As Filed with the United States
Securities and Exchange Commission on November 13, 2002
Registration No. 333-85692
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INTERDIGITAL COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in Charter)
PENNSYLVANIA 23-1882087
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
781 Third Avenue
King of Prussia, Pennsylvania 19406
(610) 878-7800
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Lawrence F. Shay, Esq., General Counsel and Vice President
InterDigital Communications Corporation
781 Third Avenue
King of Prussia, Pennsylvania 19406
(610) 878-7800
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effectiveness of this
Registration Statement.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration 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. [ ]
InterDigital Communications Corporation (the "Registrant" or the
"Company") hereby amends this registration statement (the "Registration
Statement") on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission (the "Commission"), acting pursuant to said Section 8(a), may
determine.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS 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.
Subject to Completion
Preliminary Prospectus dated November 13, 2002
PROSPECTUS
INTERDIGITAL COMMUNICATIONS CORPORATION
This Prospectus relates to the resale by the Selling Shareholders of a
total of 285,250 shares of Common Stock, $.01 par value per share (the "Common
Stock") of InterDigital Communications Corporation (the "Company", "we", "us" or
"our") which may be issued by the Company upon the exercise of outstanding
warrants (the "Warrants") to purchase shares (the "Shares") of Common Stock at a
per share exercise price ranging from $5.50 to $7.625. The issuance of the
Shares upon exercise of the Warrants is not covered by this Prospectus, but
rather only the resale of such Shares. See "Selling Shareholders."
There is no assurance that any of the Warrants will be exercised, and
therefore there are no assurances that the Company will receive any proceeds
hereunder. The Company will not receive any proceeds from the sale of Shares by
the Selling Shareholders. See "Selling Shareholders."
The Selling Shareholders and any broker executing selling orders on
their behalf may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, (the "Securities Act") in which event commissions
received by such broker may be deemed to be underwriting commissions under the
Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE PURCHASERS SHOULD CONSIDER THE RISKS SET FORTH UNDER "RISK
FACTORS" COMMENCING ON PAGE 4.
The Shares offered by the Selling Shareholders hereby will be sold at
market prices on the Nasdaq National Market or in private sales at prevailing
market prices or negotiated prices. The Selling Shareholders may pay commissions
or other compensation to broker-dealers in connection with such sales, which may
be in excess of customary commissions charged for Nasdaq National Market
transactions. See "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "IDCC." On November 12, 2002, the last reported price of the
Company's Common Stock as reported by the Nasdaq Stock Market was $14.19 per
share.
The date of this Prospectus is _________, 2002
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation is unlawful. The delivery
of this Prospectus at any time does not imply that information contained herein
is correct as of any time subsequent to its date.
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TABLE OF CONTENTS
Page
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TABLE OF CONTENTS..............................................................2
THE COMPANY....................................................................3
RISK FACTORS...................................................................4
AVAILABLE INFORMATION.........................................................18
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................19
SELLING SHAREHOLDERS..........................................................19
PLAN OF DISTRIBUTION..........................................................20
LEGAL MATTERS.................................................................21
EXPERTS.......................................................................21
-2-
THE COMPANY
We specialize in the architecture, design and delivery of wireless
technology and product platforms. Our current technology development programs
are focused on creating intellectual property and hardware and software products
for the WCDMA specifications of the 3G standard. WCDMA is comprised of two
wideband technologies: FDD and TDD. (Please refer to the Glossary of Terms,
beginning on page 14, for a list and detailed description of the various
technical, industry and other defined terms that are used in this Prospectus.)
Over the course of our corporate history, we have amassed a substantial and
significant library of digital wireless systems experience and know-how and we
hold an extensive worldwide portfolio of patents in the wireless systems field.
We market our technologies and solutions capabilities primarily to
telecommunications equipment producers and related suppliers. Our inventions are
embedded into products targeted for the following wireless telecommunications
applications: mobile phones, personal digital assistants, mobile computing
devices, other terminal-end wireless devices, base stations and other
infrastructure equipment. In addition, we license our patents to equipment
manufacturers worldwide. We are continuing to broaden and deepen our extensive
patent portfolio and body of technical know-how related to wireless technologies
and systems through continuous invention and innovation, while also linking our
licensing activities to emerging product development efforts, particularly in
those areas related to WCDMA standards.
We develop advanced wireless technologies and products that facilitate
voice and data communications. We are currently developing WCDMA FDD and WCDMA
TDD technology platforms. Our strategic objective is to create substantial
long-term value as one of the leading developers and providers of advanced
air-interface and full SOC technology for the wireless communications industry.
We expect to create a return on our investment in 3G technologies through
technology transfer to customers, the delivery (either alone or through
alliances) of software and hardware products and the licensing of our
intellectual property worldwide. The development of advanced wireless
technologies focused on market requirements is a fundamental element of our
future strategic success and is key to achieving these goals.
For the past ten years, we have been intensively involved in a
comprehensive patent licensing program with the ultimate objective of realizing
licensing revenues from use by third parties of inventions covered by ITC's
patent portfolio. ITC offers non-exclusive, royalty bearing patent licenses to
telecommunications manufacturers that manufacture, use or sell, or intend to
manufacture, use or sell, equipment that utilizes our extensive portfolio of
intellectual property. ITC has entered into 30 license agreements with 26
manufacturers, covering the manufacture, sale and use of products complying with
2G and/or 3G standards. Our license agreements are made on a paid-up, prepaid,
or current royalty bearing basis, or a combination thereof. Prepayments are
generally made as advances against payment of future royalties. As sales of
covered products are made, the royalties due are calculated and either applied
against any prepayment, or paid in cash. Sometimes, the royalties due are
applied in full against the prepayment while other times they are applied in
partial satisfaction (e.g., 40%). In the latter case, a royalty would be due for
the remaining amount not applied against the prepayment (e.g., 60%). Royalties
on sales of covered products under the license agreement are payable or
exhausted against prepayments based on the royalty formula applicable to the
particular license agreement. These formulas include flat dollar rates per unit,
percentage of sales, percentage of sales with caps, and other similar measures.
The formulas can also vary by other factors including territory, covered
standards, quantity, and dates sold.
