PROSPECTUS
INTERNET COMMERCE CORPORATION
o In our initial public offering in January 1995, we issued 1,550,000 units,
or IPO units, each IPO unit consisting of one class A warrant, one class B
warrant and one share of class A common stock. Each class A warrant is
exercisable at an exercise price of $21.30 for one class B warrant and one
share of class A common stock. Each class B warrant is exercisable at an
exercise price of $28.66 for one share of class A common stock. This
prospectus relates to the public offering from time to time of up to (i)
331,468 of these class B warrants that holders of these class A warrants
may purchase upon exercising these class A warrants and (ii) 1,013,151
shares of our class A common stock that holders of the class B warrants
described in clause (i) and holders of the class B warrants included in the
IPO units may purchase upon exercising these class B warrants. The class B
warrants and the class A common stock covered by this prospectus were
registered in our initial public offering.
o Our class B warrants are traded on the OTC Bulletin Board under the symbol
ICCSZ. On March 27, 2000, the last sale price of the class B warrants was
$36.00.
o Our common stock is traded on The Nasdaq SmallCap Market under the symbol
ICCSA. On March 27, 2000, the last sale price for the common stock was
$54.25.
o We filed a registration statement on form S-3 (file no. 333-80043) which
became effective on October 18, 1999 covering the resale of up to 5,476,280
shares of our class A common stock.
o We filed a registration statement on form S-3 (file no. 333-93301) which
became effective on March 1, 2000 covering the resale of up to 955,289
shares of our class A common stock.
o This investment involves a high degree of risk. You should carefully
consider the risk factors beginning on page 5 of this prospectus before you
decide to invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 28, 2000
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TABLE OF CONTENTS
Page
Prospectus Summary.............................................................3
Risk Factors...................................................................5
Risks Relating to ICC.......................................................5
Risks Relating to the Internet and Online Commerce Aspects of
our Business............................................................... 9
Risks Relating to this Offering............................................10
Forward-Looking Statements....................................................12
Use of Proceeds...............................................................12
Business......................................................................12
Plan of Distribution..........................................................16
Description of Securities.....................................................16
Legal Matters.................................................................22
Experts.......................................................................22
Where You Can Find More Information...........................................22
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. This summary may not contain all of the information that you
should consider before purchasing our class B warrants or shares of our class A
common stock. You should read the entire prospectus carefully, including Risk
Factors commencing on page 5, before making an investment decision.
Internet Commerce Corporation, or ICC
Business Description
Our CommerceSense service uses the Internet and our proprietary
technology to deliver our customers' documents and data files to members of
their trading communities, many of which may have incompatible systems, by
translating the documents and data files into any format required by the
receiver. We believe that our CommerceSense service has significant advantages
over traditional value added networks, or VANs, and email-based and other
Internet-based systems, including lower cost, higher level of service, greater
transmission speed and more features.
We use CommerceSense to provide the following services:
o Traditional VAN services -- CommerceSense provides the full
suite of traditional VAN services, but uses the Internet to
provide cost savings and increased capabilities for our
customers;
o EDI for web-based retailers -- CommerceSense provides an
electronic document and data file delivery link between
web-based retailers and their vendors that require that
documents and data files be transmitted using electronic data
interchange, or EDI, format;
o EDI to fax service -- CommerceSense can translate electronic
documents into fax format and send the documents by fax to our
customers' trading partners that cannot receive electronically
transmitted documents; and
o Large-scale electronic document management and delivery --
CommerceSense can transmit large-scale non-EDI electronic
documents and data files and provides real-time delivery,
archiving, security, authentication and audit services.
Business Strategy
We believe that our CommerceSense service provides a platform with many
applications that will allow our customers to integrate a substantial portion of
their document and data file delivery methods into a single, seamless process
with significantly less administrative effort and cost. We intend to continue to
market CommerceSense as a one-stop electronic document and data delivery service
to the 2,500 largest companies in the United States and abroad that use EDI to
communicate with their vendors. We believe that the cost and ease of use of our
CommerceSense service will allow these companies to request or encourage their
smaller trading partners to conduct electronic commerce using CommerceSense.
The address of our principle executive office is 805 Third Avenue, New
York, New York 10022. Our telephone number at that address is (212) 271-7640.
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Recent Developments
ICC has established a strategic global alliance with Cable & Wireless,
a global provider of Internet, data, voice and messaging services, to jointly
market and sell their respective product and service offerings in the
business-to-business e-commerce marketplace. Cable & Wireless will be entitled
to commissions for sales of ICC products and services based on quarterly target
levels to be agreed upon. These commissions will be payable in shares of class A
common stock valued at the then fair market value of such shares.
As part of these arrangements, Cable & Wireless purchased for $10
million 10,000 shares of series C convertible redeemable preferred stock, or
series C preferred stock, that is initially convertible into shares of class A
common stock at $22.34 per share. Cable & Wireless also received 400,000
warrants to purchase class A common stock of ICC. The warrants are exercisable
until January 12, 2005 at $22.21 per share.
ICC has elected a nominee of Cable & Wireless to its Board of Directors
and has agreed to allow Cable & Wireless to participate in any equity offering
on the same terms and conditions as other purchasers to maintain its percentage
interest in ICC.
ICC has completed an addition $9.5 million equity financing comprised
of $5 million from Acorn Investment Trust, $2.5 million from Firstar Investment
Research & Management, LLC and $2 million from Bantry Bay Ventures. ICC issued a
total of 434,184 shares of its Class A Common Stock in this financing based on
the market value of ICC's Class A Common Stock on the dates ICC entered into
definitive agreements with the investors. These dates ranged from November 23 to
26, 1999.
The Offering
Class A common stock to be
offered by ICC..................................................1,013,151 shares
Class B warrants to be
offered by ICC...........................................................331,468
Class A common stock to be
outstanding after the offering..............................6,578,456 shares (1)
Nasdaq SmallCap Market symbol..............................................ICCSA
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(1) This information is based on the number of shares of class A common
stock outstanding on March 21, 2000. It includes all of the shares of class A
common stock being offered by this prospectus by ICC. It excludes (a) 1,512,734
shares of class A common stock issuable upon exercise or conversion of other
warrants, series A convertible redeemable preferred stock, series C preferred
stock and class B common stock outstanding on that date and (b) 3,030,791 shares
then issuable under outstanding options or reserved for issuance under our 1994
stock option plan.
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RISK FACTORS
You should carefully consider each of the following risk factors in
addition to the other information contained in this prospectus before purchasing
our class B warrants or shares of our class A common stock. Investing in our
class B warrants or our class A common stock involves a high degree of risk. Any
of the following risks could materially and adversely affect our business,
operating results, financial condition and the market price of our class B
warrants or our class A common stock and could result in the complete loss of
your investment.
