.315
4th Quarter 13.750 3.750 0.940 0.080
Class B Warrants
1st Quarter 12.500 6.250 5.470 0.625
2nd Quarter 12.500 1.875 3.750 0.625
3rd Quarter 14.375 4.375 1.720 0.155
4th Quarter 12.500 2.500 1.250 0.080
Interim 1999 Fiscal Quarters Ended
- ---------------------------------------------
High Low
-------- --------
Units
1st Quarter $ 2.750 .125
2nd Quarter $14.500 2.000
Class A Common Stock
1st Quarter $ 2.125 .625
2nd Quarter $12.000 1.625
Class A Warrants
1st Quarter $ - -
2nd Quarter $ .001 .001
Class B Warrants
1st Quarter $ - -
2nd Quarter $ .001 .001
Holders
As of December 31, 1998, there were approximately 160 record
holders of the Class A Common Stock, approximately 24 record
holders of the Class B Common Stock, approximately 100 record
holders of the Redeemable Common Stock, and approximately 150
record holders of the Company's Class A and Class B Warrants.
Dividends
The Company has not paid any cash dividends on its Common
Stock and does not intend to declare or to pay cash dividends in
the foreseeable future. The Company expects that it will retain
all available earnings, if any, to finance and expand its
business.
Possible Delisting by Nasdaq
of Units, Class A Common Stock,
Class A Warrants and Class B Warrants
While the Company's Units, Class A Common Stock, Class A
Warrants and Class B Warrants are currently quoted on the Nasdaq
SmallCap Market, there can be no assurance that the Company will
meet the criteria for continued listing. Continued inclusion on
the Nasdaq SmallCap Market requires that, among other things, the
Company have at least $2,000,000 in "net tangible assets" ("net
tangible assets" equals total assets less total liabilities and
goodwill), or at least $35,000,000 in total market value, or at
least $500,000 in net income in two out of its last three fiscal
years, as well as at least 500,000 shares in the public float, at
least $1,000,000 in market value of the public float, and a bid
price of not less than $1.00 per share for 30 trading days.
If the Company is unable to satisfy the Nasdaq SmallCap
Market continued listing requirements, its securities may be
delisted from the Nasdaq SmallCap Market. In such event, trading,
if any, in the Units, Class A Common Stock and Warrants would
thereafter be conducted in the over-the-counter market in the so
called "pink sheets" or the NASD's "Electronic Bulletin Board."
Consequently, the liquidity of the Company's securities could be
severely adversely affected, not only in the number of securities
which could be bought and sold, but also through delays in the
timing of transactions, reduction in security analysts' and media
coverage of the Company and lower prices for the Company's
securities than might otherwise be attained.
In July 1998, the Company was notified by Nasdaq that it no
longer met the minimum net tangible assets, market capitalization
or net income requirements for continued listing on the Nasdaq
SmallCap Market. In October 1998, Nasdaq further notified the
Company that it also did not meet the minimum market maker
requirement in connection with its warrant listings on the Nasdaq
SmallCap Market, and also raised concerns about the Company's
compliance with Nasdaq's shareholder approval requirements
related to a prior issuance by the Company of shares of Class A
Common Stock representing more than 20% of the then-issued and
outstanding shares of Class A Common Stock in connection with the
merger of the Company into its majority-owned subsidiary. In a
letter dated October 22, 1998, Nasdaq informed the Company that
it would not be afforded an extension of time in which to achieve
compliance with the continued listing requirements of the
SmallCap Market and that, unless the Company requested a hearing
in that regard, the securities of the Company would be delisted
from the SmallCap Market effective with the close of business on
October 29, 1998.
On October 27, 1998, the Company requested a hearing with
the Nasdaq Hearing Department, which stayed the delisting. The
hearing was held on January 7, 1999. At that hearing, the
Company presented its plan for sustained compliance with the
continued listing requirements of the SmallCap Market. Nasdaq
informed the Company that it would notifiy the Company of its
decision within thirty days. As of February 11, 1999, the Nasdaq
decision is still pending. If delisted, the Company's securities
would be traded in the over-the-counter market and subject to the
Securities and Exchange Commission's penny stock restrictions set
forth in Rule 15g-9 promulgated under the Securities Exchange Act
of 1934, as amended "Exchange Act".
