AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1999.
REGISTRATION NO. 333-66287
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
PRE-EFECTIVE
AMENDMENT NO. 1
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
TEL-SAVE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-28277736
(State or other (I.R.S. Employee
jurisdiction of incorporation Identification Number)
or organization)
6805 ROUTE 202
NEW HOPE, PENNSYLVANIA. 18938
(215) 862-1500
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------
ALOYSIUS T. LAWN, IV
GENERAL COUNSEL AND SECRETARY
TEL-SAVE.COM, INC.
6805 ROUTE 202 NEW HOPE, PA 18938
(215) 862-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by the
Selling Shareholders on the basis of market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (as defined below), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value
per share .................. 500,000 $14.9375 $7,468,570 $2076
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933 based on the
average of the high and low prices of the Common Stock on the Nasdaq
National Market on January 11, 1999. A filing fee of $659 was paid in
connection with the original filing of this Registration Statement for
339,982 shares on October 29, 1998.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act or until this registration statement shall become effective
on such date as the securities and exchange commission, acting pursuant to said
section 8(a), may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION
DATED JANUARY 13, 1999
PROSPECTUS
[GRAPHIC OMITTED]
839,982 SHARES OF COMMON STOCK
The selling shareholders named on page 10 of this prospectus may from time
to time offer for sale the 839,982 shares of our common stock that we issued to
them. The selling shareholders will determine the price and other specific terms
at the time of sale, and we will set them forth in a prospectus supplement.
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "TALK."
Our principal executive offices are located at 6805 Route 202, New Hope,
Pennsylvania 18938, and our telephone number is (215) 862-1500.
The selling shareholders may sell the shares directly, through agents, or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any shares, we will set forth their names and any applicable
commissions or discounts in a prospectus supplement. We will receive no proceeds
from the sale of the shares, but we will set forth the net proceeds to the
selling shareholders in a prospectus supplement.
The selling shareholders may terminate this offering under certain
conditions. No minimum number of shares must be sold for this offering to go
forward. Consequently, the selling shareholders may sell less than the total
number of shares offered by this prospectus in the offering.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN
MATERIAL FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN
OUR COMMON STOCK.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. We may
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. The prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
<PAGE>
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 WITH RESPECT TO OUR BUSINESS, FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, INCLUDING, WITHOUT LIMITATION, STATEMENTS UNDER THE CAPTIONS
"BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" IN OUR ANNUAL AND QUARTERLY REPORTS. THESE FORWARD
LOOKING STATEMENTS REFLECT OUR PLANS, EXPECTATIONS AND BELIEFS AND, ACCORDINGLY,
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT
ANY OF SUCH FORWARD LOOKING STATEMENTS WILL BE REALIZED. FACTORS THAT MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD
LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FACTORS DISCUSSED IN THE SECTION
OF THIS PROSPECTUS ENTITLED "RISK FACTORS."
RISK FACTORS
You should consider carefully the following factors and other information
in this prospectus before deciding to invest in the shares of our common stock
offered in this prospectus.
DEPENDENCE ON AT&T
Our telecommunications network, which is known as "OBN," "One Better Net"
or "One Better Network," uses AT&T Corp. ("AT&T") transmission facilities,
international long distance services and operator services. AT&T also provides
the AT&T telecommunications services that we resell primarily to independent
long distance and marketing companies known as "partitions," which in turn
resell the services to end users.
Our ability to continue to obtain services from AT&T depends upon our
maintenance of a favorable relationship with AT&T. If AT&T were to cease to
provide services to us, we would seek to enter into similar arrangements with
another long distance carrier. There can be no assurance, however, that the
terms of any agreement would be favorable to us, and we have no specific
contingency arrangements in place to obtain services from other long distance
carriers. We believe it would take at least 30 days to switch to another
carrier, during which time we may be without service or subject to higher rates
than we currently pay to AT&T. Although we believe we may have the right to
switch end users to other providers without their consent, end users have the
right to discontinue such service at any time, and end-user customers and
partitions who want to remain with an AT&T network-based carrier may choose to
terminate their service with us. Accordingly, any termination of our contracts
with AT&T or the loss of telecommunication services from AT&T could have a
material adverse effect on our financial condition and results of operations.