Risks Relating to ICC
We have a limited operating history and there is insufficient
historical information to determine whether we will successfully implement any
of our business strategies. We were founded as Infosafe Systems, Inc. in
November 1991 and from 1991 to 1997 we conducted limited operations and
developed products that we were unable to exploit commercially and consequently
discontinued. In 1998, we shifted our business emphasis to focus exclusively on
the development and marketing of our CommerceSense service and launched the
current version of our CommerceSense service commercially in April 1999. As a
result, we have only a limited operating history and there is little historical
information on which to evaluate our business and prospects. We may not be
successful in implementing any of our business strategies.
We have never earned a profit and expect to incur significant losses.
We have incurred significant losses since we were founded in 1991. We have never
earned a profit in any fiscal quarter and, as of January 31, 2000, we had an
accumulated deficit of approximately $30.9 million. We expect our cost of
revenue and operating expenses to increase significantly, especially in the
areas of marketing, customer installation and customer service. As a result, we
expect to incur additional losses in the future.
We may not achieve profitability. The profit potential of our business
model is unproven. Our revenue is dependent on the number of customers who
subscribe to our CommerceSense VAN service and the volume of the data, documents
or other information they send or retrieve utilizing this service. The success
of our CommerceSense VAN service and our other proposed services depends to a
large extent on the future business-to-business electronic commerce using the
Internet, which is uncertain. If we experience a shortfall in our estimated
revenue, we may be unable to adjust spending in a timely manner and may not
achieve profitability.
We currently depend primarily on our CommerceSense VAN service and may
not be able to continue to expand into new business areas. We are currently
focusing on our CommerceSense VAN service. As a result, our financial condition
will depend heavily on the success or failure of this service. It is difficult
to predict demand and market acceptance for this service in the new and rapidly
evolving business-to-business electronic commerce market. If our CommerceSense
VAN service is not successful, our revenue may not increase sufficiently for us
to become profitable.
We are expanding our operations by developing and marketing new and
complementary services using our CommerceSense service as a platform to provide
these additional services or systems. We cannot assure you that we will be able
to continue to do so effectively.
If we are unable to manage our growth, our financial results will
suffer. Our ability to implement our business plan successfully in a new and
rapidly-evolving market requires effective planning and growth management. If we
cannot manage our anticipated growth effectively, our business and financial
results will suffer. We plan to expand our existing operations substantially,
particularly those relating to sales and marketing, customer installation and
technical support. We expect that we will
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need to continue to manage and to expand multiple relationships with customers,
Internet service providers and other third parties. We also expect that we will
need to continue to improve our financial systems, procedures and controls and
will need to expand, train and manage our workforce, particularly our
information technology staff. We also intend to expand our services, which may
require additional resources and employees.
We may face capacity constraints which impede our revenue growth and
business profitability. The satisfactory performance, reliability and
availability of our network infrastructure, customer support and document
delivery systems and our web site are critical to our reputation and our ability
to attract customers and maintain adequate customer service levels. Any
significant or prolonged capacity constraints could prevent customers from
sending or gaining access to their documents or other data or accessing our
customer support services for extended periods of time. This would decrease our
ability to acquire and retain customers and prevent us from achieving the
necessary growth in revenue to achieve profitability. If the amount of traffic
increases substantially and we experience capacity constraints, we will need to
expand further and upgrade our technology and network infrastructure. We may be
unable to predict the rate or timing of increases in the use of our services to
enable us to upgrade our operating systems in a timely manner.
If we do not keep pace with rapid technological changes, customer
demands and intense competition, we will not be successful. Our market is
characterized by rapidly changing technology, customer demands and intense
competition. If we cannot keep pace with these changes, our CommerceSense
service could become uncompetitive and our business will suffer. The Internet's
recent growth and the intense competition in our industry require us to continue
to develop strategic business and Internet solutions that enhance and improve
the customer service features, functions and responsiveness of our CommerceSense
VAN and other proposed services and that keep pace with continuing changes in
information technology and customer requirements. If we are not successful in
developing and marketing enhancements to our CommerceSense VAN service or other
proposed services that respond to technological change or customer demands, our
business will suffer.
If we are unable to obtain necessary future capital, our business will
suffer. As of January 31, 2000, we had cash and marketable securities in the
amount of approximately $21.1 million. These resources may not be sufficient and
if we are unable to obtain necessary additional financing, our business will
suffer. We cannot assure you that any additional financing will be available on
reasonable terms or at all. In addition, we may need to raise additional funds
sooner if we attempt to expand more rapidly or if competitive pressures or
technological changes are greater than anticipated. Even if we are able to
obtain additional financing, we will subsequently need to raise additional funds
if we do not become profitable or if achieving profitability takes longer than
we anticipate.
Raising additional funds in the future by issuing securities could
adversely affect our stockholders and negatively impact our operating results.
If we raise additional funds through the issuance of debt securities, the
holders of the debt securities will have a claim to our assets that will have
priority over any claim of our stockholders. The interest on these debt
securities would increase our costs and negatively impact our operating results.
If we raise additional funds through the issuance of class A common stock or
securities convertible into or exchangeable for class A common stock, the
percentage ownership of our then-existing stockholders will decrease and they
may experience additional dilution. In addition, any convertible or exchangeable
securities may have rights, preferences and privileges more favorable to the
holders than those of the class A common stock.
We may not be able to compete effectively in the business-to-business
electronic commerce market, which could limit our market share and harm our
financial performance. The business-to-business electronic commerce industry is
evolving rapidly and is intensely competitive. If we are not able
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to compete effectively against our current and future competitors, we may lose
customers, may need to lower our prices, may experience reductions in gross
margins, increases in marketing costs or losses in market share, or may
experience a combination of these problems and, as a result, our business will
suffer.
Many of our current and potential competitors have significant existing
customer relationships and vastly larger financial, marketing, customer support,
technical and other resources than we do. As a result, they may be able to
respond more quickly to changes in customer requirements or be able to undertake
more extensive marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to potential customers and employees, or be able to
devote greater resources to the development, promotion and sale of their
services than we can. As a result, we may not be successful in competing against
our competitors.
Our principal competitors include: Harbinger Corporation, GE
Information Services, Inc., International Business Machines Corporation Global
Services, Sterling Commerce, Inc., AT&T Corp. and MCI WorldCom, Inc. Each of
these competitors has an established VAN that has provided EDI for at least
several years and has long-established relationships with the users of EDI,
including many of our prospective customers.
If we are successful in utilizing our CommerceSense platform to provide
new services, we may enter into different markets and may face the same or
additional competitors, most of which will have substantially greater financial
and other resources than we do.
If we cannot successfully expand our business outside of the United
States, our revenues and operating results will be adversely affected. Our
current and future customers are conducting their businesses internationally. As
a result, an important component of our business strategy is to expand our
international marketing and sales efforts. We have limited experience in
expanding our business outside the United States and if we do not successfully
expand our business in this way, we may lose current and future customers. In
addition, our potential new service offerings may involve delivery of data and
use of the Internet in other countries which may currently have or enact laws or
regulations that restrict our ability to deliver data or use the Internet or
that impose significant taxes for doing so. Loss of customers and restrictions
on delivery of data and use of the Internet will adversely affect our revenues
and operating results.
