As filed with the Securities and Exchange Commission on September 20, 2006.
Registration No. 333-135623
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ILINC COMMUNICATIONS, INC.
--------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
76-0545043
(I.R.S. Employer Identification Number)
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, ARIZONA 85018
(602) 952-1200
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
JAMES M. POWERS, JR.
ILINC COMMUNICATIONS, INC.
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, ARIZONA 85018
(602) 952-1200
(Name, Address, Including Zip Code and Telephone Number, Including Area Code,
of Agent for Service)
COPIES OF COMMUNICATION TO:
JAMES S. RYAN, III, ESQ.
JACKSON WALKER L.L.P.
901 MAIN STREET, SUITE 6000
DALLAS, TEXAS 75202
(214) 953-6000
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following
box.........................................................................[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.................................[X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering................................[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. .....................................................[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ............................................[ ]
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ILINC COMMUNICATIONS, INC.
11,783,544 SHARES OF COMMON STOCK
This is an offering of shares of common stock, par value $0.001 per
share, of iLinc Communications, Inc. All of the shares being offered will be
sold from time to time by the selling stockholders identified in this
prospectus. We will not receive any proceeds from the sale of shares by the
selling stockholders. However, upon any exercise of the warrants by payment of
cash, we will receive the exercise price of the warrants. Expenses in connection
with the registration of these shares of common stock under the Securities Act
of 1933, including legal and accounting fees, will be paid by iLinc
Communications, Inc.
Our common stock is quoted on the American Stock Exchange under the
symbol "ILC." On September 19, 2006, the last reported sales price of our common
stock on the American Stock Exchange was $0.45 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 2 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is September 20, 2006.
The information in this prospectus is not complete and may be changed.
The selling stockholders identified in this prospectus 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
jurisdiction where the offer or sale is not permitted.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR
ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
TABLE OF CONTENTS
PROSPECTUS SUMMARY....................................................1
COMPANY INFORMATION...................................................1
THE OFFERING..........................................................3
RISK FACTORS..........................................................3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.....................8
USE OF PROCEEDS.......................................................8
SELLING STOCKHOLDERS..................................................9
PLAN OF DISTRIBUTION.................................................15
LEGAL MATTERS........................................................16
EXPERTS..............................................................16
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................16
WHERE YOU CAN FIND MORE INFORMATION..................................17
Page (i)
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD CAREFULLY READ
THE ENTIRE PROSPECTUS INCLUDING "RISK FACTORS" BEFORE MAKING AN INVESTMENT
DECISION. UNLESS THE CONTEXT REQUIRES OTHERWISE IN THIS PROSPECTUS, REFERENCES
IN THIS PROSPECTUS TO "ILINC," "WE," "US," "OUR," OR THE "COMPANY" REFER TO
ILINC COMMUNICATIONS, INC.
COMPANY INFORMATION
Headquartered in Phoenix, Arizona, iLinc Communications, Inc. is a
leading provider of Web conferencing, audio conferencing and collaboration
software and services. We develop and sell software that provides real-time
collaboration and training using Web-based tools. Our four-product iLinc Suite,
comprised of LearnLinc, MeetingLinc, ConferenceLinc, and SupportLinc, is an
award winning virtual classroom, Web conferencing and collaboration suite of
software. With our Web collaboration, conferencing and virtual classroom
products, we provide simple, reliable and cost-effective tools for remote
presentations, meetings and online events. Our software is based on a
proprietary architecture and code that finds its origins as far back as 1994, in
what we believe to be the beginnings of the Web collaboration industry. Versions
of the iLinc Suite have been translated into six languages, and it is currently
available in version 8.01. Our customers may choose from several different
pricing and licensing options for the iLinc Suite depending upon their needs.
Uses for our four-product suite of Web collaboration software include online
business meetings, sales presentations, training sessions, product
demonstrations and technical support assistance. We sell our software solutions
to large and medium-sized corporations inside and outside of the Fortune 1000.
We market our products using a direct sales force and a distribution channel
consisting of agents and value added resellers. We allow customers to choose
between purchasing a perpetual license and subscribing to a term license,
providing for flexibility in pricing and payment methods. Our revenues are a
mixture of high margin perpetual licenses of software and monthly recurring
revenues from annual maintenance, hosting and support agreements, and other
products and services.
Our common stock is quoted on the American Stock Exchange under the
symbol "ILC." Our principal executive offices are located at 2999 N. 44th
Street, Suite 650, Phoenix, Arizona 85018. Our main telephone number is
602-952-1200.
OUR BUSINESS
WEB CONFERENCING AND WEB COLLABORATION
The iLinc Suite is a four-product suite of software that addresses the
four most common business collaboration needs.
LearnLinc is an Internet-based software that is designed for training
and education of remote students. With LearnLinc, instructors and students can
collaborate and learn remotely providing an enhanced learning environment that
replicates and surpasses traditional instructor-led classes. Instructors can
create courses and classes, add varied agenda items, enroll students, deliver
live instruction, and deliver content that includes audio, video, and
interactive multimedia. In combination with TestLinc, LearnLinc permits users to
administer comprehensive tests, organize multiple simultaneous breakout
sessions, and record, edit, play back, and archive entire sessions for future
use.
MeetingLinc is an online collaboration software designed to facilitate
the sharing of documents, PowerPoint(TM) presentations, graphics, and
applications between meeting participants without leaving their desks.
MeetingLinc allows business professionals, government employees, and educators
to communicate more effectively and economically through interactive online
meetings using Voice-over IP technology to avoid the expense of travel and long
distance charges. MeetingLinc allows remote participants to: give presentations,
demonstrate their products and services, annotate on virtual whiteboards, edit
documents simultaneously, and take meeting participants on a Web tour. Like all
of the Web collaboration products in the Suite, MeetingLinc includes integrated
voice and video conferencing services.
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ConferenceLinc is a presentation software designed to deliver the
message in a one-to-many format providing professional management of Web
conferencing events. ConferenceLinc manages events such as earning
announcements, press briefings, new product announcements, corporate internal
mass communications and external marketing events. ConferenceLinc is built on
the MeetingLinc software platform and code to combine the best interactive
features with an easy-to-use interface providing meaningful and measurable
results to presenters and participants alike. Its design includes features that
take the hassle out of planning and supporting a hosted Web seminar.
ConferenceLinc includes automatic email invitations, "one-click join"
capabilities, online confirmations, update notifications, and customized
attendee registration. With ConferenceLinc, presenters may not only present
content, but may also gain audience feedback using real-time polling, live chat,
question and answer sessions, and post-event assessments. The entire
presentation is easily recordable for viewing offline and review after the show
with the recorder capturing the content and the audio, video, and participant
feedback.
SupportLinc is an online technical support and customer sales support
software designed to give customer service organizations the ability to provide
remote hands-on support for products, systems, or software applications.
SupportLinc manages the support call volume and enhances the effectiveness of
traditional telephone-based customer support systems. SupportLinc's custom
interface is designed to be simple to use so as to improve the interaction and
level of support for both customers and their technical support agents.
