PROSPECTUS
INTERNET COMMERCE CORPORATION
o This prospectus relates to the public offering from time to time of up to
434,184 shares of our class A common stock that may be sold by the persons
listed on page 17 below. These persons are referred to in this prospectus
as selling stockholders.
o Our common stock is traded on The Nasdaq SmallCap Market under the symbol
ICCSA. On September 6, 2000, the last sale price for the common stock was
$15.875.
o Any selling stockholder may sell the common stock on The Nasdaq SmallCap
Market or in privately negotiated transactions, whenever he decides and at
the price he sets. The price at which any of the shares of common stock
are sold and the commissions paid, if any, may vary from transaction to
transaction.
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 common stock, of which 967,199 shares have not
been sold as of the date of this prospectus.
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 common stock, of which 438,865 shares have not been sold as
of the date of this prospectus.
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 September 7, 2000
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............................................................ 13
Business....................................................................13
Selling Stockholders....................................................... 16
Plan of Distribution....................................................... 17
Description of Securities...................................................19
Legal Matters.............................................................. 25
Experts.................................................................... 25
Where You Can Find More Information........................................ 25
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 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 ICC.NET (formerly named 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 ICC.NET 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 ICC.NET to provide the following services:
o Traditional VAN services -- our ICC.NET service 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 -- our ICC.NET service 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 -- our ICC.NET service 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 -- our
ICC.NET service 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 ICC.NET 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 ICC.NET 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
ICC.NET service will allow these companies to request or encourage their smaller
trading partners to conduct electronic commerce using our ICC.NET service.
-3-
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.
The Offering
Class A common stock offered
by the selling stockholders.....................................434,184 shares
Class A common stock to be
outstanding after the offering............................6,602,839 shares (1)
Nasdaq SmallCap Market symbol............................................ICCSA
- ---------------------------
(1) This information is based on the number of shares of class A common stock
outstanding on September 6, 2000. It includes all of the shares being offered by
this prospectus by the selling stockholders. It excludes (a) 2,151,962 shares of
class A common stock issuable upon exercise or conversion of warrants, series A
convertible redeemable preferred stock, series C convertible redeemable
preferred stock and class B common stock outstanding on that date and (b)
5,160,000 shares then issuable under outstanding options or reserved for
issuance under our amended and restated stock option plan.
-4-
RISK FACTORS
You should carefully consider each of the following risk factors in
addition to the other information contained in this prospectus before purchasing
shares of our class A common stock. Investing in 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 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 ICC.NET service and launched the current version of our
ICC.NET 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 April 30, 2000, we had an
accumulated deficit of approximately $34 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 ICC.NET service and the volume of the data, documents or other
information they send or retrieve utilizing this service. The success of our
ICC.NET 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 ICC.NET service and may not be able
to continue to expand into new business areas. We are currently focusing on our
ICC.NET 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 ICC.NET 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 ICC.NET 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.
-5-
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 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 ICC.NET 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 ICC.NET service 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 ICC.NET 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 April 30, 2000, we had cash and marketable securities in the
amount of approximately $22 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.
-6-
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 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: Peregrine Systems, Inc., GE Global
eXchange Services, a subsidiary of GE Information Services, Inc., International
Business Machines Corporation Global Services, Sterling Commerce, Inc., a
subsidiary of SBC Communications Inc., AT&T Corp. and 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 ICC.NET 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
-7-
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 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.
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 and ICC.NET
have been registered as trademarks. The applications to register 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 ICC.NET, 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 ICC.NET 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
-8-
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.
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
-9-
services that they provide will remain at the levels needed to enable us to
conduct our business effectively.
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 ICC.NET
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.
The average weekly trading volume of our class A common stock on The Nasdaq
SmallCap Market was, approximately, 116,500 shares during the quarter ended June
30, 1999, 75,800 shares during the quarter ended September 30, 1999, 576,600
shares during the quarter ended December 31, 1999, 1,127,400 shares during the
quarter ended March 31, 2000, 809,100 shares during the quarter ended June 30,
2000 and 270,400 shares for the period from July 1, 2000 to September 1, 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, of which 967,199 shares have not been sold
as of the date of this prospectus. 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, of which 438,865
shares have not been sold as of the date of this
-10-
prospectus. 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 shares of class A common stock at a favorable price.
From January 1, 2000 through September 6, 2000, the price of our class A common
stock has fluctuated from a low of $8.25 to a high of $96.00. 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.