Effect of Outstanding Options
and Warrants; Registration Rights.
After giving effect to the issuance of the securities issued
in a 1997 private placement "1997 Private Placement"and the
anti-dilution adjustments in the exercise price of the Class A
Warrants and Class B Warrants issued and outstanding or issuable
upon the exercise of certain options, the Company has outstanding
as of the Record Date:
(i) an aggregate of 942,944 Class A Warrants
exercisable at $29.10 for 942,944 additional shares of Class
A Common Stock and 942,944 Class B Warrants;
(ii) an aggregate of 1,699,454 Class B Warrants
(including the 942,944 Class B Warrants issued upon exercise
of the Class A Warrants), exercisable at $39.15 for
1,699,454 shares of Class A Common Stock;
(iii) the Unit Purchase Options issued to D.H. Blair
and its designees in connection with the Company's initial
public offering in 1995 (the "IPO Option") and the 1997
Private Placement to purchase 31,000 and 112,229 Units,
respectively, which Units contain an aggregate of 143,229
shares of Class A Common Stock, 160,016 Class A Warrants and
an aggregate of 320,032 Class B Warrants (including 160,016
Class B Warrants underlying the Class A Warrants), such
Class A Warrants and Class B Warrants are exercisable for an
aggregate of 480,048 shares of Class A Common Stock;
(iv) options to purchase 1,960,000 shares of Class A
Common Stock under the Company's 1994 Stock Option Plan, as
amended (1994 Plan) at exercise prices ranging from
approximately $.26 to $20, and 4,000 shares of Class A
Common Stock under the Company's 1992 Stock Option Plan
(1992 Plan) at exercise prices of $20.00;
(v) options to purchase 11,500 shares of Class A Common
Stock, 5,750 shares of Class E-1 Common Stock and 5,750
shares of Class E-2 Common Stock;
(vi) 42,063 other warrants (the "Private Placement
Warrants") to purchase 42,063 shares of Class A Common
Stock, 18,825 shares of Class E-1 Common Stock and 18,825
shares of Class E-2 Common Stock;
(vii) Bridge Warrants, to purchase 778,500 shares of
Class A Common Stock at $2.50 per share
(viii) other warrants for issuance to consultants to
purchase 500,000 shares of Class A Common Stock at $2.50 per
share.
(ix) $175,000 aggregate principle amount of Series S
Preferred Stock, which may, under certain circumstances, convert
into shares of Class A Common Stock commencing no later than July
1, 1999, at the rate of $12,000 per month based upon the closing
price of the Class A Common Stock on the trading day immediately
preceding the first day of each month after such date;
(x) NASD registered broker/dealers who participated
in the Bridge Placement will be compensated with warrants to
purchase Class A Common Stock. The number of warrants to be
issued will not exceed 116,775, and is estimated to be
approximately 60,000.
(xi) 22,000 shares of Class A Common Stock is issuable
to Robert Nagel, former Vice President and Director of
Technology of the Company, as part of a settlement agreement
to resolve all actions against the Company.
(xii) Class A Common Stock to be issued to Win Capital
Corporation and its designees in connection with the Company's
1999 Private Placement, (Reg D), subject to shareholders approval,
to purchase 90,000 shares at $5.00 per share.
The existence of the IPO Options and Private Placement Unit
Purchase Options, outstanding options and warrants, Class A
Warrants, Class B Warrants, Series Preferred Stock and other
options and warrants that may be issued by the Company may hinder
future financing by the Company. Further, the holders of such
options and warrants may exercise them at a time when the Company
would otherwise be able to obtain additional equity capital on
terms more favorable to the Company. No prediction can be made
as to the effect, if any, that sale of these securities or the
availability of such securities for sale without restriction will
have on the market prices of the Company's securities prevailing
from time to time. Nevertheless, the possibility that
substantial amounts of securities may be sold in the public
market may adversely affect prevailing market prices for the
Company's securities and could impair the Company's ability to
raise capital through the sale of its securities.