-3-
In earlier years, the Company developed intellectual property relating
to 2G technologies. As a result, earlier licensing agreements cover the 2G
patents generated from such technology development. ITC continues to seek to
license its 2G patents as such patents have not expired and 2G products are
predominant in today's market. However, the Company also has a significant
number of patents related to 3G technologies, and its continuing to develop 3G
technology, leading to the filing of additional 3G patent applications.
Therefore, ITC's licensing efforts have expanded to cover its 3G patent rights.
The mailing address and telephone number of our principal executive
offices is as follows:
InterDigital Communications Corporation
781 Third Avenue
King of Prussia, Pennsylvania 19406
(610) 878-7800
RISK FACTORS
This section highlights specific risks with respect to an investment in
our Company. In analyzing this offering, prospective purchasers should carefully
consider these risks. We caution you that this Prospectus, as well as the
documents that we have filed with the Commission that are incorporated by
reference in this Prospectus, contain forward-looking statements that are based
on management's beliefs and assumptions and on information that is currently
available to us. You should carefully consider the risks and uncertainties
described below and in the documents filed with the Commission that are
incorporated herein by reference before purchasing the Common Stock.
Forward-looking statements relied upon by management reflect, among
other things, our current intentions and plans or expectations (i) to broaden
our patent portfolio and body of technical know-how, (ii) to link our licensing
activities to emerging product development efforts, (iii) to deliver (either
alone or through alliances) software and hardware products, and (iv) to engage
in technology transfers and license our intellectual property worldwide. Words
such as "objective", "intend", and "expect", variations of such words, and words
with similar meaning or connotations are intended to identify such
forward-looking statements.
Such statements are subject to risks and uncertainties. We caution
readers that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such forward looking statement. You
should not place undue reliance on these forward-looking statements, which apply
on or as of the date of this report. Certain of these risks and uncertainties
are described in greater detail in the Company's Form 10-K for the year ended
December 31, 2001 and Form 10-Q for the quarter ended September 30, 2002. It
should also be noted that risks described as affecting one forward-looking
statement may affect other forward-looking statements. In addition, other
factors may exist that are not fully known to us at this time. We undertake no
obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
-4-
Our Use of Arthur Andersen LLP as Our Independent Auditor May Pose Risks
To Us and Limit Your Ability to Seek Potential Recoveries From Them Related to
Their Work
Section 11(a) of the Securities Act provides that if any part of a
registration statement at the time it becomes effective contains an untrue
statement of a material fact or an omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
any person acquiring a security interest pursuant to such registration statement
(unless it is proved to be that at the time of such acquisition such person knew
of such untruth or omission) may sue, among others, every accountant who has
consented to be named as having prepared or certified any part of the
registration statement or as having prepared or certified any report or
valuation which is used in connection with the registration statement with
respect to the statement in such registration statement, report or valuation
which purports to have been prepared or certified by the accountant. On April
16, 2002, we announced that we had made a determination to engage
PricewaterhouseCoopers LLP ("PwC") to serve as the Company's independent public
accountants and no longer engage Arthur Andersen LLP ("Arthur Andersen") in such
capacity. Our consolidated balance sheets as of December 31, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years ended December 31, 2001, have been audited by
Arthur Andersen, as stated in their report dated February 14, 2002, included in
our Form 10-K for the year ended December 31, 2001, which is incorporated by
reference in the Registration Statement. Prior to the date of this Prospectus,
the Arthur Andersen engagement partner and engagement manager who reviewed our
most recent audited financial statements resigned from Arthur Andersen. As a
result, after reasonable efforts, we have been unable to obtain Arthur
Andersen's written consent to the incorporation by reference into the
Registration Statement of its audit reports with respect to our financial
statements. Under these circumstances, Rule 437a under the Securities Act
permits us to file the Registration Statement without a written consent from
Arthur Andersen. Accordingly, Arthur Andersen will not be liable to you under
Section 11(a) of the Securities Act because it has not consented to being named
as an expert in the registration statement. In addition, the ability of Arthur
Andersen to satisfy any claims (including claims arising from Arthur Andersen's
provision of auditing and other services to us) may be limited as a practical
matter due to recent events regarding Arthur Andersen.
Our Technologies May Not Be Widely Deployed
Our activities are focused on next-generation technologies and products
and therefore begin as research and development work. Accordingly, we are
subject to the risks typically associated with such activities. New
technological innovations generally require a substantial investment before they
are commercially viable, and we may make substantial, non-recoverable
investments in new technologies that may not result in meaningful revenues. For
example, in order to generate revenues and profits from sales of 3G Products, we
must continue to make substantial investments and technological innovations. A
significant assumption in our strategic plan is that WCDMA will be widely
deployed in the 3G market (i.e., the market for advanced mobile wireless
products and services). WCDMA may not be deployed as widely as we expect which
could reduce revenue opportunities. A second significant assumption in our
strategic plan is that TDD will be adopted and widely used in the 3G market.
While our inventions and know-how can apply across a broad range of
technologies, our detailed technology and development efforts are primarily
focused on WTDD and FDD. Other digital wireless technologies, particularly
CDMA2000, FDD multi-carrier CDMA technology, W-LAN, FDD used in data
applications, FDD high speed downlink packet access, and NTDD are expected to be
competitive with WTDD. CDMA2000 has been deployed in parts of Asia and the
United States, and such deployment could cause CDMA2000 to gain significant
-5-
market share and reduce the opportunities for WCDMA. W-LAN, which enables users
to connect laptops and personal digital assistants to the Internet, is already
being marketed worldwide and is competitive with TDD. If the initial deployment
of FDD for data applications obtains significant market share, or if FDD high
speed downlink packet access gains market acceptance, the niche targeted for
WTDD could be reduced or eliminated. All of these competing technologies also
could impair multi-vendor and operator support for WTDD, key factors in defining
opportunities in the wireless market. There can be no assurance that our
technology will ultimately have market relevance or be selected by wireless
service providers for their networks or equipment manufacturers. If we determine
that WTDD will not be adopted at all or in a time period we expect, or adopted
in a manner which justifies our continuing investment in the technology, we may
change our strategic plan to reduce or eliminate such continuing investment
and/or to capture more lucrative market opportunities. Additionally, if WTDD is
not adopted and widely used, our strategic plan will require a significant shift
and a portion of our anticipated revenue may not materialize.