Our Web collaboration software is sold on a perpetual license or
periodic license basis. A customer may choose to acquire a one-time perpetual
license (the "Purchase Model") or may rent our software on an annual basis on
either a per-seat or per minute basis (the "ASP Model"). Should they choose to
acquire the software using the Purchase Model, then they may either elect to
host our software behind their own firewall or they may choose to have iLinc
host it for them, depending upon their preferences, budget and IT capabilities.
Customers who select the Purchase Model, whether hosted by iLinc or the customer
may also subscribe for ongoing customer support and maintenance services, using
a support and maintenance contract with terms from one to five years. iLinc
launched the Enterprise Unlimited perpetual licensing model during fiscal 2006,
which enables customers to pay a one-time up-front fee for unlimited,
organization-wide Web conferencing. The maintenance and support fee charged is
between 15% and 18% of the purchase license fee that is paid for the perpetual
licenses and varies depending upon the length of the support agreement. If a
customer chooses to have iLinc host their Purchase Model licenses, then the
customer is charged a hosting fee equal to 10% of the purchase license fee that
was paid for the perpetual license. Those customers who qualify for the iLinc
Enterprise Unlimited site license may subscribe to an unlimited use license. The
initial iLinc Enterprise Unlimited license fee is determined based upon the
number of employees within the customer's organization, or other factors. The
annual maintenance and support fees and hosting fees associated with an iLinc
Unlimited license are then based upon a fixed rate per seat license that is
active on each annual anniversary of the iLinc Unlimited license agreement.
Customers may expand the number of active seats available to them at any time
with a corresponding increase in annual maintenance and hosting fees being
charged.
Customers choosing the ASP Model pay per seat (concurrent connection)
on either a per-month or per year basis depending upon the length and term of
the subscription agreement. Hosting and maintenance are included as a part of
the monthly or annual rental fees. Customers may also obtain Web conferencing
and audio conferencing on a per minute basis using the iLinc On-Demand product.
Those choosing the iLinc On-Demand product pay on a monthly basis typically
without contractual commitment.
AUDIO CONFERENCING
Through its acquisition of substantially all of the assets of Glyphics
Communications, Inc. ("Glyphics") in June 2004, the Company also delivers
comprehensive audio conferencing solutions that help businesses provide virtual
meetings, corporate events, distance learning programs, and daily conference
calls. Our audio conferencing offering includes a wide array of services and
products that include the following:
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o AUDIO ON-DEMAND(TM) (NO RESERVATIONS NEEDED): With
pre-established calling accounts for each user, you can create
or participate in conference calls with no advance notice,
24/7;
o RESERVED AUTOMATED: The solution for recurring calls, each
participant has a permanent number and passcode;
o OPERATOR ASSISTED: For important calls, this service includes
an iLinc conference operator to host, monitor, and coordinate
the call; and,
o ONLINE SEMINARS: High quality event services that include
invitation and user management, scripting, presentation
preparation, post show distribution, and dedicated operator
assistance from iLinc.
Customers may purchase our audio conferencing products and services
without an annual contract commitment on a monthly recurring usage basis, and
often subscribe for a fixed per-minute rate.
OTHER PRODUCTS AND SERVICES
In addition to the iLinc Suite of products and services, we offer to
our customers an array of e-Learning and training products and services. We
offer training software products that like iLinc, promote online collaboration
with products that integrate with our LearnLinc software. These include:
TestLinc which is an assessment and quizzing tool that allows for formal testing
and evaluation of students and i-Canvas(TM) which is a training content
development software that allows non-technical training professionals to create
Web-based training courses without programming. i-Canvas is sold on an
individual user perpetual license basis. We offer custom content development
services through a subcontractor relationship. We also offer a library of online
courses focused upon the training of executives on essential business topics.
Our off-the-shelf online library of content includes an online mini-MBA program
co-developed with the Tuck School of Business at Dartmouth College.
THE OFFERING
Common stock offered 11,783,544 shares of our common stock are
being offered by this prospectus. All of the
shares offered by this prospectus are being
sold by the selling stockholders.
Use of proceeds We will not receive any proceeds from the
sale of shares of common stock in this
offering. However, upon any exercise for
cash of the warrants described herein, we
will receive the exercise price of the
warrants.
The American Stock "ILC"
Exchange symbol
The selling stockholders identified in this prospectus, or their
pledges, donees, transferees or other successors-in-interest, may offer the
shares or interests therein from time to time through public or private
transactions at prevailing market prices, at prices related to prevailing market
prices or at privately negotiated prices.
RISK FACTORS
You should carefully consider the risks described below. The risks and
uncertainties described below are not the only ones we face. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially and adversely affected. In that case, the trading
price of our common stock could be adversely affected.
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WE HAVE A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO EVALUATE OUR
BUSINESS.
We have a limited operating history in the Web conferencing and audio
conferencing business. While the organizations that we have acquired have been
engaged in their respective businesses for over five years, we only recently
acquired those assets and have undertaken to integrate their assets into our
operations at varying levels. Since the acquisition of these businesses, we have
made significant changes to our product mix and service mix, our growth
strategies, our sales and marketing plans, and other operational matters. Given
our recent investment in technology, we cannot be certain that our business
model and future operating performance will yield the results that we intend. In
addition, the competitive and rapidly changing nature of the Web conferencing
and audio conferencing markets makes it difficult for us to predict future
results. Our business strategy may be unsuccessful and we may be unable to
address the risks we face.
WE FACE RISKS INHERENT IN INTERNET-RELATED BUSINESSES AND MAY BE UNSUCCESSFUL IN
ADDRESSING THESE RISKS.
We face risks frequently encountered by companies in new and rapidly
evolving markets such as Web conferencing and audio conferencing. We may fail to
adequately address these risks and, as a consequence, our business may suffer.
To address these risks among others, we must successfully introduce and attract
new customers to our products and services; successfully implement our sales and
marketing strategy to generate sufficient sales and revenues to sustain
operations; foster existing relationships with our customers to provide for
continued or recurring business and cash flow; and, successfully address and
establish new products and technologies as new markets develop. We may not be
able to sufficiently address and overcome risks inherent in our business
strategy.
OUR QUARTERLY OPERATING RESULTS ARE UNCERTAIN AND MAY FLUCTUATE SIGNIFICANTLY.
Our operating results have varied significantly from quarter to quarter
and are likely to continue to fluctuate as a result of a variety of factors,
many of which we cannot control. Factors that may adversely affect our quarterly
operating results include: the size and timing of product orders; the mix of
revenue from custom services and software products; the market acceptance of our
products and services; our ability to develop and market new products in a
timely manner; the timing of revenues and expenses relating to our product
sales; and, revenue recognition rules. Expense levels are based, in part, on
expectations as to future revenue and to a large extent are fixed in the short
term. To the extent we are unable to predict future revenue accurately, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall.
WE HAVE LIMITED FINANCIAL RESOURCES AND MAY NOT REMAIN PROFITABLE.