The Class A Warrants and the Class B Warrants are subject to
redemption by the Company at a redemption price of $.25 per
Warrant upon not less than 30 days' prior written notice if the
closing bid price of the Class A Common Stock shall have averaged
in excess of $45.50 and $61.25 per share, respectively as
adjusted by the reverse stock split, for 30 consecutive trading
days ending within 5 days of the notice. This condition has not
been satisfied with respect to any of the Warrants, and the
Company does not anticipate that this condition will be met in
the foreseeable future. Such redemption of the Warrants could
force the holders to exercise such Warrants and pay the exercise
prices therefor at a time when it may be disadvantageous for the
holders to do so, to sell the Warrants at the then current market
price when they might otherwise wish to hold the Warrants, or to
accept the redemption price which, at the time the Warrants are
called for redemption, is likely to be substantially less than
the market value of the Warrants.
In addition, holders of the IPO Options and Private
Placement Unit Purchase Options have registration rights with
respect to the underlying securities. Exercise of the
registration rights may involve substantial expense to the
Company. Additionally, the Company's other warrants were
exercisable through February 10, 2002 at exercise prices of $2.50
to $39.15 per share as adjusted, and contain anti-dilution
provisions, demand and "piggy-back" registration rights.
The shares of Class A Common Stock issuable upon exercise of
the Class A or Class B Warrants issued or issuable principally in
connection with the Company's IPO and 1997 Private Placement
which were registered pursuant to the Company's Registration
Statement or Form S-3 that became effective on May 22, 1997 may
be resold without restriction provided there is a current
prospectus under the Securities Act relating thereto and
applicable state securities laws are complied with.
PROPOSAL I--APPROVAL OF THE SHARE
ISSUANCE PROPOSAL
In January 1999, the Company completed a $2.595 million
private bridge financing. As indicated in the Company's
Quarterly Report on Form 10-QSB for the quarter ended October 31,
1998, the Company is in need of additional financing to fund the
Company's operations. At October 31, 1998, the Company had
negative $ 1.9 million of working capital and $112,877 of cash
and cash equivalents. The Company currently estimates that cash
on hand together with cash generated from operations will be
sufficient to satisfy the Company's cash requirements only until
April 30, 1999. The Board of Directors of the Company has
considered various means of procuring additional financing and
has determined that at the present time a private offering (the
"Private Placement") of the Company's Series A Convertible
Redeemable Preferred Stock (Series A Preferred Stock) would be in
the best interests of the Company and its stockholders. [The net
proceeds of the Private Placement will be used for sales and
marketing, research and development and general working capital
purposes in the proportions of __%, __% and __%, respectively.]
The Company commenced a $3,000 Private Placement,
("Regulation D or Reg D"), immediately following the closing of
the private bridge financing. As of February 11, 1999, [TO BE
UPDATED] the Company has received subscription agreements for
$2,425,000 and cash to its escrow account in the amount of
$850,000. Pursuant to Nasdaq Rule 4310(c)(25)(H)(i) ("Rule
4310(c)(25)(H)(i)"), the Company is required to obtain
stockholder approval in connection with any transaction, other
than a public offering, that involves the issuance by the Company
of Common Stock (or securities convertible into or exercisable
for Common Stock) that equals 20% or more of the shares of Common
Stock outstanding before the issuance of such securities (the
"20% Limitation"). On the Record Date, the closing sale price of
the Class A Common Stock on the Nasdaq SmallCap Market was $5.875
per share. The Private Placement consists of an offering of
3,000 shares of Series A Preferred Stock at a price per share of
$1,000. In addition, the Company has offered the Private Bridge
holders the opportuninty to convert their Bridge Notes into the
Series A Preferred Stock. All bridge investors have agreed to
convert subject to shareholders approval and Nasdaq compliance
as a result an additional 2,595 shares of Series A Preferred
Stock will be issued, and the total of the Seris A Prefferred
Stock will be 5,595.
If the stockholders approve the Share Issuance Proposal,
the Board of Directors of the Company will be authorized to issue
shares of Common Stock representing more than 20% of the issued
and outstanding shares thereof and to determine the other terms
and conditions of the Private Placement.