In the deployment and initial marketing of OBN, we emphasized the quality
and functionality of the AT&T (now Lucent Technologies, Inc., hereinafter
"Lucent") manufactured equipment, AT&T-provided transmission facilities and
billing services, and AT&T operator services. We have continued to reference the
quality of these services in connection with OBN. Our new contract with AT&T
includes guidelines for describing our relationship with AT&T and, specifically,
how we may refer to that relationship in the marketplace. Loss of the ability to
reference the quality of these services in connection with OBN could have a
material adverse effect on our financial condition and results of operations.
RISKS ASSOCIATED WITH AOL AGREEMENT AND OTHER ONLINE INITIATIVES
We launched a major new initiative for online marketing and provisioning of
our telecommunication services in February 1997, when we entered into a
telecommunications and marketing agreement (the "AOL Agreement") with America
Online, Inc. ("AOL"), under which we provide long distance telecommunications
services that are marketed by AOL to the subscribers to AOL's online network. We
have made, and expect to continue to make, substantial investments in the
development and promotion of our online service offerings, including the
services we offer to AOL subscribers.
We believe that the success or failure of the AOL Agreement and similar
online initiatives may have a material effect on our business, prospects and
financial condition. While to date we have received favorable indications of
acceptance of our online services, as evidenced by the level and rate of
2
<PAGE>
subscription of AOL subscribers to our long distance service offering, there can
be no assurance that the AOL Agreement will be successful from our standpoint
over time or that the response to date to our service on AOL is a fair
indication of future results under the AOL Agreement or under similar online
arrangements with others. In addition, while we will continue to have rights
regarding the online service area and use of the service brand name, our
exclusive right to market long distance service over the AOL network will expire
on June 30, 2001. See "-- Competition."
The success of our online initiatives depends on, among other things, our
ability to develop and maintain the complex systems to support our online
service offerings to AOL subscribers and our other online service offerings. We
have developed and will seek to continue to develop and to improve our systems
for customer care and billing services, including online sign-up, call detail
and billing reports and credit card payment in connection with the AOL
Agreement. We will be required, among other things, to identify and employ
sufficient personnel qualified to provide the necessary programming to develop
and maintain these complex systems. Any unanticipated delays or difficulties in
developing these complex systems or in hiring personnel could adversely affect
the success of this service offering and, specifically, the offering of these
online services to AOL subscribers.
Although we have expended substantial sums on marketing our AOL service
offering, there can be no assurance that these expenditures will prove adequate
to attract substantial additional customers to our service, or that any such
subscribers will remain our customers for a period of time sufficient to recoup
the costs of such marketing expenditures. See"-- Maintenance of End User Base."
The success of our online marketing initiatives also depends in part on our
ability timely to provision new customers. Such provisioning has been adversely
affected by so-called "PIC freezes," which require customers who elect the
freeze to contact their local phone company directly to change long distance
carriers, as opposed to having their new long distance carrier contact the local
phone company on their behalf.
Most of the targeted subscribers of our online services, including those
offered to AOL subscribers, are residential customers rather than business
customers to which we have provided services historically. Depending on the
response to the online marketing of its services, we have been required, and may
need in the future, to expand further OBN to accommodate increased traffic
levels.
RECENT RAPID GROWTH
We began operations in 1989 (as Tel-Save, Inc.) as a reseller of AT&T
services. Since then, we have grown dramatically, becoming a public company in
1995, with revenues in 1997 of $304 million and approximately 520 employees.
Although we have experienced significant growth in a relatively short period of
time and regularly consider growth opportunities through acquisitions, joint
ventures and partnerships as well as other business expansion opportunities,
there can be no assurance that the growth we have experienced will continue or
we will be able to achieve the growth contemplated by our business strategy.