We have incurred substantial operating losses and have limited
financial resources at our disposal. We have long-term obligations that we will
not be able to satisfy without additional debt and/or equity capital and/or
ultimately generating profits and cash flows from our Web conferencing and audio
conferencing operations. If we are unable to remain profitable, we will face
increasing demands for capital. We may not be successful in raising additional
debt or equity capital and may not remain profitable. As a result, we may not
have sufficient financial resources to satisfy our obligations as they come due
in the short term.
LISTING QUALIFICATIONS MAY NOT BE MET.
The American Stock Exchange's continued listing standards require that
we maintain stockholders' equity of at least $4.0 million if we have losses from
continuing operations and/or net losses in three of our four most recent fiscal
years. We have sustained losses in three of our four most recent fiscal years
and therefore must maintain stockholders' equity of at least $4.0 million. If
now or in the future, we fail to maintain a sufficient level of stockholders'
equity in compliance with those and other listing standards of the American
Stock Exchange, then we would be required to submit a plan to the American Stock
Exchange describing how we intended to regain compliance with the requirements.
In the event that our shares of common stock are diluted, the liquidity and
price per share of our common stock may be adversely affected.
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DILUTION TO EXISTING STOCKHOLDERS WILL OCCUR UPON ISSUANCE OF SHARES WE HAVE
RESERVED FOR FUTURE ISSUANCE.
On June 30, 2006, 34,342,115 shares of our common stock were issued, of
which 1,432,412 were held in treasury, leaving 32,909,703 shares issued and
outstanding. An additional 17,102,743 shares of our common stock were reserved
for issuance upon exercise of warrants or the conversion of convertible notes
and convertible preferred stock. The issuance of these additional shares will
reduce the percentage ownership of our existing stockholders. The existence of
these reserved shares coupled with other factors, such as the relatively small
public float, could adversely affect prevailing market prices for our common
stock and our ability to raise capital through an offering of equity securities.
THE LOSS OF THE SERVICES OF OUR SENIOR EXECUTIVES AND KEY PERSONNEL WOULD LIKELY
CAUSE OUR BUSINESS TO SUFFER.
Our success depends to a significant degree on the performance of our
senior management team. The loss of any of these individuals could harm our
business. We do not maintain key person life insurance for any officers or key
employees other than on the life of James M. Powers, Jr., our Chairman,
President and CEO, with that policy providing a death benefit to the Company of
$1.0 million. Our success also depends on the ability to attract, integrate,
motivate and retain additional highly skilled technical, sales and marketing,
and professional services personnel. To the extent we are unable to attract and
retain a sufficient number of additional skilled personnel, our business will
suffer.
OUR INTELLECTUAL PROPERTY MAY BECOME SUBJECT TO LEGAL CHALLENGES, UNAUTHORIZED
USE OR INFRINGEMENT, ANY OF WHICH COULD DIMINISH THE VALUE OF OUR PRODUCTS AND
SERVICES.
Our success depends in large part on our proprietary technology. If we
fail to successfully enforce our intellectual property rights, the value of
these rights, and consequently, the value of our products and services to our
customers, could diminish substantially. It may be possible for third parties to
copy or otherwise obtain and use our intellectual property or trade secrets
without our authorization, and it may also be possible for third parties to
independently develop substantially equivalent intellectual property. Currently,
we do not have patent protection in place related to our products and services.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect trade secrets or to determine the validity and scope of the
proprietary rights of others. While we have not received any notice of any claim
of infringement of any of our intellectual property, from time to time we may
receive notice of claims of infringement of other parties' proprietary rights.
Such claims could result in costly litigation and could divert management and
technical resources. These types of claims could also delay product shipment or
require us to develop non-infringing technology or enter into royalty or
licensing agreements, which agreements, if required, may not be available on
reasonable terms, or at all.
COMPETITION IN THE WEB CONFERENCING AND AUDIO CONFERENCING SERVICES MARKET IS
INTENSE AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY, PARTICULARLY AS A RESULT
OF RECENT ANNOUNCEMENTS FROM LARGE SOFTWARE COMPANIES.
The markets for Web conferencing and audio conferencing products and
services are relatively new, rapidly evolving and intensely competitive.
Competition in our market will continue to intensify and may force us to reduce
our prices, or cause us to experience reduced sales and margins, loss of market
share and reduced acceptance of our services. Many of our competitors have
larger and more established customer bases, longer operating histories, greater
name recognition, broader service offerings, more employees and significantly
greater financial, technical, marketing, public relations, and distribution
resources than we do. We expect that we will face new competition as others
enter our market to develop Web conferencing and audio conferencing services.
These current and future competitors may also offer or develop products or
services that perform better than ours. In addition, acquisitions or strategic
partnerships involving our current and potential competitors could harm us in a
number of ways.
FUTURE REGULATIONS COULD BE ENACTED THAT EITHER DIRECTLY RESTRICT OUR BUSINESS
OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE GROWTH OF INTERNET-BASED
BUSINESS AND SERVICES.
As commercial use of the Internet increases, federal, state, and
foreign agencies could enact laws or adopt regulations covering issues such as
user privacy, content, and taxation of products and services. If enacted, such
laws or regulations could limit the market for our products and services.
Although they might not apply to our business directly, we expect that laws or
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rules regulating personal and consumer information could indirectly affect our
business. It is possible that such legislation or regulation could expose us to
liability which could limit the growth of our Web conferencing and audio
conferencing products and services. Such legislation or regulation could dampen
the growth in overall Web conferencing usage and decrease the Internet's
acceptance as a medium of communications and commerce.
WE DEPEND LARGELY ON ONE-TIME SALES TO GROW REVENUES WHICH MAKE OUR REVENUES
DIFFICULT TO PREDICT.
While audio conferencing provides a more recurring revenue base, a high
percentage of our revenue is attributable to one-time purchases by our customers
rather than long term, recurring, conferencing ASP type contracts. As a result,
our inability to continue to obtain new agreements and sales may result in lower
than expected revenue, and therefore, harm our ability to achieve or sustain
operations or profitability on a consistent basis, which could also cause our
stock price to decline. Further, because we face competition from larger,
better-capitalized companies, we could face increased downward pricing pressure
that could cause a decrease in our gross margins. Additionally, our sales cycle
varies depending on the size and type of customer considering a purchase.
Potential customers frequently need to obtain approvals from multiple decision
makers within their company and may evaluate competing products and services
before deciding to use our services. Our sales cycle, which can range from
several weeks to several months or more, combined with the license purchase
model makes it difficult to predict future quarterly revenues.
OUR OPERATING RESULTS MAY SUFFER IF WE FAIL TO DEVELOP AND FOSTER OUR VALUE
ADDED RESELLER OR DISTRIBUTION RELATIONSHIPS.
We have an existing channel and distribution network that provides
growing revenues and contributes to our high margin software sales. These
distribution partners are not obligated to distribute our services at any
minimum level. As a result, we cannot accurately predict the amount of revenue
we will derive from our distribution partners in the future. The inability or
unwillingness of our distribution partners to sell our products to their
customers and increase their distribution of our products could result in
significant reductions in our revenue, and therefore, harm our ability to
achieve or sustain profitability on a consistent basis.