Our Future Operating Results are Likely to Fluctuate
Our financial condition and operating results have fluctuated
significantly in the past and may fluctuate significantly in the future. These
operating results may continue to fluctuate because (i) our markets are subject
to increased competition from other products and technologies and announcements
of new products and technologies by our competitors; (ii) it is difficult to
predict the timing and amount of licensing revenue associated with past
infringement and new licenses, or the timing, nature or amount of revenues
associated with strategic partnerships; (iii) we may not be able to enter into
additional or expanded strategic partnerships or license agreements, either at
all or on acceptable terms; (iv) the strength of our patent portfolio could be
weakened through patents being declared invalid, our claims being narrowed,
design-arounds, changes to the standards, and adverse court decisions; and (v)
our revenues are in large part dependent on sales by our licensees which is
outside of our control. General economic and other conditions causing a downturn
in the market for our products in development or technology could also adversely
affect our operating results. Nevertheless, we base our decisions regarding our
operating expenses and capital expenditures on a combination of current cash
balances, anticipated cash flow trends and the level of expenditures required to
execute our strategic plan. Because the base level of many of our expenses is
relatively fixed, variations in revenue from a small number of customers could
cause our operating results to vary from quarter to quarter and result in
operating income or losses. In addition, increased expenses which could result
from factors such as increased litigation costs or actions designed to keep pace
with technology and product market targets could adversely impact near-term
operating results. The foregoing factors are difficult to forecast and these, as
well as other factors, could adversely affect our quarterly or annual operating
results.
-6-
We Have Substantial Global Competition
Competition in the wireless telecommunications industry is intense.
There can be no assurance that we will be able to successfully compete in our
efforts to license our technology and/or sell our future products, or that our
competitors will not develop new technologies and products that are more
commercially effective than our own. Our products and services face competition
from existing companies providing services comparable to ours and companies
developing and marketing other digital and wireless technologies. We face
competition from the in-house development teams at semiconductor corporations
and telecommunication equipment suppliers. It is also possible that new
competitors may enter the market. Many current and potential competitors may
have advantages over us, including (a) existing royalty-free cross-licenses to
competing and emerging technologies; (b) longer operating histories and presence
in key markets; (c) greater name recognition; (d) access to larger customer
bases; and (e) greater financial, sales and marketing, manufacturing,
distribution channels, technical and other resources. As a result of these
factors, these competitors may be more successful than us. In addition, the
slowdown in the global economy and anticipated rollout of 3G has forced, and may
continue to force, realignment within the semiconductor industry. Such vertical
and horizontal consolidation could result in increased competition for
partnership opportunities.
We Need to Effect Further Technology and Product Development in a Timely Manner
Our future success will depend on our ability to continue to develop,
introduce and sell new products, technology and enhancements on a timely basis.
Our future success will also depend on our ability to keep pace with
technological developments, satisfy varying customer requirements, price our
products competitively and achieve market acceptance. The introduction of
products embodying new technologies and the emergence of new industry standards
could render our products and technology currently under development obsolete
and unmarketable. If we fail to anticipate or respond adequately to
technological developments or customer requirements, or experience any
significant delays in development, introduction or shipment of our products and
technology in commercial quantities, our competitive position could be damaged.
Our positioning for the 3G market will require continued significant
investment in research and development. We cannot be sure that we will have
sufficient resources to make such investments, that we will be able to make the
technological advances necessary to achieve these goals, or that the costs
associated with such efforts will be acceptable. Our business, financial
condition and operating results could be materially adversely affected if we are
unable to respond to the need for technological change or if these products or
technologies do not achieve market acceptance when released.
-7-
We may experience technical, financial or other difficulties or delays
related to the further development of our technologies. Delays can be costly,
and if such development efforts are not successful or delays are serious, our
existing and potential strategic relationships could suffer or these strategic
partners could be hampered in marketing efforts of products containing our
technologies. We could experience reduced royalty revenues on such
organizations' products containing our technology and/or we could miss a
critical market window. Further, failure to meet material obligations under our
existing or potential contracts could result in the other party terminating the
relationship and/or seeking to hold us liable for breach. Moreover, our
technologies are in the development stage, and have not been fully tested in
commercial use. It is possible that they may not perform as expected or may not
be market relevant. In such case, our business, financial condition and
operating results could be adversely affected.
Our Markets are Unpredictable and Subject to Rapid Technological Change
2G products and services were introduced in the early 1990s, taking
advantage of new digital technology that greatly increased the capacity, quality
of service and flexibility of wireless networks. In 2001, 2.5G systems (such as
GPRS) began to be deployed offering substantially higher data rate services.
Deployment of 3G services is in its early stages, and is expected to allow
operators to take advantage of additional spectrum and, through the use of
higher data speeds, deliver richer voice and data applications to their
customers.
We are positioning our current development projects for the emerging 3G
market. These projects do not have direct bearing on the 2.5G or any other
market which might develop after the 2G market but prior to the development of
the 3G market. The 3G market has and may continue to develop at a slower rate or
pace than we have and do expect and may be of a smaller size than we expect. For
example, the potential exists for 3G preemption by the hangover of 2.5G
solutions now being bought, tested and fielded. In addition, there could be
fewer applications for our technology and products than we expect. Economic
conditions, customer buying patterns, timeliness of equipment development,
pricing of 3G infrastructure and mobile products, continued growth in
telecommunications services that would be delivered on 3G devices, and
availability of capital for and the high cost of infrastructure improvements
could also affect the rate and pace of 3G market development. Failure of the 3G
market to materialize to the extent or at the rate which we expect would reduce
our opportunities for sales and licensing and could materially adversely affect
our business, financial condition and operating results.
The entire wireless communications market in which we compete is
characterized by rapid technological change, frequent product introductions and
evolving industry standards. Existing technology and products become obsolete
and unmarketable when products using new technologies are introduced and new
industry standards emerge. As a result, marketability and the potential life
cycles of the products and technologies that we are developing cannot be assured
and are difficult to estimate. In addition, new industry standards, falling
prices or technology changes may render the products and/or technologies
obsolete or non-competitive. New technologies and products can fail to become
commercially viable due to lack of market relevance. To be successful, we must
continue to develop new products and technologies that successfully respond to
such changes. We may not be able to successfully predict the market or form
strategic relationships, either at all or on acceptable terms, to enable us to
develop such new products and technologies. Even if we do, we may not be able to
introduce such products or technologies successfully in a timely manner. Missing
a critical market window could reduce or eliminate our ability to capitalize on
the technology and products as to which the window applies.