Implementation of our current business strategy places and will continue to
place significant demands on our management, operational, financial and other
resources and will require us to enhance further our operations, management,
financial and information systems and controls and to expand, train and manage
our employee base in certain areas including customer service support and
financial and marketing and administrative resources. Success in this regard
depends, among other things, on our ability to fund or finance significant
investments of resources and to manage, attract and retain qualified personnel,
competition for whom is intense. Our strategy also has resulted in significantly
increased financial management requirements.
COMPETITION
The long distance telecommunications industry is highly competitive and
affected by the introduction of new services by, and the market activities of,
major industry participants. Changes in the regulation of the telecommunications
industry may affect our competitive position, as may consolidation and alliances
across geographic regions and across industry segments. Competition in the long
dis-
3
<PAGE>
tance business is based upon pricing, customer service, billing services and
perceived quality. We compete against numerous long distance carriers that offer
essentially the same services as we do. Several of our competitors are
substantially larger and have greater financial, technical and marketing
resources than we do.
Although we believe that we have the human and technical resources to
pursue our strategy and compete effectively in this competitive environment, our
success will depend upon our continued ability to provide high quality, high
value services at prices generally competitive with, or lower than, those
charged by our competitors. While OBN makes us more price competitive,
reductions in long distance prices charged by competitors still may have a
material adverse impact on our profitability. We also from time to time consider
providing telecommunications services we have not previously provided, which new
services, if offered, would face the same competitive pressures that affect our
existing services.
In view of the dynamic nature of, and intensifying competition in, the
telecommunications industry, we believe that we eventually must either be, or
become part of, a larger organization to succeed in the long term. We continue
to seek and consider potential acquisitions and strategic partnerships.
Competition for potential acquisition candidates in the telecommunications
industry is often intense. Accordingly, there can be no assurance that any
acquisition or strategic partnership will be consummated, or, if consummated,
that these transactions will be significant or will be effectively integrated
into our business or otherwise prove to be successful. In addition, if we
consummate one or more significant acquisitions in which the consideration
consists, in whole or in part, of our common stock, or rights to purchase our
common stock, our stockholders could suffer significant dilution of their
interests in us, and earnings per share may be adversely affected. Earnings per
share also may be adversely affected by the amortization of goodwill in
connection with cash or other transactions where pooling-of-interest accounting
is unavailable.
MAINTENANCE OF END USER BASE
End users are not obligated to purchase any minimum usage amount and can
discontinue service, without penalty, at any time. There can be no assurance
that end users will continue to buy their long distance telephone service
through us or through "partitions," independent carriers and marketing companies
that purchase services from us. If a significant portion of our end users were
to decide to purchase long distance service from other long distance service
providers, there can be no assurance that we would be able to replace them.
A high level of customer attrition is inherent in the long distance
industry, and our financial results are affected by such attrition. Attrition is
attributable to a variety of factors, including the initiatives of existing and
new competitors as they engage in, among other things, national advertising
campaigns, telemarketing programs and cash payments and other forms of
incentives, as well as our termination of customers for non-payment.
DIRECT TELEMARKETING RISKS
Both federal and state officials are tightening the rules governing the
telemarketing of telecommunications services and the requirements imposed on
carriers acquiring customers in that manner. Customer complaints of unauthorized
conversion or "slamming" are widespread in the long distance industry and are
beginning to occur with respect to newly competitive local services. While our
discontinuance of our internal telemarketing operations should reduce our
exposure to customer complaints and federal or state enforcement actions with
respect to telemarketing practices, certain state officials have made inquiries
with respect to the marketing of our services. There is the risk of enforcement
actions by virtue of our prior telemarketing efforts, our ongoing support of our
customer/ partitions and telemarketing done in connection with our online
marketing agreements.
RELIANCE ON INDEPENDENT CARRIER AND MARKETING COMPANIES; LACK OF CONTROL OVER
MARKETING ACTIVITIES
Historically, we have marketed a significant portion of our services
through partitions, which generally have entered into non-exclusive agreements
with us. Most partitions to date have made no mini-
4
<PAGE>
mum use or revenue commitments to us under these agreements. If we were to lose
access to services on the AT&T network or billing services or experience
difficulties with OBN, our agreements with partitions could be adversely
affected.