SALES IN FOREIGN JURISDICTIONS BY OUR INTERNATIONAL DISTRIBUTOR NETWORK AND US
MAY RESULT IN UNANTICIPATED COSTS.
We continue to expand internationally through our value added reseller
network and OEM partners. We have limited experience in international operations
and may not be able to compete effectively in international markets. We face
certain risks inherent in conducting business internationally, such as:
o our inability to establish and maintain effective distribution
channels and partners;
o the varying technology standards from country to country;
o our inability to effectively protect our intellectual property
rights or the code to our software;
o our inexperience with inconsistent regulations and unexpected
changes in regulatory requirements in foreign jurisdictions;
o language and cultural differences;
o fluctuations in currency exchange rates;
o our inability to effectively collect accounts receivable; or
o our inability to manage sales and other taxes imposed by
foreign jurisdictions.
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THE GROWTH OF OUR BUSINESS SUBSTANTIALLY DEPENDS ON OUR ABILITY TO SUCCESSFULLY
DEVELOP AND INTRODUCE NEW SERVICES AND FEATURES IN A TIMELY MANNER.
We acquired our Web conferencing software and business in November of
2002 and we acquired our audio conferencing business in June of 2004. With our
focus on those products and services, our growth depends on our ability to
continue to develop new features, products, and services around that software
and product line. We may not successfully identify, develop, and market new
products and features in a timely and cost-effective manner. If we fail to
develop and maintain market acceptance of our existing and new products to
offset our continuing development costs, then our net losses will increase and
we may not be able to achieve or sustain profitability on a consistent basis.
IF WE FAIL TO OFFER COMPETITIVE PRICING, WE MAY NOT BE ABLE TO ATTRACT AND
RETAIN CUSTOMERS.
Because the Web conferencing market is relatively new and still
evolving, the prices for these services are subject to rapid and frequent
changes. In many cases, businesses provide their services at significantly
reduced rates, for free or on a trial basis in order to win customers. Due to
competitive factors and the rapidly changing marketplace, we may be required to
significantly reduce our pricing structure, which would negatively affect our
revenue, margins and our ability to achieve or sustain profitability on a
consistent basis. We have an existing channel and distribution network that
provides growing revenues and contributes to our high margin software sales.
These distribution partners are not obligated to distribute our services at any
particular minimum level. As a result, we cannot accurately predict the amount
of revenue we will derive from our distribution partners in the future. The
inability of our distribution partners to sell our products to their customers
and increase their distribution of our products could result in significant
reductions in our revenue, and therefore, harm our ability to achieve or sustain
profitability on a consistent basis.
IF WE ARE UNABLE TO COMPLETE OUR ASSESSMENT AS TO THE ADEQUACY OF OUR INTERNAL
CONTROLS OVER FINANCIAL REPORTING AS REQUIRED BY SECTION 404 OF THE
SARBANES-OXLEY ACT OF 2002, INVESTORS COULD LOSE CONFIDENCE IN THE RELIABILITY
OF OUR FINANCIAL STATEMENTS, WHICH COULD RESULT IN A DECREASE IN THE VALUE OF
OUR COMMON STOCK.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the
Securities and Exchange Commission adopted rules requiring non-accelerated
public companies to include in their annual reports on Form 10-K for fiscal
years beginning after December 16, 2006 a report of management on their
company's internal control over financial reporting, including management's
assessment of the effectiveness of their company's internal control over
financial reporting as of the company's fiscal year end. In addition, the
accounting firm auditing a public company's financial statements must also
attest to and report on management's assessment of the effectiveness of the
company's internal control over financial reporting as well as the operating
effectiveness of the company's internal controls. There is a risk that we may
not comply with all of its requirements. If we do not timely complete our
assessment or if our accounting firm determines that our internal controls are
not designed or operating effectively as required by Section 404, our accounting
firm may either disclaim its opinion as it is related to management's assessment
of the effectiveness of its internal controls or may issue a qualified opinion
on the effectiveness of our internal controls. If our accounting firm disclaims
its opinion or qualifies its opinion as to the effectiveness of our internal
controls, then investors may lose confidence in the reliability of our financial
statements, which could cause the market price of our common stock to decline.
WE MAY ACQUIRE OTHER BUSINESSES THAT COULD NEGATIVELY AFFECT OUR OPERATIONS AND
FINANCIAL RESULTS AND DILUTE EXISTING STOCKHOLDERS.
We may pursue additional business relationships through acquisitions
which may not be successful. We may have to devote substantial time and
resources in order to complete acquisitions and we therefore may not realize the
benefits of those acquisitions. Further, these potential acquisitions entail
risks, uncertainties and potential disruptions to our business. For example, we
may not be able to successfully integrate a company's operations, technologies,
products and services, information systems, and personnel into our business.
These risks could harm our operating results and could adversely affect
prevailing market prices for our common stock.
Page 7
OUR CURRENT STOCK COMPENSATION EXPENSE NEGATIVELY IMPACTS OUR EARNINGS, AND WHEN
WE ARE REQUIRED TO REPORT THE FAIR VALUE OF EMPLOYEE STOCK OPTIONS AS AN EXPENSE
IN CONJUNCTION WITH THE NEW ACCOUNTING STANDARDS, OUR EARNINGS WILL BE ADVERSELY
AFFECTED, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
Under our current accounting practice, stock compensation expense is
recorded on the date of the grant only if the current market price of the
underlying stock exceeds the exercise price. Beginning with the fiscal quarter
beginning April 1, 2006, we will be required to report all employee stock
options as an expense based on a change in the accounting standards and our
earnings will be negatively impacted, which could adversely affect prevailing
market prices for our common stock and increase our anticipated net losses.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this prospectus that involve words like
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
and similar expressions are intended to identify forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended. These are statements that relate to future periods and include, but are
not limited to, statements as to our ability to: sell our products and services;
improve the quality of our software; derive overall benefits of our products and
services; introduce new products and versions of our existing products; sustain
and increase revenue from existing products; integrate current and emerging
technologies into our product offerings; control our expenses including those
related to sales and marketing, research and development, and general and
administrative expenses; control changes in our customer base; support our
customers and provide sufficient technological infrastructure; obtain sales or
increase revenues; impact the results of legal proceedings; control and
implement changes in our employee headcount; obtain sufficient cash flow; manage
liquidity and capital resources; realize positive cash flow from operations; or
realize net earnings.
Such forward-looking statements involve certain risks and uncertainties
that could cause actual results to differ materially from anticipated results.
These risks and uncertainties include, but are not limited to, our dependence on
our products or services, market demand for our products and services, our
ability to attract and retain customers and channel partners, our ability to
expand our technological infrastructure to meet the demand from our customers,
our ability to recruit and retain qualified employees, the ability of channel
partners to successfully resell our products, the status of the overall economy,
the strength of competitive offerings, the pricing pressures created by market
forces, and the risks discussed herein. All forward-looking statements included
in this report are based on information available to us as of the date hereof.
