As Filed with the United States Securities and Exchange Commission
on June 7, 2002
Registration No. 333-85692
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
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.
-3-
THE INFORMATION 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 June 7, 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 3.
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 June 6, 2002, the last reported price of the Company's
Common Stock as reported by the Nasdaq Stock Market was $10.92 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.
-------------------
TABLE OF CONTENTS
Page
----
Table of Contents.............................................................2
The Company...................................................................3
Risk Factors..................................................................3
Available Information........................................................12
Incorporation of Certain Documents by Reference..............................13
Selling Shareholders.........................................................13
Plan of Distribution.........................................................15
Legal Matters................................................................16
Experts......................................................................16
-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 Wideband Code Division Multiple Access (Wideband CDMA or WCDMA)
specifications of the third generation (3G) standard. WCDMA is comprised of two
wideband (i.e., operating in the 5 MHz bandwidth) technologies: Frequency
Division Duplex (FDD) and Time Division Duplex (TDD). 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
the area of WCDMA standards.
We develop advanced wireless technologies and products that facilitate
voice and data communications. Our current technology development programs are
focused on creating intellectual property and both hardware and software
products for the WCDMA air-interface protocols of the 3G standards. 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 system-on-a-chip
technology for the wireless communications industry. We intend 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.
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.
-3-
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" and "intend", 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 March 31, 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.
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 Wideband TDD (WTDD) and FDD. Other digital wireless technologies,
particularly CDMA2000 (a competing narrowband (i.e., operating in the 1.25 MHz
bandwidth), FDD multi-carrier CDMA technology, incompatible with the WCDMA
standard), W-LAN (a wireless local area network), FDD used in data applications,
FDD high speed downlink, and NTDD (narrowband, low chip rate TDD) 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
market share and reduce the opportunities for WCDMA. W-LAN, which enables users
to connect laptops and personal digital assistants (PDAs) 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 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 be impaired.
-4-
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, revenue from a small number of customers could cause our
operating results to vary from quarter to quarter and result in operating
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 profitability. The
foregoing factors are difficult to forecast and these, as well as other factors,
could adversely affect our quarterly or annual operating results.
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 the 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.
-5-
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.
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 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
Second generation (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 general packet radio systems (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.
-6-
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.
We Have Relationships with Third Parties Which Could Terminate, 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. 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 the balance in 2002. We have not, at this time, entered into any
arrangements with Nokia to extend our development relationship and there should
be no expectation that we will do so in the future. Should our costs associated
with the development effort exceed the maximum funding committed by Nokia, we
will continue the development effort needed to complete our contractual
commitments on a self-funded basis and this could adversely affect both our cash
flow and our ability to achieve acceptable levels of profitability.
-7-
Revenues attributable to Sharp, one of our TDMA patent licensees, comprised
approximately 30% of total revenue in 2001. This license agreement with Sharp
covers PDC (Pan Asian Digital Cellular), PHS (Personal Handyphone System)
products and expires in mid 2003. Although we will 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. The inability to extend the
license could adversely affect both our cash flow and our ability to achieve or
sustain acceptable levels of profitability for the years beyond 2002.
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 (a form of software used in wireless communications systems) 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. 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. In
addition, delays in entering into such relationships could cause us to miss
critical market windows.
Our ability to derive revenues from our FDD development project is
currently largely dependent on Infineon's success in developing integrated
circuits that incorporate the FDD software developed under the cooperative
relationship (Joint 3G Protocol Stack), and on Infineon's and our success in
marketing and selling the Joint 3G Protocol Stack independently. Moreover, while
we may independently market and use our own portions of the Joint 3G Protocol
Stack being jointly developed with Infineon, the 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.
-8-
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 (Global System for Mobile Communications,
deployed in Europe, Asia, Africa, the Middle East, parts of North America and
other regions), IS-54/136 (the AMPS-D standard, deployed in North, Central and
South America) , PDC and PHS (deployed in Japan, the People's Republic of China
and Taiwan). 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, 2G licensing revenues are or are
expected to be adversely impacted 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 products compliant
with the standards adopted for 3G (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.
-9-
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.
-10-
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, has and
may continue to lead to decreased sales of licensed products. 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.
-11-
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.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 with the
Securities 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.
-12-
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.
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 quarter ended
March 31, 2002;
(c) Our Current Reports on Form 8-K files with the Commission
on January 16, 2002 and June 4, 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:
-13-
Number of
Shares
Beneficially Number of
Owned Prior to Shares Beneficial Ownership
Name Offering Offered After Offering
---- ---------------- ---------- -------------------------------
Percent of
Class (if
Number of greater
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, 130,000(5) 80,000(6) 50,000 --
Inc.(4)
----------------
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.
--------
* Information regarding George Calhoun's beneficial ownership of the
Company's Common Stock is current though January 31, 2002.
-14-
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Shareholders. As used herein, "Selling Shareholders" includes donees, pledgees
or other transferees selling shares received from the named Selling Shareholders
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 an "underwriter"
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.
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 or other transferee intends to
sell more than 500 shares, a supplement to this Prospectus will be filed.
-15-
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 1,288 shares of Common Stock and
options to purchase 50,000 shares of Common Stock.
EXPERTS
The financial statements and financial statement schedule incorporated by
reference in this Prospectus to the Annual Report on Form 10-K of the Company
for the year ended December 31, 2001, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
-16-
InterDigital Communications Corporation
-------------
PROSPECTUS
-------------
285,250 Shares
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 $15,000**
Miscellaneous $3,476.55
Total $20,000.00**
----------
* Actual
** Estimated in connection with the registration of the Shares for resale.
Item 15. Indemnification of Directors and Officers
Sections 1741-1750 of the BCL and the Company's By-Laws 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 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.
Item 16. Exhibits
* 5 Opinion of Lawrence F. Shay, Esq.
* 23.1 Consent of Independent Public 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.
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.
II-2
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. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in King of Prussia, Pennsylvania, on June 7, 2002.
INTERDIGITAL COMMUNICATIONS CORPORATION
By: /s/ Howard E Goldberg
---------------------------------------------------
Howard E. Goldberg, Director, President and Chief
Executive Officer (Principal Executive Officer)
By: /s/ Richard J. Fagan
---------------------------------------------------
Richard J. Fagan, Executive Vice President and
Chief Financial Officer (Principal Financial and
Accounting Officer)
II-3
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
Date: June 7, 2002 *
--------------------------------------------
Harry G. Campagna, Chairman of the Board
Date: June 7, 2002 /s/ Howard E. Goldberg
--------------------------------------------
Howard E. Goldberg, Director, President and
Chief Executive Officer
Date: June 7, 2002 *
--------------------------------------------
D. Ridgely Bolgiano, Director
Date: June 7, 2002 *
--------------------------------------------
Steven T. Clontz, Director
Date: June 7, 2002 *
--------------------------------------------
Joseph S. Colson, Jr., Director
Date: June 7, 2002 *
--------------------------------------------
Robert S. Roath, Director
By: /s/ Howard E Goldberg
----------------------------------------
* Howard E. Goldberg
Attorney-in-Fact
II-4