Provisions in our agreements with the partitions mandate that they comply
with state and federal statutes and regulations, including those regulating
telemarketing. See "-- Government Regulation" and "-- Direct Telemarketing
Risks." Because our partitions are independent carriers and marketing companies,
however, we are unable to control their activities. We are also unable to
predict the extent of their compliance with applicable regulations or the effect
of increased regulatory review. Increased regulatory review could also affect
possible future acquisitions of new business from new partitions or other
resellers.
GOVERNMENT REGULATION
The Federal Communications Commission (the "FCC") and various state public
service and public utility commissions regulate us as a non-dominant provider of
long distance services. There can be no assurance that the FCC or state
regulators will not take action having an adverse effect on our business,
financial condition or results of operations. FCC or state regulatory action
also could affect the partitions adversely. We also are subject to applicable
regulatory standards for marketing activities, and the increased FCC and state
attention to certain marketing practices could be significant to us. See "--
Direct Telemarketing Risks."
ADVERSE EFFECT OF RAPID CHANGE IN TECHNOLOGY AND SERVICE
The telecommunications industry has been characterized by rapid
technological change, frequent new service introductions and evolving industry
standards. We believe that our future success will depend on our ability to
anticipate such changes and to offer on a timely basis services that meet or
compete with these evolving standards. There can be no assurance that we will
have sufficient resources to make necessary investments or to introduce new
services that would satisfy an expanded range of partition and end user needs.
RISKS RELATED TO OBN
In 1997, we deployed our own nationwide telecommunications network, One
Better Net, or OBN. At September 1, 1998, we provided services over OBN to
approximately 80% of the lines using our services. Operation as a switch-based
provider subjects us to risk of significant interruption in the provision of
services on OBN in the event of damage to our facilities (switching equipment or
connections to transmission facilities) such as fire or natural disaster could
cause. To the extent that we, rather than AT&T or another carrier, are
principally responsible for providing end users with telecommunications
services, interruption or failure to provide such services may subject us to
claims from end users who suffer damages as a result of such interruption or
failure. Thus, interruptions or other difficulties in operating OBN could have a
material adverse effect on our financial condition and results of operations.
ABSENCE OF DIVIDENDS
We have not paid cash dividends since inception and do not anticipate
paying any cash dividends in the foreseeable future.
INVESTMENT COMPANY ACT CONSIDERATIONS
The Investment Company Act of 1940 principally regulates vehicles for
pooled investments in securities, such as mutual funds. The Investment Company
Act, however, also may be applicable to companies that are not organized for the
purpose of investing or trading in securities but nonetheless have more than a
specified percentage of their assets in investment securities. We are engaged in
the telecommunications business, and the availability of cash and liquid
securities is important to our ability to
5
<PAGE>
take advantage of opportunities to acquire other telecommunications businesses,
assets and technologies from time to time. We believe, therefore, that our
activities do not and will not subject us to regulation under the Investment
Company Act.
If we were to be deemed to be an investment company within the meaning of
the Investment Company Act, we would become subject to certain restrictions
relating to our activities, including, but not limited to, restrictions on the
conduct of our business, the nature of our investments, the issuance of
securities and transactions with affiliates. Therefore, our characterization as
an investment company would have a material adverse effect on us. In the
Indenture governing our 5% Convertible Subordinated Notes, we have covenanted
that we will not become an investment company within the meaning of the
Investment Company Act and that we will take all such actions as are necessary
to continue not to be deemed an investment company.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER CONSIDERATIONS
As of September 22, 1998, Mr. Borislow owned beneficially approximately
31.9% of our outstanding common stock. Accordingly, Mr. Borislow may have the
ability to control the election of all of the members of our board of directors
and the outcome of corporate actions requiring majority stockholder approval.
Even as to corporate transactions in which super-majority approval may be
required, such as certain fundamental corporate transactions, Mr. Borislow may
have the ability to control the outcome of such actions. In addition to Mr.