The Series A Preferred Stock
Annex I attached hereto is the proposed form of Designation
of Series and Determination of Rights and Preferences of Series A
Convertible Redeemable Preferred Stock (Designation). The
following is a summary of the Designation and of the rights and
preferences of the Series A Preferred Stock
The Series A Convertible Preferred is convertible into Class
A Common Stock of the Company at a 25% discount to the market
with the cap price of $5.00 per share. It has a term of ____
years and a coupon of ____%. The Class A Common Stock underlying
the Series A Convertible Preferred must be registered within 120
days of the closing of the 1999 Private Placement.
The Board of Directors of the Company has determined to
obtain approval of the Private Placement in order to avoid a
possible conflict with Rule 4310(c)(25)(H)(i), which conflict
could result in the removal of the Company's Common Stock from
inclusion on the Nasdaq SmallCap Market. Approval by the
stockholders for the Private Placement is assured.
The Company believes that, notwithstanding the consummation
of the Private Placement, it will be required to seek additional
financing in the future to fund its operations and to continue to
develop its products. With the consummation of the Private
Placement, the Company anticipates that its cash requirements
should be satisfied for approximately nine to twelve months.
CAPITALIZATION
The following table sets forth the debt and the total
capitalization of the Company (i) as of October 31, 1998, (ii)
pro forma to give effect to the sale of the Series A Preferred
Stock in the Private Placement at the offering price of $1,000
per share and the application of the estimated net proceeds
therefrom, after deducting offering expenses estimated at
$300,000. The table should be read in conjunction with the
financial statements, including the notes thereto, attached
hereto as Annex B and Annex C.
(i) (ii)
October 31, October 31,
1998 1998
(unaudited) pro forma
Liabilities
Accounts Payable $ 627,034 $ 161,034
Bridge notes, net of debt disc. 518,084 -
Notes payable 157,649 -
Capital lease obligation 261,572 261,572
Accrued expenses 628,786 538,566
------------- ------------
Total liabilities $ 2,193,125 $ 961,172
------------- ------------
Redeemable Common Stock 5,729 5,729
Stockholders Equity
Common & Preferred 14,769 26,779
Additional paid-in capital 15,106,015 20,912,309
Notes receivable (112,500) -
(Deficit) accumulated during
the development stage (15,390,531) (15,434,531)
------------- -------------
Total stockholders equity $ (382,247) $ 5,504,557
------------- -------------
Total liabilities & equity $ 1,816,607 $ 6,471,458
------------- -------------
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
SHARE ISSUANCE PROPOSAL
ANNUAL AND QUARTERLY REPORT
INFORMATION INCORPORATED BY REFERENCE
All stockholders of record as of the Record Date are
concurrently herewith being sent a copy of the Company's (i)
Annual Report on Form 10-KSB for the fiscal year ended July 31,
1998, which contains certified financial statements of the
Company and (ii) Quarterly Report on Form 10-QSB for the quarter
ended October 31, 1998, which such documents are incorporated
herein by reference.
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR
ENDED JULY 31, 1998 (WITHOUT EXHIBITS) AND QUARTERLY REPORT ON
FORM 10-QSB FOR THE QUARTER ENDED OCTOBER 31, 1998, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO WALTER M.
PSZTUR, SECRETARY, AT INTERNET COMMERCE CORPORATION, 805 THIRD
AVENUE, 9TH FLOOR, NEW YORK, NEW YORK 10022
OTHER MATTERS
As of the date of this Proxy Statement, management knows of
no matters other than those set forth herein which will be
presented for consideration at the Special Meeting. If any other
matter or matters are properly brought before the Special Meeting
or any adjournment thereof, the persons named in the
accompanying Proxy will have discretionary authority to vote,
or otherwise act, with respect to such matters in accordance
with their judgment.
Respectfully submitted,
/s/ Walter M. Psztur
-----------------------
Secretary
New York, New York
February __, 1999
ANNEX A
DESIGNATION OF SERIES AND
DETERMINATION OF RIGHTS AND PREFERENCES OF
SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK
ANNEX B
ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED JULY 31, 1998
ANNEX C
QUARTERLY REPORT ON FORM 10-QSB FOR
THE QUARTER ENDED OCTOBER 31, 1998