Losing any of our key personnel could cause our revenues to decline. We
are substantially dependent on the continued services and performance of our
executive officers and other key employees. The loss of the services of any of
our executive officers or other key employees could impede the operation and
growth of our business and cause our revenues to decline. Although all of our
executive officers, except Dr. Geoffrey S. Carroll, and some key employees have
entered into employment agreements, none of these agreements prevents any of
them from leaving us.
If we cannot hire and retain highly qualified employees, our business
and financial results will suffer. We believe we will need to expand
significantly our information technology, marketing and customer service staffs.
Competition for employees in our industry is intense. If we are unable to
attract, assimilate or retain highly qualified employees, our management may not
be able to effectively manage our business, exploit opportunities and respond to
competitive challenges and our business and financial results will suffer. Many
of our competitors may be able to offer more lucrative compensation packages
which include stock options and other stock-based compensation and
higher-profile employment opportunities than we can.
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If we are not able to hire and retain independent contractors, our
business will be harmed. We are substantially dependent on the services of
independent contractors to train customers in the use of CommerceSense. We have
entered into three relationships with independent contractors and need to retain
several other providers of these services to achieve our business plan. If we
fail to hire and retain qualified independent contractors, then our business
will be harmed.
We depend on our intellectual property, which may be difficult and
costly to protect. Other than our decryption/logging/branding patent, our
intellectual property consists of proprietary or confidential information that
is not currently subject to patent or similar protection. CommerceSense has been
registered as a trademark. The applications to register ICC.NET, AUDINET,
B2B4B2C and B to B for B to C have now been allowed as trademarks and await
registration. We intend to apply for additional name and logo marks in the
United States and in foreign jurisdictions. No assurance can be given that
registrations will issue on the non-allowed applications or that interested
third parties will not petition the United States Patent and Trademark Office to
cancel our registration. We may not be able to protect these trademarks. If our
competitors or others adopt product or service names similar to CommerceSense,
it may impede our ability to build brand identity and customer loyalty. We may
need to file lawsuits to defend the validity of our intellectual property rights
and trade secrets, or to determine the validity and scope of the proprietary
rights of others. Litigation is expensive and time-consuming and could divert
management's attention away from running our business.
The validity, enforceability and scope of protection of some types of
proprietary rights in Internet-related businesses are uncertain and still
evolving. If unauthorized third parties try to copy our service or our business
model or use our confidential information to develop competing services, we may
lose customers and our business could suffer. We may not be able to effectively
police unauthorized use of our technology because policing is difficult and
expensive. In particular, the global nature of the Internet makes it difficult
to control the ultimate destination or security of software or other data
transmitted. The laws of other countries may not adequately protect our
intellectual property.
Intellectual property infringement claims against us could harm our
business. Our business activities and our CommerceSense service may infringe
upon the proprietary rights of others and other parties may assert infringement
claims against us. Any such claims and any resulting litigation could subject us
to significant liability for damages and could result in invalidation of our
proprietary rights. We could be required to enter into costly and burdensome
royalty and licensing agreements, which may not be available on terms acceptable
to us, or may not be available at all.
We may suffer systems failures and business interruptions which would
harm our business. Our success depends in part on the efficient and
uninterrupted operation of our service that is required to accommodate a high
volume of traffic. Almost all of our network operating systems are located at a
single leased facility in New York, New York. Our systems are vulnerable to
events such as damage from fire, power loss, telecommunications failures,
break-ins and earthquakes. This could lead to interruptions or delays in our
service, loss of data or the inability to accept, transmit and confirm customer
documents and data. Our business may suffer if our service is interrupted.
Although we have implemented network security measures, our servers may be
vulnerable to computer viruses, electronic break-ins, attempts by third parties
deliberately to exceed the capacity of our systems and similar disruptions.
Year 2000 issues could affect the performance of our business. We may
have substantial exposure to the year 2000 problem, both with our own systems
and with systems we do not control. The year 2000 problem could harm our
business and financial results. Although we did not experience any system
failures on January 1, 2000, it is possible that problems may emerge later this
year. Many currently installed computer systems and software products have been
coded to accept or recognize only
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two digit entries to define the applicable year. These systems may erroneously
recognize the year 2000 as the year 1900. Thus could result in major failures or
malfunctions.
This risk is particularly significant for our business. We rely on
computer programs and systems in connection with our internal and external
communication networks and systems, including transmissions of information over
the Internet, order processing and fulfillment, accounting and financial
systems, customer access to our web site and other business functions. Based on
our design process and assessment to date, we believe the current versions of
our service and our various systems are year 2000 compliant. However, we cannot
assure you that our programs designed to minimize the impact of the transition
to the year 2000 on the terminal operations software at our facilities and other
date sensitive equipment will be completely successful. In addition, the costs
of implementing these programs may exceed our current estimates. If these
programs are not successful or if their costs exceed our estimates, the date
change from 1999 to 2000 could harm our business. The full extent of any adverse
impact on our business is impossible to determine.
In addition, our customers may not become year 2000 compliant in a
timely fashion or at all. The failure of a customer to become year 2000
compliant will adversely affect the ability of that customer's trading partners
to receive or utilize the document or data we transmit. As a result, customers
that are not year 2000 compliant may cease using our CommerceSense service,
decreasing our revenues and harming our results of operations.
Risks Relating to the Internet and Online Commerce Aspects of Our Business
If Internet usage does not continue to grow or its infrastructure
fails, our business will suffer. If the Internet does not gain increased
acceptance for business-to-business electronic commerce, our business will not
grow or become profitable. We cannot be certain that the infrastructure or
complementary services necessary to maintain the Internet as a useful and easy
means of transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline.
Privacy concerns may prevent customers from using our services.
Concerns about the security of online transactions and the privacy of users may
inhibit the growth of the Internet as a means of delivering business documents
and data. We may need to incur significant expenses and use significant
resources to protect against the threat of security breaches or to alleviate
problems caused by security breaches. We rely upon encryption and authentication
technology to provide secure transmission of confidential information. If our
security measures do not prevent security breaches, we could suffer operating
losses, damage to our reputation, litigation and possible liability. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments that render current encryption technology outdated may result in a
breach of our encryption and authentication technology and could enable an
outside party to steal proprietary information or interrupt our operations.
Failure of our third-party providers to provide adequate Internet and
telecommunications service could result in significant losses of revenue. Our
operations depend upon third parties for Internet access and telecommunications
service. Frequent or prolonged interruptions of these services could result in
significant losses of revenues. Each of them has experienced outages in the past
and could experience outages, delays and other difficulties due to system
failures unrelated to our on-line architecture. These types of occurrences could
also cause users to perceive our services as not functioning properly and
therefore cause them to use other methods to deliver and receive information. We
have limited control over these third parties and cannot assure you that we will
be able to maintain satisfactory relationships with any of them on acceptable
commercial terms or that the quality of services that they provide will remain
at the levels needed to enable us to conduct our business effectively.