Borislow, as of September 22, 1998, our other directors and executive officers
owned beneficially approximately 12.6% of the our outstanding common stock. See
"Description of Capital Stock" regarding references to percentages of the
outstanding common stock in this prospectus.
We also have an authorized class of 5,000,000 shares of preferred stock
that may be issued by our board of directors on such terms and with such rights,
preferences and designations as our board may determine. Issuance of such
preferred stock, depending upon its rights, preferences and designations, may
have the effect of delaying, deterring or preventing a change in control. A
change of control also may be delayed or prevented by provisions of the Delaware
General Corporation Law and our bylaws, as well as our charter, which divides
our board of directors into three classes, each of which is elected for three
year terms.
Such anti-takeover effects may deter a third party from acquiring us or
engaging in a similar transaction affecting control in which our stockholders
might receive a premium for their shares over the then-current market value.
OUR SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock could adversely
affect the market price of our common stock. As of September 22, 1998, Mr.
Borislow owned of record or had dispositive power with respect to approximately
16.8% of the outstanding common stock, and a decision by Mr. Borislow to sell
his shares could adversely affect the market price of the common stock.
As of September 22, 1998, our employees, former employees and directors had
outstanding options to purchase 7,166,510 shares of common stock. In addition,
as of such date, there were warrants outstanding to purchase up to 12,000,000
shares of common stock and 15,762,757 shares reserved for issuance upon the
conversion of our outstanding 4-1/2% Convertible Subordinated Notes due 2002 and
our 5% Convertible Subordinated Notes due 2004.
Paul Rosenberg, the holder of 7,440,000 shares of common stock, has the
right, under certain conditions, to participate in future registrations of
common stock and to cause us to register certain shares of common stock owned by
him. Holders of warrants also have registration rights under certain conditions.
Sales of substantial amounts of our common stock in the public market, or
the perception that such sales could occur, may adversely affect the market
price of our common stock.
6
<PAGE>
YEAR 2000 RISKS
The "Year 2000" issue refers to the potential harm from computer
programs that identify dates by the last two digits of the year rather than
using the full four digits. As such, dates after January 1, 2000 could be
misidentified and such programs could fail.
If those systems were to malfunction due to the "Year 2000" problem, our
services could fail as well. Such failures could have a material adverse effect
upon our business, results of operations and financial condition. We are
inquiring of such third parties to determine the effect, if any, of the "Year
2000" problem on the systems upon which we are dependent, and to obtain
appropriate assurance that no such problem exists.
If such a failure occurs to our internal computer-based systems or if the
computer-based systems, on which our business depends, that are operated by
others were to malfunction, we could be unable to continue to provide
telecommunications services, to sign up new customers or to bill existing
customers for services. Such failures, if they occur, would have a material
adverse effect on our business and financial condition. However, because of the
complexity of the issues and the number of parties involved whose actions could
affect us and the fact that many of the issues are outside our control, it is
difficult for us to predict the nature or likelihood of such effects.
Our internal staff has conducted a review of most of our internal
computer-based systems that we use in conducting our business. Most of our
systems are relatively new. Much of the software we use in our business has been
developed internally and we regularly modify and update it to meet changing
requirements. We expect that our critical internal systems will be able to
process relevant date information in the future to permit us to continue to
provide services without significant interruption or material adverse effect on
our business, results of operations and financial condition. However, we cannot
guarantee that we will not experience unanticipated negative consequences caused
by undetected errors or defects in the technology we use internally.