We expressly disclaim any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein, to
reflect any change in our expectations or in events, conditions or circumstances
on which any such statement is based. Readers are urged to carefully review and
consider the various disclosures made in this report and in our other reports
filed with the SEC that attempt to advise interested parties of certain risks
and factors that may affect our business. Our reports are available free of
charge as soon as reasonably practicable after such material is electronically
filed with the SEC and may be obtained through our Web site located at
www.ilinc.com.
USE OF PROCEEDS
All of the common stock offered under this prospectus is being sold by
the selling stockholders identified in this prospectus. We will not receive any
of the proceeds from the sale of the common stock.
Certain of the shares covered by this prospectus are, prior to their
resale pursuant to this prospectus, issuable upon exercise of warrants. Upon any
exercise of warrants by payment of cash, we will receive the exercise price of
those exercised warrants.
We have, therefore, outstanding warrants whose underlying common stock
is covered by this prospectus that would provide cash in the amount of $386,000
to us if all of the warrants were exercised at the various prices as reflected
in the following table:
Page 8
--------------------------- ------------------ ----------------------
NUMBER OF SHARES OF COMMON EXERCISE PRICE PROCEEDS PROVIDED TO
STOCK UNDERLYING WARRANTS PER SHARE COMPANY UPON EXERCISE
--------------------------- ------------------ ----------------------
700,000 $0.50 $350,000
--------------------------- ------------------ ----------------------
50,000 $0.32 $16,000
--------------------------- ------------------ ----------------------
50,000 $0.40 $20,000
--------------------------- ------------------ ----------------------
To the extent we receive cash upon any exercise of the warrants, we
expect to use that cash for general corporate purposes.
SELLING STOCKHOLDERS
The shares of common stock being sold by the selling stockholders
consist of:
o 2,800,000 shares of our common stock issuable upon conversion
of convertible preferred stock issued in a private placement
in September of 2005. The convertible preferred stock has the
following terms:
The convertible preferred stock, with respect to
dividend rights and rights on liquidation, is on par
with the Company's Series A Preferred Stock and ranks
senior to the Common Stock and to all other equity
securities issued by the Company. For this purpose,
the term "equity securities" does not include debt
securities convertible into or exchangeable for
equity securities or other debt instruments
outstanding.
The holders of convertible preferred stock are
entitled to receive cash dividends, out of funds that
are legally available therefore, at an annual rate
equal to 8% of the original purchase price per share
of convertible preferred stock ($10.00). Such
dividends are payable quarterly. All dividends on the
convertible preferred stock are cumulative.
Upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, the
holders of Series B Preferred Stock shall be entitled
to be paid in cash out of the assets of the Company
an amount per share of Series B Preferred Stock equal
to 100% of the Series B Original Issue Price (as
adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect
to such shares), plus accrued but unpaid dividends.
Series B Preferred Stock shall be on par with the
Series A Preferred Stock terms of Liquidation
Preference and dividend treatment.
After payment of the full amount of the liquidating
distributions to which they are entitled, our
remaining assets available for distribution shall be
distributed pro rata among the holders of the Common
Stock and convertible preferred stock based on the
number of shares of Common Stock into which the
shares of convertible preferred stock would then
convert.
Any shares of convertible preferred stock may, at the
holder's option, be converted at any time after the
90th day following the initial closing date of the
offering, September 30, 2005, at a conversion price
of $0.25 per share, subject to adjustment of value.
The deemed $10.00 per share issue price and initial
conversion price result in an initial conversion rate
of 40 shares of Common Stock for each share of
convertible preferred stock held. The Company may
require conversion of the convertible preferred stock
if at any time that the 5-trading day average closing
price of the Common Stock exceeds $0.90 per share.
Upon conversion, a holder of convertible preferred
stock will be entitled to receive a payment of all
accrued but unpaid dividends.
Page 9
Holders of convertible preferred stock generally do
not have the right to vote on matters brought before
the stockholders of the Company.
o 700,000 shares of our common stock issuable upon exercise of
warrants issued in a private placement offering in September
2005. These warrants have the following terms:
The warrants are exercisable for shares of Common
Stock at an exercise price equal to $0.50 per share,
subject to adjustment for certain events, and expire
in September 2008. The exercise price of the warrants
is subject to adjustment generally in the event of
(i) the subdivision of the Common Stock into a
greater number of shares, or the combination of the
Common Stock into a lesser number of shares; (ii)
distributions to all or substantially all holders of
Common Stock of evidences of indebtedness, any other
securities of the Company or any property or assets
other than cash; and (iii) issuances of other
securities of the Company by reclassification of
Common Stock.
The warrants are redeemable at the option of the
Company at a price of $0.001 per warrant on thirty
(30) days prior notice if at any time that the
5-trading day average closing price of the Company's
Common Stock has exceeded $1.50 per share. A call for
redemption does not limit the right of the holder to
exercise the warrant prior to the date of redemption.
o 100,000 shares of our common stock issuable upon exercise of
warrants issued to John Rhodes, III pursuant to a Note
Modification and Settlement Agreement with us dated December
8, 2004 and a subsequent agreement in March of 2006, both of
which were entered into for the purpose of extending terms on
debt assumed by us under the terms of an asset purchase and
plan of reorganization between us and the stockholders of
Glyphics Communications, Inc. The warrants issued on June 8,
2005 are exercisable for 50,000 shares of Common Stock at an
exercise price equal of $0.32 per share at any time from and
after June 8, 2005 through the second anniversary of the date
of the Warrant, June 8, 2007. The warrants issued on April 1,
2006 are exercisable for 50,000 shares of Common Stock at an
exercise price equal of $0.40 per share at any time from and
after April 1, 2006 through the third anniversary of the date
of the Warrant, April 1, 2009.
o 8,183,544 shares of common stock were issued to investors in
private transactions as indicated below that were exempt from
registration under Section 4(2) of the Securities Act of 1933.
o 508,084 shares of its common stock, par value $0.001
issued to investors who were holders of the Company's
12% convertible redeemable subordinated notes. The
stock was issued in exchange for notes with an
aggregate principal balance of $150,000, together
with accrued but unpaid interest aggregating
$6,271.23. The notes had been issued in March of 2002
as a part of a private placement, and under their
terms, principal was due in 2012, with interest
payable quarterly at the rate of 12% until maturity.
The notes were exchanged for common stock using the
fixed price of $0.30 per share on August 1, 2005.
o 966,850 shares of its common stock, par value $0.001
issued to investors who were holders of the Company's
12% convertible redeemable subordinated note. The
stock was issued in exchange for the notes with an
aggregate principal balance of $250,000, together
with accrued but unpaid interest aggregating
$1,380.82. The notes had been issued in March of 2002
as a part of a private placement, and under its
terms, principal was due in 2012, with interest
payable quarterly at the rate of 12% until maturity.
The notes were exchanged for common stock using the
fixed price of $0.26 per share on August 12 and
August 16, 2005.