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Government regulation and legal uncertainties relating to the Internet
could harm our business. Changes in the regulatory environment in the United
States and other countries could decrease our revenues and increase our costs.
The Internet is largely unregulated and the laws governing the Internet remain
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy and taxation apply to the Internet. In addition,
because of increasing popularity and use of the Internet, any number of laws and
regulations may be adopted in the United States and other countries relating to
the Internet or other online services covering issues such as:
o user privacy;
o security;
o pricing and taxation;
o content; and
o distribution.
Costs of transmitting documents and data could increase, which would
harm our business and operating results. The cost of transmitting documents and
data over the Internet could increase. We may not be able to increase our prices
to cover these rising costs. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet and
on-line service providers in a manner similar to long distance telephone
carriers and to impose access fees on these providers. Also, foreign and state
laws and regulations relating to the provision of services over the Internet are
still developing. If individual states or foreign countries impose taxes or laws
that negatively impact services provided over the Internet, our cost of
providing our CommerceSense and other services may increase.
Risks Relating to this Offering
Shares eligible for future sale by our existing stockholders may
adversely affect our stock price and may render it difficult to sell class A
common stock and class B warrants. The average weekly trading volume of our
class A common stock on The Nasdaq SmallCap Market was, approximately, 133,800
shares during the quarter ended March 31, 1999, 116,500 shares during the
quarter ended June 30, 1999, 75,800 shares during the quarter ended September
30, 1999, 576,621 shares during the quarter ended December 31, 1999 and
approximately 1,150,000 shares for the period from January 1, 2000 to March 24,
2000. On October 18, 1999, our registration statement on form S-3 became
effective. This registration statement covers the sale of up to 5,476,280 shares
of class A common stock by holders of our class A common stock and holders of
our series A preferred stock, class B common stock and warrants that may be
converted into or exchanged for class A common stock. On March 1, 2000, another
registration statement on form S-3 became effective. This registration statement
covers the sale of up to 955,289 shares of class A common stock by holders of
our class A common stock and by holders of our series A preferred stock and
warrants that may be converted into or exchanged for class A common stock. The
market price of our class A common stock could be materially and adversely
affected by sales of even a small percentage of these shares or the perception
that these sales could occur.
Our stock price may be extremely volatile and this volatility could
affect your ability to sell your class B warrants or shares of class A common
stock at a favorable price. From January 1, 2000 through March 24, 2000, the
price of our class A common stock has fluctuated from a low of $29.50 to a high
of $95.69. The market price of our class A common stock is likely to fluctuate
substantially in the future. In the past, companies that have experienced
volatility in the market price of their stock have been subject to securities
class action litigation. If we were subject to a securities class action
lawsuit, it could result in substantial costs and a significant diversion of
resources, including management time and attention.
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The market price of our class B warrants is closely related to the
market price of our class A common stock since a class B warrant allows the
holder upon exercise to purchase one share of class A common stock at a set
price. The market price of our class B warrants could be materially and
adversely affected if the market price for the class A common stock decreases
for any of the reasons described in this risk factor or for any other reason.
The class B warrants may be called for redemption by ICC which will
force the holders to either exercise the class B warrants or the class B
warrants will be redeemed. If the market price of the class A common stock
exceeds $61.25 for the thirty consecutive business days ending within 15 days of
the date of the notice of redemption, ICC may redeem the class B warrants. The
holders must then either exercise all of their class B warrants or the class B
warrants will be redeemed at $0.25 per class B warrant. The rights of holders of
the class B warrants to exercise the warrants will terminate at 5:00 p.m., New
York time, on the business day immediately preceding the date set for redemption
of the class B warrants.
The markets for our class B warrants or our class A common stock may be
illiquid, which would restrict your ability to sell your class B warrants or
your shares of class A common stock. Our class A common stock is currently
trading on The Nasdaq SmallCap Market and our class B warrants are currently
traded on the OTC Bulletin Board. A purchaser of the class B warrants or the
shares of class A common stock covered by this prospectus may not be able to
find a buyer for the portion of the class B warrants or the shares of class A
common stock the purchaser wishes to sell at an acceptable price. It is possible
that the trading markets for the class B warrants or the class A common stock in
the future will be thin and illiquid, which could result in increased volatility
in the trading prices for our class B warrants or our class A common stock. The
price at which our class B warrants and our class A common stock will trade in
the future cannot be predicted and will be determined by the market. The price
may be influenced by investors' perceptions of our business, financial condition
and prospects, the use of the Internet for business purposes and general
economic and market conditions.
If we lose our $20 million net operating loss carryforward, our
financial results will suffer. Section 382 of the Internal Revenue Code contains
rules designed to discourage persons from buying and selling the net operating
losses of companies. These rules generally operate by focusing on ownership
changes among stockholders owning directly or indirectly 5% or more of the
common stock of a company or any change in ownership arising from a new issuance
of stock by a company. In general, the rules limit the ability of a company to
utilize net operating losses after a change of ownership of more than 50% of its
class A common stock over a three-year period. Purchases of our class A common
stock in amounts greater than specified levels could inadvertently create a
limitation on our ability to utilize our net operating losses for tax purposes
in the future. We are currently subject to a limitation on the utilization of
our net operating loss carryforward and we may suffer further limitation as a
result of sales of class A common stock covered by this prospectus.
Our board of directors can issue preferred stock with rights adverse to
the holders of class A common stock. Our board of directors is authorized,
without further stockholder approval, to determine the provisions of and to
issue up to 4,979,825 shares of preferred stock. We have issued a new series of
preferred stock in connection with our transaction with Cable & Wireless. See
Recent Developments on page 4 of this prospectus for more information about this
transaction. See also Description of Securities - Preferred Stock on pages 17 to
19 of this prospectus. Issuance of preferred shares with rights to dividends and
other distributions, voting rights or other rights superior to the class A
common stock could be adverse to the holders of class A common stock.
We may have to spend significant resources indemnifying our officers
and directors or paying for damages caused by their conduct. The Delaware
General Corporation Law provides for broad
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indemnification by corporations of their officers and directors and permits a
corporation to exculpate its directors from liability for their actions. Our
bylaws and certificate of incorporation implement this indemnification and
exculpation to the fullest extent permitted under this law as it currently
exists or as it may be amended in the future. Consequently, subject to this law
and to some limited exceptions in our certificate of incorporation, none of our
directors will be liable to us or to our stockholders for monetary damages
resulting from conduct as a director.