-8-
We Have Arrangements with Third Parties Which Could Expire, Adversely Affecting
Our Cash Flow And Our Ability to Achieve or Sustain Acceptable Levels of
Profitability
Revenues attributable to Nokia, a strategic engineering partner,
comprised approximately 42% of total revenue in 2001. In the third quarter of
2001, we amended our development program agreement with Nokia to, among other
things, provide for Nokia's funding of the project up to a maximum of
approximately $58 million. Under the amendment, generally, Nokia is obligated to
pay for the work based on negotiated commercial rates and to reimburse certain
expenses, all up to a maximum of approximately $58 million. Nokia is obligated
to pay the maximum amount when billable amounts equal or exceed the maximum
amount and we effect certain deliverables to Nokia. We are obligated to complete
the scope of work at our own expense to the extent that billable amounts exceed
the maximum. Previous to the amendment, revenue had been reported on a time and
materials basis and we had billed Nokia approximately $46 million under the
contract leaving approximately $12 million of revenue to be recognized. After
the amendment, we recognize revenue under the contract on a percentage of
completion basis. Of the $12 million remaining under the contract after the
amendment, approximately $6.2 million was recognized in 2001, and we expect to
recognize a substantial portion of the balance of $5.8 million in 2002. The
Nokia development project ends when the contractual scope of work has been
completed, which we currently expect to occur in 2003. Certain royalty-free
licenses granted under the contract continue after the development work has been
completed. We have not, at this time, entered into any arrangements with Nokia
to extend the work covered by this development project and there should be no
expectation that we will do so in the future. Although our costs associated with
the development effort have exceeded the maximum funding committed by Nokia, we
are continuing the development effort needed to complete our contractual
commitments on a self-funded basis. This could adversely affect both our cash
flow and our ability to achieve acceptable levels of profitability, especially
if such costs are greater than currently anticipated. Although cash receipts
from Nokia attributable to the development project were used to fund the
development work, other cash and cash equivalents on hand are enabling us to
complete the project and redirect certain of our resources to self-funded
development work. In addition, we have continued to explore potential strategic
relationships with third parties involving development and/or productization of
3G wireless technologies. As the Nokia development project winds down, we intend
to continue our operations as a developer of wireless technology and a licensor
of intellectual property.
Revenues attributable to Sharp, one of our patent licensees, comprised
approximately 30% of total revenue in 2001. Revenues through June 30, 2002 have
continued at approximately the same rate. Our TDMA patent license agreement with
Sharp is royalty-bearing, non-exclusive, and generally non-transferable. It
covers Sharp's sale of PDC and PHS products on a world-wide basis through mid
2003, at which time it expires unless extended. Although we intend to seek to
extend the term of this license with Sharp, there can be no assurance that we
will be successful, either at all or on favorable or comparable terms. Since
this license is non-exclusive, we are not restricted from licensing the same
patents to multiple licensees and potential licensees. In addition, the
enforceability of our other license agreements would not be affected in the
event of a termination of the Sharp TDMA patent license. Expenditures relating
to this patent license have been minimal, being predominantly administrative in
nature. Further, cash receipts attributable to our TDMA patent license with
Sharp have been used for general corporate purposes, as opposed to any
particular program, expense or initiative. However, if we are not able to secure
sufficient cash flow or revenues from alternative sources and, at the same time,
maintain or increase current company expenditure levels, the inability to extend
this patent license could materially adversely affect both our cash flow and our
ability to achieve or sustain acceptable levels of profitability for the years
beyond 2003.
-9-
The Company is also a party to an additional patent license agreement
with Sharp covering Sharp's sale of GSM, N-CDMA and 3G Products on a world-wide
basis. This patent license agreement is royalty-bearing, non-exclusive,
generally non-transferable and expires upon the last to expire of the patents
licensed under the agreement. No revenues were generated under this patent
license agreement through the end of 2001. Revenues through June 30, 2002
associated with this patent license agreement were minimal. Since this license
is non-exclusive, we are able to license the same patents to multiple licensees
and potential licensees. Cash receipts attributable to this patent license
agreement with Sharp have been used for general corporate purposes, as opposed
to any particular program, expense or initiative. Expenditures relating to this
patent license have been minimal, being predominantly administrative in nature.
We Rely and Intend to Rely on Relationships with Third Parties.
The successful execution of our strategic plan is partially dependent
on the establishment and success of relationships with equipment producers and
other industry participants. Our plan contemplates that these third parties will
give us access to product capability, markets and additional libraries of
technology. We currently have a limited number of such third party
relationships. To date we have not entered into any semi-conductor partnership
relating to our TDD technology. We have only one semi-conductor partner in our
FDD technology development effort, Infineon, and if we commence a FDD Access
Stratum development effort with another semiconductor company for terminal unit
applications, Infineon may engage a third party for the development or
modification of a new FDD Access Stratum. Our failure to enter into such
additional relationships, either on acceptable terms or at all, or our failure
to successfully execute such relationships, could impair our ability to
introduce portions of our technology and resulting products. In addition, delays
in entering into such relationships could cause us to miss critical market
windows. Further, the failure to maintain existing relationships and to
establish new relationships, all on satisfactory terms with capable partners,
could also adversely affect our future operating results.
Our ability to derive revenues from our FDD development project is
currently largely dependent on Infineon's success in developing the integrated
circuits that incorporate the Joint 3G Protocol Stack, and on Infineon's and our
success in marketing and selling the Joint 3G Protocol Stack independently. We
may independently market and use our own portions of the Joint 3G Protocol Stack
being jointly developed with Infineon. Other anticipated benefits of the
Infineon relationship may be impacted by economic conditions affecting
semi-conductor companies in general and their ability to compete effectively,
Infineon's financial condition and engineering resources, and the market timing
and technological success of the Infineon platform upon which our designs are
based.
-10-
From time to time, certain companies may also assert that their patent,
copyright and other intellectual property rights are also important to the
industry or to us. In that regard, from time to time third parties provide us
with copies of their patents relating to digital wireless technologies and offer
licenses to such technologies. We in turn evaluate such patents and the
advisability of obtaining such licenses. If any of our products were found to
infringe on protected technology, we could be required to redesign such
products, license such technology, and/or pay damages to the infringed party. If
we are unable to license protected technology used in our products and/or if we
cannot economically redesign such products, we could be prohibited from
marketing such products. In such case, our prospects for realizing future income
could be adversely affected.