Page 10
o 400,000 shares of its common stock, par value $0.001
issued to investors who were holders of the Company's
12% convertible redeemable subordinated notes. The
stock was issued in exchange for notes with an
aggregate principal balance of $100,000. The notes
had been issued in March of 2002 as a part of a
private placement, and under their terms, principal
was due in 2012, with interest payable quarterly at
the rate of 12% until maturity. The notes were
exchanged for common stock using the fixed price of
$0.25 per share on August 16, 2005.
o 903,205 shares of its common stock, par value $0.001
issued to investors who were holders of the Company's
10% senior notes due July 15, 2007. The stock was
issued in exchange for their notes with an aggregate
principal balance of $225,000, together with accrued
but unpaid interest aggregating $801.37. The notes
had been issued in April of 2004 as a part of a
private placement, and under their terms, principal
was due in 2007, with interest payable quarterly at
the rate of 10% until maturity. The notes were
exchanged for common stock using the fixed price of
$0.25 per share on August 2, 2005.
o 5,405,405 shares of its common stock, par value
$0.001 issued to investors in the Company's private
placement offering of its common stock on June 9,
2006. The stock was issued in exchange for an
investment of $2,000,000.
Page 11
SELLING STOCKHOLDER TABLE - BENEFICIAL OWNERSHIP AND SHARES OFFERED FOR SALE
As of August 31, 2006, we had 34,343,677 shares of our common stock
issued and 32,911,265 shares of our common stock outstanding. Assuming the
complete exercise of the warrants referenced herein, we would have 33,711,265
shares of common stock outstanding. The following table sets forth the name and
relationship with us, if any, of the selling stockholders and (1) the number of
shares of common stock beneficially owned by each of the selling stockholders as
of July 6, 2006 (2) the maximum number of shares of common stock which may be
offered for the account of each of the selling stockholders under this
prospectus and (3) the amount and percentage of common stock that would be owned
by each of the selling stockholders after completion of the offering, assuming a
sale of all of the common stock which may be offered hereunder. The information
set forth below is based upon written documentation submitted to us by the
selling stockholders. Except as otherwise noted below, none of the selling
stockholders has, within the past three years, had any position, office or other
material relationship with us.
NAME OF HOLDER SHARES SHARES OFFERED SHARES OWNED PERCENTAGE OWNED
BENEFICIALLY AFTER OFFERING AFTER THE
OWNED BEFORE OFFERING
OFFERING (2)
(1)
James H. Keet and Margaret O. Keet 225,000 125,000 100,000 *
James L. Dunn, Sr. (3) 155,000 125,000 30,000 *
Sage Lentz and Wendy Lentz 250,000 250,000 0 *
Kent Petzold (4) 288,460 250,000 38,460 *
Investor Group, L.P. (5) 300,000 300,000 0 *
CCI Network Services (6) 300,000 300,000 0 *
Lightstream Communications, Inc. (7) 450,000 450,000 0 *
Investor Growth Capital Limited (8) 700,000 700,000 0 *
Leeds Equity Partners III, L.P. (9) 1,718,066 1,000,000 718,066 2.1%
John D. Rhodes, III (10) 1,327,345 100,000 1,227,345 3.6%
James M. Powers, Jr. (11) 937,617 96,154 841,463 2.5%
Delaware Charter Guarantee & Trust Co.
TTEE FBO Laura G. Powers IRA, LTJ -
890536 (12) 96,154 96,154 0 *
David A. Little 148,961 96,154 52,807 *
Jack A. Belz 200,000 200,000 0 *
Jimmie D. Williams 210,800 200,000 10,800 *
Edgar E. Greve and Kay S. Greve 282,308 192,308 90,000 *
Page 12
NAME OF HOLDER SHARES SHARES OFFERED SHARES OWNED PERCENTAGE OWNED
BENEFICIALLY AFTER OFFERING AFTER THE
OWNED BEFORE OFFERING
OFFERING (2)
(1)
John Rowland Jordan and Billie Sager
Jordan 389,926 389,926 0 *
Katsinam Partners (13) 481,068 301,068 180,000 *
Anthony Silverman Rollover IRA (14) 1,456,157 602,137 854,020 2.5%
Peldawn, LLC (15) 84,183 84,183 0 *
Bansco & Co. (16) 520,055 520,055 0 *
Benjamin James Taylor and Diane Wong
Shoda, JT 1,081,081 1,081,081 0 *
Goldman, Sach & co., as nominee on behalf
of Sophrosyne Technology Fund Ltd. (17) 1,621,621 1,621,621 0 *
Hare and Co. Sub Custodian to Herald
Investment Trust PLC (18) 2,702,703 2,702,703 0 *
TOTALS: 15,926,505 11,783,544 4,142,961
*Denotes less than 1% of the outstanding shares of common stock.
(1) Each person named above has the sole investment and voting power with
respect to all shares of common stock shown as beneficially owned by the
person, except as otherwise indicated below. Under applicable SEC rules,
a person is deemed the "beneficial owner" of a security with regard to
which the person directly or indirectly, has or shares (a) the voting
power, which includes the power to vote or direct the voting of the
security, or (b) the investment power, which includes the power to
dispose, or direct the disposition, of the security, in each case
irrespective of the person's economic interest in the security. Under
these SEC rules, a person is deemed to beneficially own securities which
the person has the right to acquire within 60 days through the exercise
of any option or warrant or through the conversion of another security.
(2) In determining the percent of voting stock owned by a person after this
offering (a) the numerator is the number of shares of common stock
beneficially owned by the person, including shares the beneficial
ownership of which may be acquired within 60 days upon the exercise of
options or warrants or conversion of convertible securities, and (b) the
denominator is the total of (i) the 33,711,265 shares of common stock
that would be outstanding after the offering assuming the complete
exercise of the warrants referenced herein. Neither the numerator nor
the denominator includes shares which may be issued upon the exercise of
any other options or warrants or the conversion of any other convertible
securities.
(3) Includes 100,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 25,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by James L. Dunn, Sr., the father of James L.
Dunn, Jr., who serves as Senior Vice President, Corporate Development,
Chief Financial Officer. Mr. James L. Dunn, Jr. has no direct and
beneficial interest in his father's investment.
Page 13
(4) Includes 200,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 50,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by Kent Petzold. Mr. Petzold is a member of
the Company's board of directors.
(5) Includes 240,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 60,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by Investor Group, L.P. Wayne Tallowin, Marc
Hollander, Robert De Heus, Lisa Helene Crawford, Neil Jesse Crocker,
Mary Rose Lacey and Anders Berg are directors and share the voting
and/or dispositive powers with regard to our common stock owned by the
this entity.
(6) Includes 240,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 60,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by CCI Network Services. Chris J. Gose,
Christopher G. Nottoli and Dave Christenholz share the voting and/or
dispositive powers with regard to our common stock owned by the this
entity.
(7) Includes 360,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 90,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 Lightstream Communications, Inc. Kurt
Richter, James Cassell, Sharon Louie and Rodney Stout share the voting
and/or dispositive powers with regard to our common stock owned by the
this entity.
(8) Includes 560,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 140,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by Investor Growth Capital Limited. Wayne
Tallowin, Marc Hollander, Robert De Heus, Lisa Helene Crawford, Neil
Jesse Crocker, Mary Rose Lacey and Anders Berg are directors and share
the voting and/or dispositive powers with regard to our common stock
owned by the this entity.