We are, however, dependent upon computer systems operated by third
parties, such as local exchange carriers, AT&T, AOL and other vendors. Other
parties whose ability to deal with Year 2000 issues could affect us include our
partitions and the credit card companies through which most of our and AOL's
customers are billed. We have asked some of these parties with which we have
direct relationships about their respective levels of preparedness for Year 2000
issues and we will continue follow up with them. We will also monitor the public
disclosures of these companies regarding their Year 2000 status. The companies
we have asked about their Year 2000 issues have generally given us vague answers
regarding their levels of preparedness or their willingness to provide
assurances to us. In almost all cases, we are not in a position to require
either that these other companies give assurances to the Company as to their
continued provision of services or that such companies take the necessary
actions to assure that they will be ready for the Year 2000. Accordingly, while
none of these other companies on which we depend have told us that they do not
expect to be ready for Year 2000 issues, we do not believe we can project the
likelihood of such parties' abilities to provide uninterrupted services to us.
We have considered possible contingency plans, should one of these
significant suppliers fail, including entering into contracts with long-distance
service providers other than AT&T to support our OBN network. However, given the
nature of our relationships with most of these significant suppliers, it may be
impracticable for us to replace should they be unable to continue to provide
these services. The failure of any of these companies to provide uninterrupted
service to us likely would have a material adverse effect on our business and
results of operations and financial condition.
We do not separately identify costs incurred in connection with Year
2000 compliance activities. To date, however, we do not believe such costs to be
significant because they generally have been incurred in normal course
activities of our internal personnel in regularly modifying and updating our
software programs. Future expenditures are not expected to be significant and
will be funded out of operating cash flows.
7
<PAGE>
THE COMPANY
The Company, originally incorporated in 1989 as Tel-Save, Inc., provides
long distance telephone service. For further information about our business and
operations, reference is made to our reports incorporated in this prospectus by
reference. See "Where You Can Find More Information."
DESCRIPTION OF CAPITAL STOCK
As of September 22, 1998, our authorized capital stock consisted of
300,000,000 shares of common stock, $.01 par value per share, and 5,000,000
shares of undesignated preferred stock, $.01 par value per share. As of
September 22, 1998, 50,406,091 shares of common stock were issued and
outstanding, which number (and other references in this prospectus to
percentages of outstanding common stock), reflects as held in treasury and no
longer outstanding all shares of common stock that had been purchased for our
account as of September 22, 1998 and for which we have paid, notwithstanding
that delivery of such shares to us may not have been made. No shares of
preferred stock were designated or issued. For further information about our
authorized capital stock, reference is made to our reports incorporated in this
prospectus by reference. See "Where You Can Find More Information."
USE OF PROCEEDS
We will not receive any of the proceeds from the shares offered in this
prospectus.
PLAN OF DISTRIBUTION
The shares offered pursuant to this prospectus are being offered on behalf
of their selling shareholders or their respective pledgees, donees, transferees
or other successors in interest. We will not receive any proceeds from this
offering. The shares may be offered for sale from time to time in the open
market, on the Nasdaq National Market, in privately negotiated transactions, or
in a combination of such methods, at market prices prevailing at the time of
sale or at negotiated prices. The shares are intended to be sold through one or
more brokers or dealers or directly to purchasers. Such broker-dealers may
receive compensation in the form of commissions, discounts or concessions from
the selling shareholders and/or purchasers of the shares for whom such
broker-dealers may act as agent, or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling shareholders and any broker-dealers who act
in connection with the sale of the shares under this prospectus may deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
they receive and proceeds of any sale of shares may be deemed to be underwriting
discounts and commissions under the Securities Act.
Pursuant to applicable rules and regulations under the Exchange Act, any
distribution participant and their affiliated purchasers (as defined in
Regulation M adopted under the Exchange Act) may not simultaneously engage in
market making activities with respect to such shares for a restricted period
beginning on the day proxy solicitation or offering materials are first
disseminated to security holders and ending upon the completion of the
distribution, except under certain limited circumstances. In addition to, and
without limiting the foregoing, the selling shareholders, their affiliated
purchasers and any other person participating in such distribution will be
subject to applicable provisions of the Exchange Act and rules and regulations
thereunder, which provisions prohibit, except under certain limited
circumstances, purchases and sales of any of the shares by the selling
shareholders and any other such shareholders during the above-referenced
restricted period. The foregoing may affect the marketability of the shares and
the ability of any person or entity to engage in market making activities with
respect to the shares.