Our Revenue in the Short and Long Term Depends Upon Our Success in Enforcing
Patent Rights and Protecting Other Intellectual Property
Our strategic plan depends, over the next several years, upon our
continued ability to generate patent licensing revenue related to the sale by
third parties of handsets and infrastructure compliant with the TDMA digital
cellular standards in use today among them GSM, IS-54/136, PDC and PHS. Our
ability to collect such revenue is subject to a number of risks. First, major
telecommunications equipment manufacturers have challenged, and we expect will
continue to challenge, the validity of ITC's patents. In some instances, certain
of ITC's patent claims have been declared invalid or substantially narrowed.
While ITC continues to maintain a worldwide portfolio of patents that it
believes are valid and infringed, and while we intend to vigorously defend and
enforce such patents, we cannot assure that the validity of our patents will be
maintained or that any of our key patents will be determined to be applicable to
any 2G or 3G product. Any significant adverse finding as to the validity or
scope of ITC's key patents could result in the loss of patent licensing revenue
from existing licensees and could substantially impair our ability to secure new
patent licensing arrangements. Additionally, while we license a portfolio of
patents, our 2G licensing revenues are expected to be impacted negatively over
time by the decline of the 2G market coupled with the expiration of certain of
our TDMA patents in the coming years.
In the long term, our strategic plan depends upon our ability to
generate patent licensing revenue from the sale by third parties of 3G Products.
Our ability to generate such revenue is subject to certain risks. First, many of
the inventions which we believe will be employed in 3G Products are the subject
of patent applications which have not yet been issued by the relevant patent
reviewing authorities. While we intend to vigorously defend such patents, we
cannot assure that these patent applications will be granted or that the
resulting patents will be infringed by 3G Products. Second, we expect that the
validity of our patents will be challenged, and that we will be required to
enforce our patents against parties that refuse to take a license under our
patents. While we intend to vigorously defend and enforce our patents, we cannot
assure that the validity of our patents will be maintained or that any of our
patents will be determined to be applicable to any 3G Product. Finally, our
ability to generate 3G patent licensing revenue is dependent on our licensees'
success in selling 3G Products. This, in turn, may be affected by many other
factors, which are described in this "Risk Factors" section, including global
economic conditions, buying patterns of end users, competition and the changing
technology and market landscapes.
-11-
In addition, the cost of defending our intellectual property has been
and may continue to be significant. Litigation may be required to enforce our
intellectual property rights, protect our trade secrets, enforce confidentiality
agreements, or determine the validity and scope of proprietary rights of others.
As a result of any such litigation, we could lose our proprietary rights and/or
incur substantial unexpected operating costs. Any action we take to protect our
intellectual property rights could be costly and could absorb significant
management time and attention which, in turn, could negatively impact our
results of operations. Moreover, third parties could circumvent the patents held
by our wholly-owned subsidiary, ITC, through design changes. Any of these events
could adversely affect our prospects for realizing future income.
Together with ITC, we are currently engaged in a significant patent
infringement litigation with Ericsson, Inc. (Ericsson) over certain of ITC's
patents. During the course of this litigation (or a future yet unidentified and
unfiled litigation, should such litigation arise), certain of ITC's key patents
could be found to be invalid or not infringed or its patent claims could be
narrowed. Any such adverse finding as to the validity or scope of ITC's key
patents could result in the loss of patent licensing revenue from existing
licensees and could substantially impair our ability to secure new patent
licensing arrangements.
Our License Agreements Contain Provisions which Could Impair Our Ability to
Realize Licensing Revenues
Certain of our licenses contain provisions which could cause the
licensee's obligation to pay royalties to us to be reduced, terminated or
suspended for an indefinite period, with or without the accrual of the royalty
obligation. In addition, certain of our licensees had, in the past, stated,
among other things, that the outcome of a prior litigation over ITC's patents
materially impacted the royalties due under their license agreements and have
refused to pay royalties under their license agreements. While we believe that
these positions have been meritless, similar positions could be asserted in the
event that a licensee's obligation to pay royalties to us in the future is
either terminated or indefinitely suspended, or in the event that ITC's patents
are held invalid or unenforceable, and these positions could be found to have
merit. The assertion or validity of such positions could interfere with ITC's
ability to secure new licenses or to generate recurring licensing revenue under
the existing agreements.
We Face Risks From Doing Business in Global Markets
A significant part of our strategy involves our continued pursuit of
growth opportunities in a number of international markets. In doing so, we are
subject to the effects of a variety of uncontrollable and changing factors,
including: difficulty in protecting our intellectual property in foreign
jurisdictions; inability to enter foreign markets; government regulations,
tariffs and other applicable trade barriers; currency control regulations;
social, economic and political instability; natural disasters, acts of terrorism
and war; potentially adverse tax consequences; inability to enforce contractual
commitments abroad; and general delays in remittance and difficulties of
collecting non-U.S. payments. In addition, we are also subject to risks specific
to the individual countries in which our customers, our licensees and we do
business.
-12-
A long lasting downturn in the global economy that impacts the wireless
communications industry could negatively affect our revenues and operating
results. The global economy is in a slowdown that has had wide-ranging effects
on our licensees and the markets that we target, particularly wireless equipment
manufacturers and network operators. In particular, recent economic weakness in
Japan, from which a significant portion of our 2001 revenue was derived, may
continue to lead to decreased sales by current and prospective licensees. This
downturn has had and is expected to continue to have a negative effect on, among
other things, the ability and willingness of companies to invest in
technological and product development, and the sales of our licensees (which, in
turn, affects our revenues). We cannot predict the depth or duration of this
downturn, and if it grows more severe or continues for a long period of time,
our ability to increase or maintain our revenues and other operating results may
be impaired.
Consolidations in the Wireless Communications Industry Could Adversely Affect
Our Business
The wireless communications industry has experienced consolidation of
participants, and this trend may continue. ITC's licensing opportunities are
affected by the increasing concentration of the wireless industry, particularly
as to infrastructure, which results in a substantial portion of the licensing
opportunities being concentrated in a small number of non-licensed
manufacturers, many of whom are opposing the validity of ITC's patents in
multiple forums. In addition, certain business combinations may result in the
loss or diminution of existing royalty obligations. Further, if wireless
carriers consolidate with companies that utilize technologies competitive to our
technologies, we may lose market opportunities.