(9) Includes 800,000 shares of our common stock issuable upon conversion of
Series B Preferred Stock and 200,000 shares of our common stock issuable
upon exercise of warrants pursuant to investment in a private placement
offering in September 2005 by Leeds Equity Partners III, L.P. Mr. Robert
Bernstein is the principal of Leeds Equity Partner, III, LP and general
partner of Leeds Equity Associates, L.P. and exercises the sole voting
and/or dispositive powers with regard to our common stock owned by the
this entity.
(10) Includes shares issuable upon exercise of warrants to purchase 100,000
shares of our common stock held by John D. Rhodes III pursuant to a Note
Modification and Settlement Agreement with the Company dated December 8,
2004 and a subsequent agreement in March of 2006.
(11) Includes 96,154 shares of its common stock held by James M. Powers, Jr.
who was a holder of the Company's 12% convertible redeemable
subordinated note. The stock was issued in exchange for the note with a
principal balance of $25,000. The note had been issued in March of 2002
as a part of a private placement, and under its terms, principal was due
in 2012, with interest payable quarterly at the rate of 12% until
maturity. The note was exchanged for common stock using the fixed price
of $0.26 per share. Dr. James M. Powers, Jr. serves as the Chairman,
President and CEO of the Company.
(12) Includes 96,154 shares of our common stock held by Delaware Charter
Guarantee Trust Co. TTEE FBO Laura G. Powers, IRA LTJ 890536 who was a
holder of the Company's 12% convertible redeemable subordinated note.
The stock was issued in exchange for the note with a principal balance
of $25,000. The note had been issued in March of 2002 as a part of a
private placement, and under its terms, principal was due in 2012, with
interest payable quarterly at the rate of 12% until maturity. The note
was exchanged for common stock using the fixed price of $0.26 per share.
Ms. Laura Powers is the wife of James M. Powers, Jr. who serves as the
Chairman, President and CEO of the Company and Ms. Powers exercises the
sole voting and/or dispositive powers with regard to our common stock
owned by the trust.
Page 14
(13) Includes 301,068 shares of common stock held by Katsinam Partners, LP.
Mr. Anthony Silverman exercises the sole voting and/or dispositive
powers with regard to our common stock owned by the this entity.
(14) Includes 602,137 shares of our common stock held by the Anthony
Silverman Rollover IRA. Anthony Silverman is trustee and beneficiary
that exercises the sole voting and/or dispositive powers with regard to
our common stock owned by the IRA.
(15) Includes 84,183 shares of our common stock held by the PelDawn, LLC.
PelDawn, LLC is a family trust of Daniel T. Robinson, Jr. who is a
member of the Company's board of directors. Mr. Robinson owns 1%
directly and 49% indirectly of the LLC. Mr. Russell J. Hensley is the
Chief Manager and exercises the sole voting and/or dispositive powers
with regard to our common stock owned by the entity.
(16) Includes 520,055 shares of our common stock held by Bansco & Co. of
which the Bank of Nova Scotia exercises the sole voting and/or
dispositive powers with regard to our common stock owned by the entity.
(17) Includes 1,621,621 shares of our common stock held by Sophrosyne
Technology Fund Ltd. of which the Benjamin James Taylor is a director
and exercises the sole voting and/or dispositive powers with regard to
our common stock owned by the entity.
(18) Includes 2,702,703 shares of our common stock held by Hare and Co. as
sub custodian to Herald Investment Trust PLC of which Herald Investment
Management Limited is the manager, Katie Potts, Richard Clode and Fraser
Elms are managers of Herald Investment Management Limited and in that
capacity share voting and dispositive powers with regard to our common
stock held by Hare and Co.
PLAN OF DISTRIBUTION
The shares of our common stock offered by this prospectus may be sold
by the selling stockholders or their transferees from time to time in: (i)
transactions in the over-the-counter market, the American Stock Exchange, or on
one or more exchanges; (ii) privately negotiated transactions; (iii)
underwritten offerings; or (iv) a combination of these methods of sale. The
selling stockholders may sell the shares of our common stock at: (i) fixed
prices which may be changed; (ii) market prices prevailing at the time of sale;
(iii) prices related to prevailing market prices; or (iv) privately negotiated
prices.
DIRECT SALES, AGENTS, DEALERS AND UNDERWRITERS
The selling stockholders or their transferees may effect transactions
by selling the shares of common stock either directly to purchasers; or to or
through agents, dealers or underwriters designated from time to time. Agents,
dealers or underwriters may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom they act as agent or to whom they sell as
principals, or both. The selling stockholders and any agents, dealers or
underwriters 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 discount or commission received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts or commissions
under the Securities Act.
SUPPLEMENTS
To the extent required, we will set forth in a supplement to this
prospectus filed with the SEC the number of shares to be sold, the purchase
price and public offering price, any new selling stockholders (who will be
limited to stockholders who acquire shares after the date of this prospectus
from persons named as selling stockholders in this prospectus), the name or
names of any agent, dealer or underwriter, and any applicable commissions or
discounts with respect to a particular offering. No supplement to this
prospectus may involve increasing the number of shares or the dollar amount
registered under the registration statement of which this prospectus is a part,
or include shares from a transaction other than the one to which the original
registration statement filing relates. Information regarding selling
stockholders who are unnamed at the time of effectiveness of the registration
statement of which this prospectus is a part must be provided using a
post-effective amendment to the registration statement.
Page 15
STATE SECURITIES LAW
Under the securities laws of some states, the selling stockholders may
only sell the shares in those states through registered or licensed brokers or
dealers. In addition, in some states the selling stockholders may not sell the
shares unless they have been registered or qualified for sale in that state or
an exemption from registration or qualification is available and is satisfied.
EXPENSES AND INDEMNIFICATION
We will not receive any of the proceeds from the sale of the shares of
common stock sold by the selling stockholders and we will bear all expenses
related to the registration of this offering. However, we will not pay for any
underwriting commissions, fees or discounts, if any. We have agreed to indemnify
certain of the selling stockholders against certain civil liabilities, including
certain liabilities which may arise under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by
this prospectus will be passed upon for us by Jackson Walker L.L.P.
EXPERTS
The consolidated financial statements as of and for the years ended
March 31, 2005 and March 31, 2006 are incorporated by reference in this
prospectus by reference to the Annual Report on Form 10-K for the years ending
March 31, 2005 and March 31, 2006. Our consolidated financial statements as of
and for the years ended March 31, 2005 and March 31, 2006 incorporated by
reference in this prospectus have been audited by Epstein Weber & Conover, PLC,
an independent registered public accounting firm, to the extent set forth in
their report and incorporated herein in reliance upon such reports given on the
authority of said firm as experts in auditing and accounting.