We have agreed to pay all of the expenses incident to the registration,
offering and sale of the shares to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We have agreed to indemnify
the selling shareholders against certain liabilities, including certain
liabilities under the Securities Act.
8
<PAGE>
SELLING SHAREHOLDERS
This prospectus offer 839,982 shares of our common stock. Of these,
2,050 were initially issued to Randy Burns, 1,026 to Charles Mashburn, 167,257
to W. Gerald Quick, 167,257 to Gerald D. Skinner and 2,392 to Kenneth Stegall
pursuant to the Agreement and Plan of Reorganization by and among us, TS
Billing, Inc. and Compco, Inc. dated November 26, 1997 (the "Merger Agreement").
Messrs. Burns Mashburn, Quick, Skinner and Stegall are now our employees. The
remainig shares offered in this prospectus were issued to Michael Goldstone and
Avrohom Oustatoustatcher in connection with a settlement among the parties.
Messrs. Goldstone and Outstatoustatcher are former employees and consultants of
ours.
The following table provides certain information with respect to the shares
held by each selling shareholder as of the date of this prospectus. The shares
registered under the registration statement of which this prospectus is a part
may be offered from time to time by the selling shareholders named below.
However, such selling shareholders are under no obligation to sell all or any
portion of such shares, nor are the selling shareholders obligated to sell any
such shares immediately under this prospectus. We will not receive any proceeds
from any sales of shares by the selling shareholders. All information with
respect to share ownership has been furnished by the selling shareholders.
The following table sets forth certain information with respect to the
beneficial ownership of the shares by each selling shareholder as of January 12,
1999.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
NAME AND ADDRESS(1) BENEFICIALLY OWNED REGISTERED HEREIN HELD AFTER OFFERING(2)
- --------------------------- -------------------- ------------------- -----------------------
<S> <C> <C> <C>
Randy Burns ............... 2,050 2,050 0
Michael Goldstone ......... 250,000 250,000 0
Charles Mashburn .......... 1,026 1,026 0
Avrohom Oustatoustatcher .. 250,000 250,000 0
W. Gerald Quick ........... 167,257 167,257 0
Gerald D. Skinner ......... 167,257 167,257 0
Kenneth Stegall ........... 2,392 2,392 0
</TABLE>
- ----------
(1) The address of each of the selling shareholders is c/o Tel-Save Holdings,
Inc., 6805 Route 202, New Hope, Pennsylvania 18938.
(2) Assumes all of the shares registered offered in this prospectus are sold.
LEGAL MATTERS
Aloysius T. Lawn, IV, our General Counsel and Secretary, has rendered
an opinion to the effect that the shares of common stock offered by this
prospectus are duly authorized, legally issued, fully paid and non-assessable.
Mr. Lawn owns 153,650 shares of common stock and holds vested options to
purchase 50,000 shares at a price of $5.75 per share.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries incorporated by reference in this prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the periods set forth in their reports incorporated in this prospectus by
reference, and are incorporated in this prospectus in reliance upon such reports
given upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
9
<PAGE>
The SEC allows us to incorporate by reference the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be 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 future filings (File
No. 0-26728) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
a. our annual report on Form 10-K for the year ended December 31, 1997 and
the amendments to our annual report filed with the SEC on April 17, 1998
and April 30, 1998;
b. our quarterly reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998;
c. our current reports on Form 8-K, dated March 10, 1998, August 27, 1998 and
September 18, 1998; and
d. the description of our capital stock contained in our registration
statement on Form 8-A, dated September 8, 1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Aloysius T. Lawn, IV
General Counsel and Secretary
Tel-Save Holdings, Inc.
6805 Route 202
New Hope, PA 18938
(215) 862-1500
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide information other than that
provided in this prospectus. We have authorized no one to provide you with
different information. 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 is accurate as of any date other than the date on
the front of this document.