We Depend on Sufficient Engineering Resources
Competition for qualified and talented individuals with engineering
experience in emerging technologies, like WCDMA, is intense. There can be no
assurance that we will be able to attract and retain a satisfactory number of
such individuals. The failure to attract and retain highly qualified personnel
could interfere with our ability to undertake additional technology and product
development efforts as well as our ability to meet our strategic objectives.
Market Predictions are Forward-Looking in Nature
Our market strategy is based on our own predictions and on analyst,
industry observer and expert predictions, which are forward-looking in nature
and are inherently subject to risks and uncertainties. The validity of their and
our assumptions, the timing and scope of the 3G market, economic conditions,
customer buying patterns, timeliness of equipment development, pricing of 3G
Products, growth in wireless telecommunications services that would be delivered
on 3G devices, and availability of capital for infrastructure improvements could
affect these predictions. If any of these predictions are wrong, our strategic
plan may require a significant shift and our operating results could be
adversely affected.
We Face Risks from Terrorist, Cyber and Other Attacks
None of our properties or data were damaged or compromised as a result
of the terrorist attacks that occurred in the United States on September 11,
2001. Our operations during the period that followed suffered only minor
disruption such as delayed travel. However, we could be impacted, in the future,
by a terrorist, cyber or other attack either directly or indirectly through our
customers or vendors.
-13-
If Wireless Handsets Pose Health and Safety Risks, Demand for Our Products in
Development and Those of Our Licensees and Customers Could Decrease
Media reports and certain studies have suggested that radio frequency
emissions from wireless handsets may be linked to health concerns, such as brain
tumors, other malignancies and genetic damage to blood, and may interfere with
electronic medical devices, like pacemakers, telemetry and delicate medical
equipment. If concerns over radio frequency emissions grow, this could
discourage the use of wireless handsets, and cause a decrease in demand for our
products and those of our licensees and customers. There are also some safety
risks associated with the use of wireless handsets while driving. Concerns over
these safety risks and the effect of any legislation that may be adopted in
response to these risks could reduce demand for our products in development and
those of our licensees and customers.
Our Stock Price is Volatile
Historically, market prices for securities of companies involved in the
wireless telecommunications industry have been volatile. In addition, market
prices for the Common Stock have historically been particularly volatile due, in
part, to the Company's history of quarterly fluctuations of revenues and
operating results. Announcements of, among other things, technological
innovations or new commercial products by the Company or its competitors,
developments concerning proprietary technologies, results of patent enforcement
activities, regulatory developments in both the United States and other
countries, and global and national economic and political factors, as well as
period-to-period fluctuations in financial results, may have a significant
impact on the market price of the Common Stock.
GLOSSARY OF TERMS
Access Stratum
Layers of a software stack used by devices to gain access to a network.
Air Interface
The modulation standard of a wireless network that defines the wireless
interface between a terminal unit and the base station.
Bandwidth
A range of frequencies that can carry a signal on a transmission medium,
measured in Hertz and computed by subtracting the lower frequency limit from the
upper frequency limit.
Base Station
The central radio transmitter/receiver that maintains communications with
subscriber -equipment sets within a given range (typically, a cell site).
-14-
CDMA
"Code Division Multiple Access". A method of digital spread spectrum technology
wireless transmission that allows a large number of users to share access to a
single radio channel by assigning unique code sequences to each user.
CDMA2000
A family of IMT-2000 standards, as amended, which evolved from narrowband CDMA
technologies (i.e., IS-95 and cdmaOne) and, include without limitation CDMA2000
1X, CDMA 1X EV-DO, CDMA-2000 1X_EV-DV and CDMA2000 3X.
Chip
An electronic circuit that consists of many individual circuit elements
integrated into a single substrate.
Digital
Information transmission where the data is represented in discrete numerical
form.
Duplex
A characteristic of data transmission; either full duplex or half duplex. Full
duplex permits simultaneous transmission in both directions of a communications
channel. Half duplex means only one side can transmit at a time.
FDD
"Frequency Division Duplex". A duplex operation using a pair of frequencies,
one for transmission and one for reception.
Frequency
The rate at which an electrical current alternates, usually measured in Hertz.
GPRS
"General Packet Radio Systems". A packet-based wireless communications service
that enables high-speed wireless Internet and other data communications via GSM
networks.
GSM
"Global System for Mobile Communications". A digital cellular standard, based on
TDMA technology, specifically developed to provide system compatibility across
country boundaries.
Hertz
The unit of measuring radio frequency (one cycle per second).
High Speed Downlink Packet Access
A high speed means of transmitting data from a 3G WCDMA communications
infrastructure to compatible terminal equipment.
ITC
"InterDigital Technology Corporation", our wholly-owned Delaware subsidiary.
-15-
IS-54
The original TDMA digital cellular standard in the United States. Implemented in
1992 and then upgraded to the IS-136 digital standard in 1996.
IS-136
A United States standard for digital TDMA technology.
Joint 3G Protocol Stack
The FDD software for Terminal unit applications to be developed under our
co-development agreement with Infineon.
MHz
"MegaHertz", millions of Hertz.
Multi-carrier
The use of multiple carrier channels to support the transmission of traffic.
Multiple Access
A methodology (e.g., FDMA, TDMA, CDMA) by which multiple users share access to a
transmission channel. Most modern systems accomplish this through "demand
assignment" where the specific parameter (frequency, time slot, or code) is
automatically assigned when a subscriber requires it.
NTDD
Narrowband, low chip rate, TDD.
PDC
"Personal Digital Cellular". The standard developed in Japan for TDMA digital
wireless mobile radio communications systems.
PHS
"Personal Handyphone System". A digital cordless telephone system and digital
network based on TDMA. This low-mobility microcell standard was developed in
Japan..
Platform
The base technology of a system's hardware and software that defines how the
system is operated and determines other kinds of software that can be used.
Protocol
A formal set of conventions governing the format and control of interaction
among communicating functional units.
2G
"Second Generation". A generic term usually used in reference to voice-oriented
digital wireless products, primarily mobile handsets which provide basic voice
services.