The consolidated statement of operations, the consolidated statement of
shareholders' equity and consolidated statement of cash flows for the year ended
March 31, 2004 are incorporated by reference in this prospectus by reference to
the Annual Report on Form 10-K for the year ending March 31, 2006. Our
consolidated financial statements for the year ended March 31, 2004 incorporated
by reference in this prospectus have been audited by BDO Seidman, LLP, an
independent registered public accounting firm, to the extent set forth in their
report which contains an explanatory paragraph relating to the Company's ability
to continue as a going concern, as described in Note 2 to the consolidated
financial statements and incorporated herein in reliance upon such report given
on the authority of said firm as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" some of the documents
that we file with it into this prospectus, which means incorporated documents
are considered part of this prospectus. Therefore, we can disclose important
information to you by referring you to those documents, and that information
that we file with the SEC will automatically update and supersede this
incorporated information.
The following documents, which have been filed with the Commission by
the Company, are incorporated herein by reference and made a part hereof:
Page 16
o our Current Report on Form 8-K, filed with the SEC on May 4,
2006;
o our Current Report on Form 8-K, filed with the SEC on May 8,
2006;
o our Current Report on Form 8-K, filed with the SEC on June 13,
2006;
o our Current Report on Form 8-K, filed with the SEC on June 22,
2006;
o our Annual Report on Form 10-K for the year ended
March 31, 2006, filed with the SEC on June 29, 2006;
o our Current Report on Form 8-K, filed with the SEC on July 6,
2006;
o our Proxy Statement on Form 14A, filed with the SEC on July
13, 2006;
o our Current Report on Form 8-K, filed with the SEC on July 27,
2006; and
o our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2006, filed with the SEC on August 1, 2006.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this initial registration
statement and prior to the effectiveness of the registration statement shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents. All documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this prospectus and prior to the termination of the offering of the Common
Stock to be made hereunder shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
The Company will provide, without charge, to each person to whom a copy
of this prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the information that this prospectus
incorporates). Written or telephone requests for such documents should be
directed to: James L. Dunn, Jr., Senior Vice President, Chief Financial Officer
& General Counsel, 2999 N. 44th Street, Suite 650, Phoenix, AZ 85018, Telephone:
(602) 952-1200, email: jdunn@ilinc.com.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
at the Public Reference Room of the SEC at 100 F Street N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings are also available to
the public at the Company's Web site at http://www.ilinc.com and the SEC's Web
site at http://www.sec.gov.
Page 17
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by us in
connection with the offering described in this registration statement. All
amounts are estimates, except the SEC registration fee.
SEC Registration Fee $ 643.03
Legal Fees and Expenses $ 4,500.00
Accounting Fees and Expenses $30,000.00
----------
TOTAL $34,143.03
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
Page II - 1
forth in subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, even though less than a
quorum or (2) if there are no such directors or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL states that the indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of Section 145 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of the Company provides that
a director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided for in Section 174 of the DGCL. If the
DGCL is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability described above, shall be
limited to the fullest extent permitted by the amended DGCL. Further, any repeal
or modification of such provision of the Restated Certificate of Incorporation
by the stockholders of the Company shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Company existing at the time of such repeal or modification.
BYLAWS
The Bylaws of the Company provide that the Company will indemnify any
director or officer of the Company to the full extent permitted by applicable
law, and may, if and to the extent authorized by the Board of Directors, so
indemnify such other persons whom it has the power to indemnify against any
liability, reasonable expense or other matter whatsoever.
INSURANCE
The Company maintains liability insurance for the benefit of its
directors and officers. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers or controlling persons of the Company pursuant to the foregoing
provisions, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act, as amended, and is therefore unenforceable.
Page II - 2
ITEM 16. EXHIBITS.
The list of exhibits under the heading EXHIBIT LIST beginning on page
II-6 of this registration statement is incorporated into this Item 16 by
reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the 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
in 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 end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (Section 230.424(b)
of this chapter) if, in the aggregate, the changes in volume and
price represent no more than a 20% 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 paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by
reference in the 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.
(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.
(4) That, for the purpose of determining liability under the Securities
Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it
is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such date of first use.
Page II - 3
(5) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the 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
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Page II - 4
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, as amended, the
registrant 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Phoenix, State of Arizona, on September 20, 2006.
ILINC COMMUNICATIONS, INC.
By: /s/ JAMES M. POWERS, JR.
------------------------------------
James M. Powers, Jr.,
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
NAME CAPACITY DATE
---- -------- ----
/s/ JAMES M. POWERS, JR. Chairman of the Board, President and Chief September 20, 2006
-------------------------------- Executive Officer (Principal Executive Officer)
James M. Powers, Jr.
/s/ JAMES L. DUNN, JR. Senior Vice President and Chief Financial Officer September 20, 2006
-------------------------------- (Principal Financial and Accounting Officer)
James L. Dunn, Jr.
/s/ JAMES H. COLLINS * Director September 20, 2006
--------------------------------
James H. Collins
/s/ KENT PETZOLD * Director September 20, 2006
--------------------------------
Kent Petzold
/s/ DANIEL T. ROBINSON, JR. * Director September 20, 2006
--------------------------------
Daniel T. Robinson, Jr.
/s/ CRAIG W. STULL * Director September 20, 2006
--------------------------------
Craig W. Stull
* BY JAMES L. DUNN, JR., ATTORNEY-IN-FACT
Page II - 5
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1(1) Restated Certificate of Incorporation of the Company
3.2(1) Bylaws of the Company
3.3(2) Restated Certificate of Incorporation of the Company
3.4(2) Amendment of Bylaws of the Company
3.5(3) Restated Certificate of Incorporation of the Company
3.6(4) Certificate of Designations of Series A Preferred Stock
3.7(5) Certificate of Amendment of Restated Certificate of Incorporation of
the Company
3.8(6) Revised Certificate of Designations of Series B Preferred Stock
4.1(1) Form of certificate evidencing ownership of Common Stock of the
Company
4.2(2) Form of certificate evidencing ownership of Common Stock of the
Company
4.3(3) Form of Convertible Redeemable Subordinated Note
4.4(4) Form of Redeemable Warrant (2003 Private Placement Offering)
5.1(7) Opinion of Jackson Walker L.L.P.
+23.1 Consent of independent auditors, BDO Seidman, LLP, dated September
20, 2006 to the incorporation by reference of their report dated May
21, 2004 in the Company's annual report on Form 10-K for the year
ended March 31, 2006.
+23.2 Consent of independent auditors, Epstein, Weber & Conover, PLC dated
September 20, 2006 to the incorporation by reference of their report
dated June 13, 2006 in the Company's annual report on Form 10-K for
the year ended March 31, 2006.
_______________________
(1) Previously filed as an exhibit to iLinc's Registration Statement on
Form S-1 (No. 333-37633), and incorporated herein by reference.
(2) Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
for the year ended March 31, 2001.
(3) Previously filed as an exhibit to iLinc's Annual Report on Form 10-K
for the year ended March 31, 2002.
(4) Previously filed as an exhibit to iLinc's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2003.
(5) Previously filed as an exhibit to iLinc's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 2003.
(6) Previously filed as an exhibit to iLinc's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2005.
(7) Previously filed as an exhibit to this Registration Statement.
+ Filed herewith as an exhibit.
Page II - 6