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
======================================================= =======================================================
839,982 SHARES
[GRAPHIC OMITTED]
TABLE OF CONTENTS
PAGE
----
<S> <C>
Risk Factors ................................. 2
The Company .................................. 8
Description Of Capital Stock ................. 8
Use Of Proceeds .............................. 8
Plan Of Distribution ......................... 8
Selling Shareholders ......................... 9
Legal Matters ................................ 9
Experts ...................................... 9
COMMON STOCK
Where You Can Find More Information .......... 9
--------------- ----------
PROSPECTUS
----------
January 13, 1999
======================================================= =======================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee ................. $2,735
Legal fees and expenses ..............
Accounting fees and expenses .........
Transfer agent fees ..................
Miscellaneous ........................ ------
Total .............................. $
======
ITEM 15. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
The Delaware General Corporation Law provides, in substance, that Delaware
corporations shall have the power, under specified circumstances, to indemnify
their directors, officers, employees and agents in connection with actions or
suits by or in the right of the corporation, by reason of the fact that they
were or are such directors, officers, employees and agents, against expenses
(including attorneys' fees) and, in the case of actions, suits or proceedings
brought by third parties, against judgment, fines and amounts paid in settlement
actually and reasonably incurred in any such action, suit or proceeding.
The Company's Bylaws also provide for indemnification to the fullest extent
permitted by the Delaware General Corporation Law. Reference is made to the
Company's Bylaws.
As permitted by the Delaware General Corporation Law, the Company's Bylaws
eliminate the personal liability of its directors to the Company and its
stockholders, in certain circumstances, for monetary damages arising from a
breach of the director's duty of care. Additionally, the Company has entered
into indemnification agreements with some of its directors and officers. These
agreements provide for indemnification to the fullest extent permitted by law
and, in certain respects, may provide greater protection than that specifically
provided for by provide indemnification for, among other things, conduct which
is adjudged to be fraud, deliberate dishonesty or willful misconduct.
The Company has purchased an insurance policy that purports to insure the
officers and directors against certain liabilities incurred by them in the
discharge of their functions as officers and directors.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
5.1* Opinion of Aloysius T. Lawn, IV.
23.1 Consent of BDO Seidman, LLP.
23.2* Consent of Aloysius T. Lawn, IV (included as part of Exhibit 5.1).
24.1 Power of Attorney (included as part of the signature page).
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered)
and any deviation form the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrar pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, any information omitted from the form of prospectus filed as a part of
this registration statement in reliance upon Rule 430A and contained in any
form of prospectus filed by the registrant pursuant to Rule 242(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this pre-effective
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Solebury,
Commonwealth of Pennsylvania, on January 12, 1999.
TEL-SAVE HOLDINGS, INC.
By: /s/ Gabriel Battista
-----------------------------------
Gabriel Battista
Chairman of the Board of
Directors, Chief Executive
Officer, President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated below:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gabriel Battista Chairman of the Board of Directors, Chief January 12, 1999
- ----------------------------- Executive Officer, President and Director
Gabriel Battista (Principal Executive Officer)
* Director January 12, 1999
- ---------------------------
Gary W. McCulla
* Director January 12, 1999
- ---------------------------
Emanuel J. DeMaio
* Chief Financial Officer and Director January 12, 1999
- --------------------------- (Principal Financial Officer)
George P. Farley
* Controller (Principal Accounting Officer) January 12, 1999
- ---------------------------
Kevin R. Kelly
* Director January 12, 1999
- ---------------------------
Harold First
* Director January 12, 1999
- ---------------------------
Ronald R. Thoma
/s/ Aloysius T. Lawn IV Power of Attorney January 12, 1999
- ---------------------------
Aloysius T. Lawn IV
</TABLE>
II-3
EXHIBIT 23.1
COSENT OF BDO SEIDMAN, LLP
Tel-Save Holdings, Inc.
New Hope, Pennsylvania
We hereby consent to the incorporation by reference in this Prospectus
constituting a part of this Registration Statement of our reports dated February
5, 1998, relating to the consolidated financial statements and schedule of
Tel-Save.com, Inc. and Subsidiaries (the "Company") appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
New York, New York
January 12, 1999