FORWARD-LOOKING STATEMENTS
This prospectus contains a number of forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Specifically, all statements other than
statements of historical facts included in this prospectus, or incorporated by
reference in this prospectus, regarding our financial position, business
strategy and plans and objectives of management for future operations are
forward-looking statements. These forward-looking statements are based on the
beliefs of management, as well as assumptions made by and information currently
available to management. When used in this prospectus, including the information
incorporated by reference, the words anticipate, believe, estimate, expect, may,
will, continue, intend and plan and words or phrases of similar import, as they
relate to our financial position, business strategy and plans, or objectives of
management, are intended to identify forward-looking statements. These
cautionary statements reflect our current view regarding future events and are
subject to risks, uncertainties and assumptions related to various factors which
include but may not be limited to those listed under the heading Risk Factors
starting on page 5 and other cautionary statements in this prospectus and in the
information incorporated in this prospectus by reference.
Although we believe that our expectations are reasonable, we cannot
assure you that our expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described in this prospectus as anticipated, believed,
estimated, expected, intended or planned. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
USE OF PROCEEDS
We intend to use the proceeds from the exercise of class A warrants and
class B warrants pursuant to this prospectus for working capital and other
general corporate purposes.
BUSINESS
Internet Commerce Corporation
Industry Background
We believe that although the Internet has become an important new sales
channel, its real value will be in achieving business efficiencies and cost
savings by expanding global business-to-business interconnectedness.
We believe that in an increasingly global economy, improvements in
speed and efficiency in the supply chain between businesses are important and
improvements in the capacity of a business to buy and sell
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goods and services or raw materials within its business community becomes an
important factor in its ability to compete. Thus, for example, in a just-in-time
economy, timeliness, and not price, may be the most important component in
creating competitive advantage.
The speed and efficiency of the supply chain are hindered by
incompatibilities in technologies and methodologies used to communicate business
information among trading communities, which slow down the flow of information
and create bottlenecks. These incompatibilities stem from the diversity of
trading partners, which may range from members of the Fortune 100 to sole
proprietors providing niche products. Trading partners may therefore have
different communications capabilities and requirements. Some trading partners
may rely on paper or fax to communicate, others exchange data in proprietary
file formats through direct dial-up connections or over the Internet, while the
largest trading partners use electronic methods such as electronic data
interchange, or EDI, over value added networks, or VANs.
The CommerceSense Solution
We believe that our CommerceSense service provides a solution to the
communication difficulties caused by the differences in data formats, networks
and communications methods used by the members of trading communities, and thus
bridges the incompatibility gap and enabling seamless electronic business
communication. Our CommerceSense service can translate incompatible files into a
format any user is capable of receiving and uses the Internet to transmit the
data file by EDI, fax or other format. We believe that users of our
CommerceSense service can thus improve their productivity and reduce their costs
by enabling electronic business-to-business transactions between parties with
different systems.
We believe that our CommerceSense service improves the basic
infrastructure of business-to-business electronic communications by providing
intelligent messaging and routing using the Internet, which, we believe,
improves the security, reliability, ease of use and acceptability of using the
Internet for business-to-business electronic commerce. CommerceSense performs
these functions without requiring that the user purchase any software and at
prices that are, we believe, less than half of the prices currently charged by
traditional VANs.
We designed our CommerceSense service to avoid what we believe are
inefficiencies in traditional VAN services, software products and phone and
manual fax processes, which we believe are more expensive, slower and more
difficult to use than our CommerceSense service. CommerceSense incorporates
proprietary technology and is immediately accessible using a standard Internet
connection and a web browser.
Our CommerceSense service uses the Internet to deliver a higher level
of service and more features than traditional VANs:
o Documents are delivered up to 100 times faster, depending upon
the speed of the customer's Internet connections;
o Our customers may more effectively track, monitor and process
business documents and other data files using our real-time
document management browser screen displays;
o Our CommerceSense service allows us to consistently provide
confirmed delivery of documents and other data files;
o Documents can be delivered either in real-time or retrieved
when convenient for the customer. Real-time delivery reduces
the potential for document corruption, bottlenecks and other
problems associated with batch delivery modes, which are
traditionally store-and-forward and in some cases can take
several hours to be delivered;
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o Our CommerceSense service can handle transmissions of data
other than standard business documents, such as images,
engineering drawings, architectural blueprints, audio and some
types of video; and
o Our customers enjoy flexibility in creating different document
types and formats for various business applications. For
example, our customers can add their business logo to their
documents and can use their own format for each document type.
In addition, we believe our CommerceSense service offers advantages
over e-mail and other Internet-based electronic commerce systems, such as a full
range of VAN services, translation of a wide variety of data into
customer-specified formats, management of business documents or data files of
virtually any size and of a wide variety, including purchase orders, invoices,
statements, inventory tracking and shipping documents, images, engineering
drawings, architectural blueprints, audio and some types of video. CommerceSense
also provides a complete audit trail of content delivery and customer selection
from a variety of security methods.
We believe that CommerceSense is one of the only Internet-based data
transmission services that is approved to interconnect with the eight largest
traditional VANs, which we believe currently provide EDI services for 90% of
companies capable of using EDI. As a result, we can handle EDI traffic between
our customers and any of their trading partners that choose to continue to use a
traditional VAN and between a customer that uses a traditional VAN and its
trading partners that do not. This provides our customers with the possibility
of maximum penetration into their trading partner community.
EDI for web-based retailers. We provide an electronic document and data file
delivery link between web-based retailers and their vendors. We believe that
many larger vendors require that product orders and other documents be
transmitted using EDI. Web retailers can use our CommerceSense service to comply
with this requirement and thus can reduce their costs and improve their ability
to locate, order, track and deliver products. Our CommerceSense service can
process purchase orders, invoices, order status reports and other files
transmitted between web-based shopping portals of electronic retailers and their
vendors, distributors, and manufacturers and can also manage critical logistics
delivery files. Due to the special requirements and rapid growth of these new
web-based retail companies, we have a dedicated web retailer sales and support
team that offers the retail companies the option to outsource to us all of their
electronic document and data file delivery requirements.
EDI to fax service. Traditional EDI users convert electronic documents into a
faxable format and fax the documents manually to their trading partners that can
not receive documents transmitted electronically in EDI. Our CommerceSense fax
service allows our customers to send a document electronically, which we will
then electronically convert and fax to any of our customer's trading partners
that cannot receive electronically transmitted documents and specify that they
want to receive the document by fax. We believe that our CommerceSense fax
service will result in lower fax costs for our customers as well as reduced
human involvement in the document delivery process and fewer errors. Recently,
several other VANs began offering similar EDI-fax services; however, we believe
that these services cost 3 to 5 times more per page and are currently only
offered domestically. Our customers currently send documents using our
CommerceSense fax service to approximately 900 trading partners.
Large-scale electronic document management and delivery. Our CommerceSense
service can transmit large-scale non-EDI electronic documents and other large
files, which may include catalogs, engineering drawings, graphics and some types
of video. CommerceSense allows customers to manage and distribute these large
files in real-time and provides archiving, security, authentication and audit
services. CommerceSense will support both a publish/subscribe configuration, in
which a customer can publish any number of files for subscribers authorized by
the customer to view and/or download, and a point-to-point-delivery
configuration that operates like our CommerceSense VAN service.