The market for our class A common stock may be illiquid, which would
restrict your ability to sell your shares of class A common stock. Our class A
common stock is currently trading on The Nasdaq SmallCap Market. A purchaser of
the shares of class A common stock covered by this prospectus may not be able to
find a buyer for the portion of the shares of class A common stock the purchaser
wishes to sell at an acceptable price. It is possible that the trading market
for 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 A
common stock. The price at which 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. 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
-11-
for broad 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
The selling stockholders are selling all the common stock covered by this
prospectus for their own account. We will not receive any proceeds from the sale
of this class A common stock.
-12-
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 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 1000 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 ICC.NET Solution
We believe that our ICC.NET 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 enables seamless electronic business
communication. Our ICC.NET 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 ICC.NET
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 ICC.NET 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. Our ICC.NET service 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 ICC.NET 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 ICC.NET service. Our
-13-
ICC.NET service incorporates proprietary technology and is immediately
accessible using a standard Internet connection and a web browser.
Our ICC.NET 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 ICC.NET 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;
o Our ICC.NET 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 ICC.NET 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. Our ICC.NET service
also provides a complete audit trail of content delivery and customer selection
from a variety of security methods.
We believe that ICC.NET is one of the only Internet-based data
transmission services that is approved to interconnect with the fifteen 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 ICC.NET service to comply with
this requirement and thus can reduce their costs and improve
-14-
their ability to locate, order, track and deliver products. Our ICC.NET 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 ICC.NET 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 ICC.NET 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 ICC.NET fax service to
approximately 700 trading partners.
Large-scale electronic document management and delivery. Our ICC.NET 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.
Our ICC.NET service allows customers to manage and distribute these large files
in real-time and provides archiving, security, authentication and audit
services. Our ICC.NET service 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 ICC.NET service.
Business Strategy
We believe that our ICC.NET 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 our ICC.NET service 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; its trading partners, vendors or customers, are referred to as
spokes. We intend to continue to market ICC.NET 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.
-15-
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. Small
spoke companies using our ICC.NET 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 ICC.NET fax service.
As a result, 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 ICC.NET service.
We intend to encourage the use of our ICC.NET service through exceptional
customer service. We currently offer technical support to our customers
twenty-four hours 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 ICC.NET
service has been fully operational more than 99% of the time. SIAC runs all
computing operations for the New York Stock Exchange and the American Stock
Exchange.
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.
Year 2000 Compliance
We implemented and completed a Year 2000 program designed to address the
Year 2000 issue. We have experienced no significant disruptions in our
information technology and non-information technology systems and we believe
those systems successfully responded to the Year 2000 date change. In addition,
we have not experienced any significant adverse effects with any of our third
party vendors, suppliers or customers. While we are not aware of, and do not
expect that we will experience, any material problems related to this issue, we
will continue to monitor our computer applications and those of our suppliers,
vendors and customers throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
-16-
SELLING STOCKHOLDERS
In December 1999 and January 2000 we completed a private placement of
434,184 shares of class A common stock. The shares were sold for a total of $9.5
million at prices equal to the market value of our class A common stock on the
dates on which we entered into definitive agreements with the investors. The
shares offered by this prospectus are the shares purchased by the investors in
this private placement.
The table below sets forth information, as of September 6, 2000, regarding
the beneficial ownership of the shares by the selling stockholders. The
information regarding the selling stockholders' beneficial ownership after this
offering assumes that all shares of class A common stock offered by this
prospectus are sold. The presentation is based on 6,602,839 shares of our class
A common stock outstanding as of September 6, 2000, which includes all of the
shares being offered by this prospectus.
- --------------------------------------------------------------------------------
Number of Shares Common Stock
Of Common Stock Number of Beneficially Owned
Beneficially Shares of After Offering
Owned Common Stock -------------------
Selling Stockholders Before Offering Offered Number Percent
- --------------------------------------------------------------------------------
Acorn Investment Trust,
Series Designated Acorn
Fund 197,725 197,725 0 *
Band & Co. 29,580 21,180 11,000 *
Firststar Funds, Inc.,
a Wisc. Corp., on
behalf of MicroCap 155,802 114,702 44,000 *
Fund
Maril & Co. 3,318 2,418 700 *
Bantry Bay Ventures, LLC 74,601 74,601 0 *
Mark Fife 6,544 6,544 0 *
Michael Horowitz 6,544 6,544 0 *
Gregg S. Hymowitz 6,544 6,544 0 *
Andrew E. Lewin 3,926 3,926 0 *
_____________
* Less than 1%
PLAN OF DISTRIBUTION
ICC is registering the shares on behalf of the selling stockholders. As
used herein, "selling stockholders" includes donees and pledgees selling shares
received from a named selling stockholder after the date of this prospectus. We
anticipate that the selling stockholders may sell all or a portion of the shares
offered by this prospectus from time to time on The Nasdaq SmallCap Market, on
other securities exchanges or in private transactions, at fixed prices, at
-17-
market prices prevailing at the time of sale or at prices reasonably related to
the market price, at negotiated prices, or by a combination of these methods of
sale through:
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o sales to one or more brokers or dealers as principal, and the resale by
those brokers or dealers for their account, including resales to other
brokers and dealers;
o block trades in which a broker or dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction; or
o privately negotiated transactions with purchasers.