-16-
2.5G
A generic term usually used in reference to fully integrated voice and data
digital wireless devices offering higher data rate services and enhanced
Internet access.
SOC
"System-on-a-chip". The embodiment on a single silicon chip of the essential
components that comprise the operational core of a digital system.
Standards
Specifications that reflect agreements on products, practices, or operations by
nationally or internationally accredited industrial and professional
associations or governmental bodies.
Technology Transfer
The sale, license or other transfer of technology rights.
Terminal
Equipment at the end of a communication circuit. Often referred to as an
end-user device or handset. Terminal units include mobile phone handsets,
personal digital assistants, computer laptops and telephones.
TDD
"Time Division Duplexing". A duplex operation using a single frequency, divided
by time, for transmission and reception.
TDMA
"Time Division Multiple Access". A method of digital wireless transmission that
allows a multiplicity of users to share access (in a time ordered sequence) to a
single channel without interference by assigning unique time segments to each
user within the channel.
3G
"Third Generation". A generic term usually used in reference to the next
generation digital mobile devices and network, which provide high speed data
communications capability along with voice services.
3G Products
Products compliant with the standards adopted for 3G.
WCDMA
"Wideband Code Division Multiple Access" or "Wideband CDMA". The next generation
of CDMA technology optimized for high speed packet-switched data and
high-capacity circuit switched capabilities.
Wideband
A communications channel with a user data rate higher than a voice-grade
channel; usually 64kpbs to 2mbps.
-17-
Wireless
Radio-based systems that allow transmission of information without a physical
connection, such as copper wire or optical fiber.
Wireless LAN (W-LAN)
"Wireless local area network". A collection of devices (computers, networks,
portables, mobile equipment, etc.) linked wirelessly over a limited area.
WTDD
"Wideband TDD" or "Wideband Time Division Duplex".
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 with the
Commission relating to the Shares offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby.
We are subject to the informational requirements of the Securities and
Exchange Act of 1934 (the "Exchange Act"). In accordance with the Exchange Act,
we file annual, quarterly and special reports and other information with the
Commission. Statements contained in this Prospectus concerning the provisions of
any document are not necessarily complete and, in each instance, reference is
hereby made to the copy of the document filed as an exhibit to the registration
statement.
You can inspect and copy the reports, proxy statements, and other
information that we file with the Commission at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You can also obtain copies of such material
by mail at prescribed rates from the Commission's Public Reference Section at
its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
also access such material at the Commission's home page on the Internet at
http://www.sec.gov.
Our Common Stock is traded as "National Market Securities" on the
Nasdaq National Market. Materials that we file can be inspected at the offices
of the National Association of Securities Dealers, Inc., Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006. Prior to April 26, 2000, our Common Stock
was listed on the American Stock Exchange. Thus, certain reports, proxy
statements and other information concerning the Company previously filed may
also be inspected at the offices of the American Stock Exchange, Inc., 9801
Washingtonian Blvd., Gaithersburg, MD 20878.
In addition, we will provide without charge to each person to whom this
Prospectus is delivered, upon either the written or oral request of such person,
the Annual Report for the Company's latest fiscal year and a copy of any or all
of the documents incorporated herein by reference other than exhibits to such
documents. Such requests should be directed to InterDigital Communications
Corporation, 781 Third Avenue King of Prussia, Pennsylvania 19406, Attention:
General Counsel; telephone number (610) 878-7800.
-18-
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with them, 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 a part of this Prospectus, and information that we file
later with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act:
(a) Our Annual Report on Form 10-K for the year ended December 31,
2001;
(b) Our Quarterly Report on Form 10-Q for the quarters ended March 31,
2002, June 30, 2002 and September 30, 2002;
(c) Our Current Reports on Form 8-K filed with the Commission on
January 17, 2002, April 16, 2002, June 4, 2002, and July 12, 2002; and
(d) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on April 25, 2000,
together with Amendment No. 1 on Form 8-A/A filed with the Commission on May 2,
2000, and including any amendments or reports filed for the purpose of updating
such description in which there is described the terms, rights and provisions
applicable to our Common Stock.
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling Shareholders
and certain information regarding the beneficial ownership of the Company's
Common Stock held by the Selling Shareholders as of March 27, 2002*, and as
adjusted to reflect the sale of the shares offered by this Prospectus:
Beneficial Ownership
After Offering
Number of -----------------------------
Shares Percent of
Beneficially Number of Class (if
Owned Prior to Shares Number of greater
Name Offering Offered Shares than 1%)
------ --------------- ------------ ------------- ----------
George Calhoun 90,000(1) 90,000(1) -- --
LibertyView Fund, LLC 27,050(2) 27,050(2) -- --
LibertyView Plus Fund, L.P. 88,200(3) 88,200(3) -- --
CPR (USA) Inc., f/k/a Paresco,
Inc.(4) 130,000(5) 80,000(6) 50,000 --
--------
* Information regarding George Calhoun's beneficial ownership of the
Company's Common Stock is current though January 31, 2002.
---------------
1. Consists of shares issuable upon the exercise of warrants to purchase
such shares at an exercise price of $5.85 per share which expire on May
31, 2004.
2. Consists of shares issuable upon the exercise of a warrant to purchase
such shares at an exercise price of $5.50 per share which expires on
December 21, 2002.
3. Consists of shares issuable upon the exercise of warrants to purchase
such shares at an exercise price of $5.50 per share which expire on
December 21, 2002.
4. George T. Hartigan, Richard A. Meckler and Steven S. Rogers, acting
individually, and David H. Mancilla, acting jointly with either Cort
Gwon or Alan M. Mark, have investment and voting control over the
shares beneficially owned by CPR (USA) Inc.
5. Consists of 50,000 shares issuable upon the exercise of a warrant to
purchase such shares at an exercise price of $5.50 per share which
expires on December 31, 2002, and 80,000 shares issuable upon the
exercise of a warrant to purchase such shares at an exercise price of
$7.625 per share which expires on October 1, 2006.
6. Consists of shares issuable upon the exercise of a warrant to purchase
such shares at an exercise price of $7.625 per share which expires on
October 1, 2006.