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Business Strategy
We believe that our CommerceSense service provides a platform with many
applications that will allow our customers to fulfill a substantial portion of
their electronic document and data delivery requirements with significantly less
administrative effort and cost. We believe that CommerceSense will allow our
customers to send us the majority of their important documents and data files
which we will then be able to transmit to each of the intended recipients in any
form requested by the recipient. Our customers will thus be able to integrate a
substantial portion of their document and data file delivery methods into a
single, seamless process.
A large company that uses EDI to communicate with its vendors is
referred to as a hub; their trading partners, vendors or customers, are referred
to as spokes. We intend to continue to market CommerceSense as a one-stop
electronic document and data delivery service to the 2,500 largest hub companies
in the United States. Due to the cost to the spoke companies of implementing EDI
and using VANs and other electronic document delivery methods, large hub
companies are currently connected electronically to only a small percentage of
their potential spoke companies.
Our current customers conduct their business internationally, and we
intend to service these customers and pursue new international customers by
expanding our marketing and operation to Europe and other places outside the
United States.
We believe that a significant number of these hub companies intend to
expand the use of electronic commerce to more of their spoke companies. Since
small spoke companies using our CommerceSense service require only an Internet
connection or a web browser to receive and transmit documents electronically
and, we believe, will also be able to receive electronic documents using our
CommerceSense fax service, large hub companies may now be able to request or
encourage electronic commerce with their small hub companies. In turn, many of
these spoke companies may become the hub companies for their suppliers, which
should further broaden the reach of our CommerceSense service.
We intend to encourage the use of our CommerceSense service through
exceptional customer service. We currently offer technical support to our
customers twenty-four hour a day, seven days a week. Due to the multiple
redundancies of all of our systems and the stability of the Securities Industry
Automation Corporation, or SIAC, which is the location of our data center, our
CommerceSense service has been fully operational more than 99% of the time.
We intend to seek acquisitions of services, products or companies,
joint ventures or other arrangements which complement or expand our business.
However, we cannot assure you that we will be able to identify appropriate
acquisition candidates in the future or that we will be able to successfully
negotiate and finance the acquisition if an acquisition candidate is identified.
If we make other types of acquisitions, it will be necessary to assimilate the
acquired services, technologies or customers into our operations. If we
consummate one or more significant acquisitions through the issuance of shares
of class A common stock, you could suffer significant dilution of your ownership
interests in ICC. Finally, expanding our business through acquisitions may
expose us to new and different competitors, which will likely have greater
financial and other resources than we do.
We expect to experience seasonality in our business that reflects the
seasonality of the businesses of our customers. We believe that period-to-period
comparisons of our operating results may not be meaningful and that our
operating results for any particular period will not necessarily be a good
indicator of our future performance.
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PLAN OF DISTRIBUTION
Upon exercise in accordance with its terms of each class A warrant
included in the IPO units, ICC will issue to the holder of that class A warrant
one class B warrant and one share of class A common stock. Upon exercise in
accordance with its terms of each class B warrant included in the IPO units or
upon exercise in accordance with its terms of each class B warrant issued upon
the exercise of a class A warrant referred to in the previous sentence, ICC will
issue to the holder of that class B warrant one share of class A common stock.
DESCRIPTION OF SECURITIES
The following summary description of the material terms of our capital
stock and warrants is not intended to be complete. Since the terms of our
capital stock must comply with the provisions of our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement, and the Delaware General Corporation Law, you should read our
certificate of incorporation and bylaws very carefully. The relevant provisions
of our certificate of incorporation and bylaws and the Delaware General
Corporation Law are discussed under the heading Delaware Law and Certificate of
Incorporation and Bylaw Provisions on pages 20 and 21 of this prospectus.
We have the authority to issue up to 40,000,000 shares of class A
common stock, 2,000,000 shares of class B common stock, 2,000,000 shares of
class E-1 common stock, 2,000,000 shares of class E-2 common stock and 5,000,000
shares of preferred stock, which includes 10,000 shares of series A preferred
stock, 175 shares of series S preferred stock and 10,000 shares of series C
preferred stock.
Common Stock
Class A common stock
As of January 31, 2000, there were 4,595,853 shares of class A common
stock outstanding, held of record by approximately 200 stockholders. Class A
common stock is currently traded on The Nasdaq SmallCap Market under the symbol
ICCSA.
Holders of class A common stock are entitled to one vote per share on
all matters to be voted on by our common stockholders. Subject to the
preferences of the preferred stock, the holders of class A common stock are
entitled to a proportional distribution of any dividends that may be declared by
the board of directors, provided that if any distributions are made to the
holders of class A common stock, identical per-share distributions must be made
to the holders of the class B common stock, even if the distributions are in
class A common stock. In the event of a liquidation, dissolution or winding up
of ICC, the holders of class A common stock are entitled to share equally with
holders of the class B common stock in all assets remaining after liabilities
and amounts due to holders of preferred stock have been paid in full or set
aside. Class A common stock has no preemptive, redemption or conversion rights.
The rights of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of series A preferred stock,
series S preferred stock, series C preferred stock or any other series of
preferred stock that ICC may designate and issue in the future.
Class B common stock
As of January 31, 2000, there were 89,595 shares of class B common
stock outstanding, held of record by seven stockholders.
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Class B common stock is convertible into class A common stock on a
one-for-one basis both upon request of the holder of the class B common stock or
automatically upon transfer of the class B common stock to a stockholder that
does not hold any class B common stock before the transfer. Class B common stock
is entitled to six votes per share rather than one vote per share, but in all
other respects each share of class B common stock is identical to one share of
class A common stock.
Class E-1 and E-2 common stock
On May 28, 1999, we called for redemption on June 11, 1999 all
outstanding shares of class E-1 and class E-2 common stock for a total
redemption price of $276.85. On July 31, 1999 there were no shares of class E-1
or E-2 common stock outstanding.
Preferred Stock
Our certificate of incorporation authorizes our board of directors,
without any approval of our stockholders, to issue up to 5,000,000 shares of
preferred stock from time to time and in one or more series and to fix the
number of shares of any series and the designation, conversion, dividend and
other rights of the series. The board of directors has designated 10,000 shares
of preferred stock as series A preferred stock, 175 shares of preferred stock as
series S preferred stock and 10,000 shares of preferred stock as series C
preferred stock.
Future issuances of preferred stock may have the effect of delaying or
preventing a change in control of ICC. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and powers,
including voting rights, of the holders of our common stock. In some
circumstances, the issuance of preferred stock could have the effect of
decreasing the market price of our common stock.
Series A preferred stock
As of January 31, 2000, ICC had 1,683 shares of series A preferred
stock outstanding, held by approximately 22 stockholders.