We are not aware as of the date of this prospectus of any agreements
between the selling stockholders and any broker-dealers regarding the sale of
the shares offered by this prospectus, although we have made no inquiry in that
regard. In connection with distributions of the shares, the selling stockholders
may enter into hedging transactions with broker-dealers. In connection with
these transactions:
o broker-dealers may engage in short sales of the shares covered by this
prospectus in the course of hedging the positions they assume with selling
stockholders;
o the selling stockholders may sell shares of our class A common stock short
and deliver the shares offered by this prospectus to close out their short
positions;
o the selling stockholders may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the
shares offered by this prospectus, which the broker-dealer may resell
according to this prospectus; and
o the selling stockholders may pledge the shares offered by this prospectus
to a broker or dealer and upon a default, the broker or dealer may effect
sales of the pledged shares according to this prospectus.
The selling stockholders and any broker, dealer or other agent executing
sell orders on behalf of the selling stockholders may be considered to be
underwriters within the meaning of the Securities Act. If so, commissions
received by any of these brokers, dealers or agents and profit on any resale of
the shares may be considered to be underwriting commissions under the Securities
Act. These commissions received by a broker, dealer or agent may be in excess of
customary compensation.
All costs, fees and expenses of registration incurred in connection with
the offering will be borne by us. All selling and other expenses incurred by the
selling stockholders will be borne by the selling stockholders.
The selling stockholders also may resell all or a portion of the shares
offered by this prospectus in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that Rule.
-18-
We have notified the selling stockholders that they will be subject to
applicable provisions of the Securities Exchange Act of 1934 and its rules and
regulations, including, among others, Rule 102 under Regulation M. These
provisions may limit the timing of purchases and sales of any of the common
stock by the selling stockholders. Rule 102 under Regulation M provides, with
some exceptions, that it is unlawful for the selling stockholders or their
affiliated purchasers to, directly or indirectly, bid for or purchase, or
attempt to induce any person to bid for or purchase, for an account in which the
selling stockholders or affiliated purchasers have a beneficial interest, any
securities that are the subject of the distribution during the applicable
restricted period under Regulation M. All of the above may affect the
marketability of the class A common stock. To the extent required by law, we may
require the selling stockholders, and their brokers if applicable, to provide a
letter that acknowledges compliance with Regulation M under the Exchange Act
before authorizing the transfer of the selling stockholders' shares.
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 page 24 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 September 6, 2000, there were 6,602,839 shares of class A common
stock outstanding, held of record by approximately 155 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
-19-
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 September 6, 2000, there were 2,574 shares of class B common stock
outstanding, held of record by four stockholders.
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.
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 September 6, 2000, ICC had 568 shares of series A preferred stock
outstanding, held by ten 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
-20-
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.
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 and a total of $181,773 in
cash in payment of the dividend due on July 1, 2000.
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 September 6, 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.
-21-
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.
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 September 6, 2000, there were 234,140 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 September 6, 2000, there were 263,835 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.
-22-
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.
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
-23-
class A common stock or any subdivision or combination of the outstanding class
A common stock.
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.
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 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
Our board of directors is divided into three classes of directors. The
classes are as nearly equal in number as possible and serve staggered three-year
terms. One class of directors is elected each year to serve a three-year term.
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.
-24-
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 is American
Stock Transfer and Trust Company.
LEGAL MATTERS
The legality of the shares being offered by this prospectus has been
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 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 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
-25-
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.
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 proxy statement for the annual meeting of stockholders for
the year ended July 31, 1999;
o Our proxy statement for a special meeting of stockholders
initially filed on August 11, 2000;
o Our annual report on form 10-KSB for the year ended July 31, 1999;
o Our quarterly reports on form 10-QSB for the quarters ended October
31, 1999, January 31, 2000 and April 30, 2000;
o Our current reports on form 8-K dated December 1, 1999, December 13,
1999, February 15, 2000, March 28, 2000, April 26, 2000, May 4,
2000, May 18, 2000, June 15, 2000, August 11, 2000 and September 7,
2000;
o Our amended current report on form 8-K/A dated February 15, 2000;
and
o The description of our class A common stock contained in our Rule
424 prospectus filed with the SEC on June 18, 1995, including any
amendments or reports filed for the purpose of updating the
description. See also Description of Securities on pages 19 to 25 of
this prospectus.
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
-26-
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.