-19-
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Shareholders. As used herein, "Selling Shareholders" includes donees, pledgees,
transferees or other successors-in-interest selling shares received from the
named Selling Shareholders as a gift, pledge, partnership distribution or other
non-sale related transfer, after the date of this Prospectus. All costs,
expenses and fees in connection with the registration of the Shares offered
hereby will be borne by the Company. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of Shares will be borne by the
Selling Shareholders. Sales of Shares may be effected by Selling Shareholders
from time to time in one or more types of transactions (which may include block
transactions) on the Nasdaq National Market, in negotiated transactions, through
put or call options transactions relating to the Shares, through short sales of
Shares, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The Selling Shareholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities,
nor is there an underwriter or coordinating broker acting in connection with the
proposed sale of Shares by the Selling Shareholders.
The Selling Shareholders may effect such transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such brokers-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders and/or the
purchasers of Shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers that act in connection
with the sale of Shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of Shares sold by them while acting
as principals might be deemed to be underwriting discounts or commissions under
the Securities Act. The Company has agreed to indemnify the Selling Shareholders
against certain liabilities, including liabilities arising under the Securities
Act. The Selling Shareholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the Shares
against certain liabilities, including liabilities arising under the Securities
Act.
Because the Selling Shareholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Shareholders will be subject to the prospectus delivery requirements of the
Securities Act. The Company has informed the Selling Shareholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
The Selling Shareholders also may resell all or a portion of the Shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule
144.
-20-
Upon the Company being notified by any of the Selling Shareholders that
any material arrangement has been entered into with a broker-dealer for the sale
of Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such Shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and (vi) other facts
material to the transaction. In addition, upon the Company being notified by any
of the Selling Shareholders that a donee, pledgee, transferee or other
successor-in-interest intends to sell more than 500 shares, a supplement to this
Prospectus will be filed.
LEGAL MATTERS
The validity of the Common Stock registered hereunder has been passed
upon for the Company by Lawrence F. Shay, Esq., 781 Third Avenue, King of
Prussia, Pennsylvania 19406. Mr. Shay is General Counsel, Vice President and
Corporate Secretary of the Company, and Mr. Shay owns 1,421 shares of Common
Stock and options to purchase 50,000 shares of Common Stock.
EXPERTS
We have not been able to obtain, after reasonable efforts, the written
consent of Arthur Andersen to our naming it in this Prospectus as having
certified our consolidated financial statements for the three years ended
December 31, 2001, as required by Section 7 of the Securities Act. Accordingly,
Arthur Andersen will not have any liability under Section 11 of the Securities
Act for false and misleading statements and omissions contained in this
prospectus, including the financial statements, and any claims against Arthur
Andersen related to any such false and misleading statements and omissions may
be limited.
-21-
InterDigital Communications Corporation
-------------
PROSPECTUS
-------------
Common Stock
______, 2002
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $273.45*
Accounting fees and expenses $1,250**
Legal fees and expenses $50,000**
Miscellaneous $3,476.55
Total $55,000.00**
--------------
* Actual
** Estimated in connection with the registration of the Shares for resale.
Item 15. Indemnification of Directors and Officers
Sections 1741-1750 of the Pennsylvania Business Corporation Law of 1988
(the "BCL") and the Company's By-Laws, as amended through March 21, 2002,
provide for indemnification of the Company's directors and officers and certain
other persons. Under Sections 1741-1750 of the BCL, directors and officers of
the Company may be indemnified by the Company against all expenses incurred in
connection with actions (including, under certain circumstances, derivative
actions) brought against such director or officer by reason of his or her status
as a representative of the Company, or by reason of the fact that such director
or officer serves or served as a representative of another entity at the
Company's request, so long as the director or officer acted in good faith and in
a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company. As permitted under the BCL, the Company's By-Laws
provide that the Company (to the full extent permitted under the BCL) shall
indemnify directors and officers against all expenses incurred in connection
with actions (including derivative actions) brought against such director or
officer by reason of the fact that he or she is or was a director or officer of
the Company, or by reason of the fact that such director or officer serves or
served as an employee or agent of any entity at the Company's request, unless
the act or failure to act on the part of the director or officer giving rise to
the claim for indemnification is determined by a court in a final, binding
adjudication to have constituted willful misconduct or recklessness. The
Company's By-Laws authorize the Company to purchase and maintain insurance to
insure its indemnification obligations on behalf of any person who is or was or
has agreed to become a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against any expense, liability or loss asserted against him and
incurred by him or on his behalf in any such capacity.
Item 16. Exhibits
* 5 Opinion of Lawrence F. Shay, Esq.
* 23.1 Consent of Independent Accountants
23.2 Consent of Lawrence F. Shay, Esq.
* 25 Power of Attorney
--------------
* Previously filed.
II-1
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions discussed in Item 15 of this Registration
Statement, or otherwise, the Company has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person with the securities being
registered, the Company 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 Securities Act and will be governed by the final
adjudication of such issue.
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; (ii) to reflect in the prospectus any facts or
events arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent 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 from 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); and (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 clauses
(i) and (ii) above do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic reports filed
by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in this Registration Statement; (2) that, for the
purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
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The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in King of Prussia, Pennsylvania, on
November 13, 2002.
INTERDIGITAL COMMUNICATIONS CORPORATION
By: /s/ Howard E. Goldberg
----------------------------------------------------
Howard E. Goldberg, Director, President and Chief
Executive Officer (Principal Executive Officer)
By: /s/ R. J. Fagan
----------------------------------------------------
Richard J. Fagan, Executive Vice President and
Chief Financial Officer (Principal Financial and
Accounting Officer)
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Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities indicated and on the dates indicated.
Date: November 13, 2002 *
--------------------------------------------
Harry G. Campagna, Chairman of the Board
Date: November 13, 2002 /s/ Howard E. Goldberg
--------------------------------------------
Howard E. Goldberg, Director, President and
Chief Executive Officer
Date: November 13, 2002 *
--------------------------------------------
D. Ridgely Bolgiano, Director
Date: November 13, 2002 *
--------------------------------------------
Steven T. Clontz, Director
Date: November 13, 2002 *
--------------------------------------------
Joseph S. Colson, Jr., Director
Date: November 13, 2002 *
--------------------------------------------
Robert S. Roath, Director
By: /s/ Howard E. Goldberg
--------------------------------------------
* Howard E. Goldberg
Attorney-in-Fact
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EXHIBIT INDEX
Exhibit No. Description
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23.2 Consent of Lawrence F. Shay, Esquire
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