Series A preferred stock is convertible, at the option of the holder,
into class A common stock. Each share of series A preferred stock is convertible
into a number of shares of class A common stock determined by dividing $1,000 by
75% of the average market price of the class A common stock for the ten trading
days before the conversion date. However,
o if 75% of the average market price is less than $3 per share,
the series A preferred stock provides that 75% of the average
market price will be considered to be $3 per share, which
results in a maximum of 333 shares which may be issued upon
conversion of one share of series A preferred stock; and
o if 75% of the average market price is greater than $5 per
share, the series A preferred stock provides that 75% of the
average market price will be considered to be $5 per share,
which results in a minimum of 200 shares which may be issued
upon conversion of one share of series A preferred stock.
If all of the series A preferred stock were converted on January 31, 2000, a
maximum of 561,000 shares of class A common stock would be issued in this
conversion. The minimum and maximum conversion rates apply even if at the time
of conversion the class A common stock is not traded on The Nasdaq SmallCap
Market. No fewer than 25 shares may be converted at one time unless the holder
then holds fewer than 25 shares and converts all of the holder's shares at that
time.
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Series A preferred stock is redeemable, in whole or in part, by ICC,
commencing on the third anniversary of the date of issuance. The redemption
price for each share of series A preferred stock is $1,000 plus unpaid
dividends. Notice of redemption must be given 30 days before the redemption
date.
Subject to the rights of stockholders holding any series of ICC
preferred stock that is senior to the series A preferred stock, upon a
liquidation, dissolution or winding up of ICC, the holders of series A preferred
stock are entitled to receive an amount equal to $1,000 per share of series A
preferred stock before any distribution is made to holders of common stock.
The holders of the outstanding shares of series A preferred stock are
entitled to a 4% annual dividend payable in cash or in shares of class A common
stock, at the option of ICC. These dividends are payable on each July 1
commencing on July 1, 1999. ICC elected to issue 14,641 shares of class A common
stock in payment of the dividend due on July 1, 1999.
Series A preferred stock has no voting rights except as expressly
required by law.
Series S preferred stock
As of July 1, 1999, ICC had no outstanding shares of series S preferred
stock. ICC does not intend to issue any shares of series S preferred stock in
the future.
Series C preferred stock
As of January 31, 2000, ICC had 10,000 shares of series C preferred
stock outstanding, held by one stockholder.
Series C preferred stock is convertible, at the option of the holder,
into class A common stock. Each share of series C preferred stock is convertible
into a number of shares of class A common stock determined by dividing $1,000 by
the conversion price at the date of conversion. The initial conversion price for
the series C preferred stock is $22.34 per share, which is subject to adjustment
in the case of a reclassification, subdivision or combination of ICC's common
stock and upon a consolidation, merger or sale of substantially all of the
assets of ICC.
Series C preferred stock is redeemable, in whole or in part, by ICC,
commencing on the fifth anniversary of the date of issuance. The redemption
price for each share of series C preferred stock is $1,000 plus unpaid
dividends. Notice of redemption must be given not less than fifteen days nor
more than 45 days before the redemption date.
Upon a liquidation, dissolution or winding up of ICC, the holders of
series C preferred stock are entitled to receive an amount equal to $1,000 per
share of series C preferred stock plus unpaid dividends before any distribution
is made to holders of series A preferred stock or common stock.
The holders of the outstanding shares of series C preferred stock are
entitled to a 4% annual dividend payable in cash or in shares of class A common
stock, at the option of ICC. These dividends are payable on each January 1,
commencing on January 1, 2001.
Each share of series C preferred stock is entitled to a number of votes
equal to the number of whole shares of common stock into which each share of
series C preferred is convertible as of the record date for the determination of
stockholders entitled to vote on any matter submitted to stockholders.
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Warrants
As of June 30, 1999, there were 1,184,715 class A warrants outstanding
and 950,490 class B warrants outstanding. On June 30, 1999, we commenced an
offer to exchange one share of class A common stock for each 8 outstanding class
A warrants and one share of class A common stock for each 16 outstanding class B
warrants. The exchange offer was completed on July 30, 1999 and, as a result,
ICC issued a total of 148,651 shares of class A common stock in exchange for
868,500 class A warrants and 639,002 class B warrants.
As of January 31, 2000, there were 314,256 class A warrants
outstanding. Each class A warrant entitles the holder upon exercise to purchase
one class B warrant, which is described below, and one share of class A common
stock. Each class A warrant is exercisable for $23.20 and expires in February
2002.
As of January 31, 2000, there were 309,403 class B warrants
outstanding. Each class B warrant entitles the holder upon exercise to purchase
one share of class A common stock. Each class B warrant is exercisable for
$31.22 and expires in February 2002.
The class A and class B warrants are traded in the over-the-counter
market on the OTC Bulletin Board. The number of class A and class B warrants and
the exercise prices of the class A and class B warrants are subject to
adjustment in the event of any subdivision or combination of the outstanding
class A common stock, any stock dividend payable in shares of class A common
stock paid to holders of class A common stock, or any sale of any shares of
class A common stock, or of any rights, warrants, options or securities
convertible into or exercisable for class A common stock, for consideration
valued at less than the market price of the class A common stock at that time.
The class A and class B warrants are subject to redemption by ICC, at
$0.25 per class A or class B warrant, on not less than 30 days notice in the
event that the average closing bid price for the class A common stock, if the
class A common stock is then traded on The Nasdaq SmallCap Market, or the last
reported sales price, if the class A common stock is then traded on a national
securities exchange, exceeds $44.50 in the case of the redemption of the class A
warrants and $61.25 in the case of the redemption of the class B warrants, for
the thirty consecutive business days ending within 15 days of the date of the
notice of redemption. All warrants of a class must be redeemed if any of that
class are redeemed. The date set for redemption of the class B warrants may not
be earlier than 31 days after the date set for redemption of the class A
warrants. The rights of holders of class A and class B warrants to exercise the
warrants terminate at 5:00 p.m., New York time, on the business day immediately
preceding the date set for redemption.
In connection with our initial public offering, unit purchase options
were issued to D.H. Blair and its designees to purchase 31,000 units for $33.75
per unit. Upon exercise of these options, the holders are entitled to receive
one share of class A common stock, one class A warrant and one class B warrant.
In connection with our 1997 private placement, unit purchase options were issued
to D.H. Blair and its designees to purchase 112,229 of the same units for $15.75
per unit. The unit purchase options issued in connection with our 1997 private
placement are subject to an anti-dilution adjustment as a result of the private
placement of series A preferred stock and this adjustment would be substantial.
On June 30, 1999, D.H. Blair and its designees exchanged all of these unit
purchase options for a total of 105,000 shares of class A common stock.
Investors in our 1998 bridge financing purchased 10% notes with
warrants attached. For each $1 of notes, a purchaser was entitled to 0.3
warrants and we issued a total of 778,500 warrants in this transaction. Each of
these warrants entitles the holder upon exercise to purchase one share of class
A common stock for $2.50. These warrants expire between December 2001 and July
2002.
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Three finders introduced us to investors in our 1998 bridge financing
and have received a total of 66,600 warrants for these services. Each of these
warrants entitles the holder upon exercise to purchase one share of class A
common stock for $2.50. These warrants expire between July 2001 and January
2002.
Several NASD registered broker/dealers provided services in connection
with our April 1999 private placement of series A preferred stock and are
entitled to receive a total of 173,250 warrants for these services. Each of
these warrants entitles the holder upon exercise to purchase one share of class
A common stock for $5.00 and expires in April 2002.
The warrants issued in our 1998 bridge financing to investors and
finders are redeemable by ICC for $2.50 per warrant within 10 days of mailing an
acceleration notice at any time after one year from issuance if the bid price of
the class A common stock exceeds $7.50 subject to adjustment for stock splits,
dividends or combinations for 10 consecutive trading days.
The number and exercise price of the warrants issued to financial
advisors in connection with our 1998 bridge financing and our April 1999 private
placement are subject to adjustment in the event of any stock dividend payable
in shares of class A common stock paid to holders of class A common stock or any
subdivision or combination of the outstanding class A common stock.
Summerwind Restructuring, Inc. received 500,000 warrants as
consideration for various consulting services under a consulting agreement with
our predecessor, Infosafe Systems, Inc. Each of these warrants entitles the
holder upon exercise to purchase one share of class A common stock for $2.50 and
expires in June 2003. The number and exercise price of the Summerwind warrants
are subject to adjustment in the event of any sale or distribution of debt or
other securities of ICC or of cash, property or other assets to holders of class
A common stock, any stock dividend payable in shares of class A common stock
paid to holders of class A common stock, any subdivision or combination of the
outstanding class A common stock, or any sale of any shares of class A common
stock, or of any rights, options, warrants, or securities convertible into or
exercisable for class A common stock, for consideration valued at less than the
then exercise price of the Summerwind warrants.
In connection with our strategic global alliance with Cable & Wireless,
we issued to Cable & Wireless 400,000 warrants to purchase shares of our class A
common stock. Each of these warrants entitles the holder upon exercise to
purchase one share of class A common stock for $22.21 per share and expires in
January 2005. The number and exercise price of these warrants are subject to
adjustment in the event of any stock dividend payable in shares of class A
common stock paid to holders of class A common stock or any subdivision or
combination of the outstanding class A common stock. See Recent Developments on
page 4 for more information regarding this transaction.
Delaware Law and Certificate of Incorporation and Bylaw Provisions
The following is a summary description of material provisions of the
Delaware General Corporation Law and our certificate of incorporation and
bylaws. For further information you should refer to our certificate of
incorporation and bylaws.
We must comply with the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a business combination with an interested
stockholder for three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. A business combination includes mergers, asset
sales and other transactions resulting in a financial benefit to the
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interested stockholder. An interested stockholder is generally a person who,
together with affiliates and associates, owns, or within the past three years
did own, 15% of the corporation's voting stock.
There are provisions in our certificate of incorporation, our bylaws
and Delaware law that make it more difficult for a third party to obtain control
of ICC, even if doing so would be beneficial to our stockholders. This could
depress our stock price. However, these provisions enhance the likelihood of
continuity and stability in the composition of the policies formulated by the
board of directors. In addition, these provisions are intended to ensure that
the board of directors will have sufficient time to act in what it believes to
be in the best interests of ICC and its stockholders. These provisions also are
designed to reduce the vulnerability of ICC to an unsolicited proposal for a
takeover of ICC that does not contemplate the acquisition of all of its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of ICC. The provisions are also intended to discourage some tactics
that may be used in proxy fights.
Classified Board of Directors
We received stockholder authorization on June 26, 1998 to amend our
certificate of incorporation to divide the board of directors into three classes
of directors. The classes must be as nearly equal in number as possible and
serve staggered three-year terms. We intend to elect directors for each class at
our next annual meeting of stockholders. As a result, after out next annual
meeting, approximately one-third of the board of directors will be elected each
year. The classified board provision will help to assure the continuity and
stability of the board of directors and the business strategies and policies of
ICC as determined by the board of directors. The classified board provision
could have the effect of discouraging a third party from making a tender offer
for our shares or attempting to obtain control of ICC. In addition, the
classified board provision could delay stockholders who do not agree with the
policies of the board of directors from removing a majority of the board of
directors for two years.
Indemnification
We have included in our certificate of incorporation and bylaws
provisions to (1) eliminate the personal liability of our directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware General Corporation Law and (2) indemnify our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law, including circumstances in which indemnification is discretionary.
We believe that these provisions are necessary to attract and retain
qualified persons as directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for our class A common stock and class
B warrants is American Stock Transfer and Trust Company.
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LEGAL MATTERS
The legality of the class B warrants and the shares of class A common
stock being offered by this prospectus will be passed upon by Kramer Levin
Naftalis & Frankel LLP, New York, New York.
EXPERTS
Richard A. Eisner & Company, LLP, independent auditors, have audited
our financial statements as of July 31, 1999, as stated in their report,
included in our annual report on Form 10-KSB for the year ended July 31, 1999
which is incorporated in this prospectus by reference. Our financial statements
are incorporated by reference in reliance on Richard A. Eisner & Company, LLP's
report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
o Government Filings. We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our sec filings
are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the sec's
public reference room in Washington, D.C. by calling the SEC at
1-800-SEC-0330.
We have filed with the SEC a registration statement on form S-3 to
register the class B warrants and the shares of class A common stock to be
offered. This prospectus is part of that registration statement and, as
permitted by the SEC's rules, does not contain all the information included in
the registration statement. For further information about us, our class B
warrants and our class A common stock, you should refer to that registration
statement and to the exhibits and schedules filed as part of that registration
statement, as well as the documents we have incorporated by reference which are
discussed below. You can review and copy the registration statement, its
exhibits and schedules, as well as the documents we have incorporated by
reference, at the public reference facilities maintained by the SEC as described
above. The registration statement, including its exhibits and schedules, are
also available on the SEC's web site, given above.
o Stock Market. Shares of our class A common stock are traded on The
Nasdaq SmallCap Market. Our class B warrants are traded on the OTC
Bulletin Board.
o Information Incorporated by Reference. The SEC allows us to incorporate
by reference the information we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is an important
part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any further
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, until this offering has been completed:
o Our annual report on form 10-KSB for the year ended July 31,
1999;
o Our quarterly report on form 10-QSB for the quarter ended
October 31, 1999;
o Our quarterly report on form 10-QSB for the quarter ended
January 31, 2000;
o Our current reports on form 8-K dated December 1, 1999 and
December 13, 1999; and
o The descriptions of our class A common stock and our class B
warrants contained in our Rule 424 prospectus filed with the
SEC on June 18, 1995. See also Description of Securities on
pages 16 to 21 of this prospectus.
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You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
(212) 271-7640
Attn: Victor Bjorge
We are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents. We have not authorized anyone to
provide you with, and you should not rely on, information other than that which
is in this prospectus, any prospectus supplement or which is incorporated in
this prospectus by reference.
