As Filed with the United States Securities and Exchange Commission on
July 30, 2002
Registration No. 333-85692
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 2
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.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion
Preliminary Prospectus dated July __, 2002
PROSPECTUS
INTERDIGITAL COMMUNICATIONS CORPORATION
This Prospectus relates to the resale by the Selling
Shareholders of a total of 285,250 shares of Common Stock, $.01 par value per
share (the "Common Stock") of InterDigital Communications Corporation (the
"Company", "we", "us" or "our") which may be issued by the Company upon the
exercise of outstanding warrants (the "Warrants") to purchase shares (the
"Shares") of Common Stock at a per share exercise price ranging from $5.50 to
$7.625. The issuance of the Shares upon exercise of the Warrants is not covered
by this Prospectus, but rather only the resale of such Shares. See "Selling
Shareholders."
There is no assurance that any of the Warrants will be
exercised, and therefore there are no assurances that the Company will receive
any proceeds hereunder. The Company will not receive any proceeds from the sale
of Shares by the Selling Shareholders. See "Selling Shareholders."
The Selling Shareholders and any broker executing selling
orders on their behalf may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933, (the "Securities Act") in which event commissions
received by such broker may be deemed to be underwriting commissions under the
Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE PURCHASERS SHOULD CONSIDER THE RISKS SET FORTH UNDER "RISK
FACTORS" COMMENCING ON PAGE 4.
The Shares offered by the Selling Shareholders hereby will be
sold at market prices on the Nasdaq National Market or in private sales at
prevailing market prices or negotiated prices. The Selling Shareholders may pay
commissions or other compensation to broker-dealers in connection with such
sales, which may be in excess of customary commissions charged for Nasdaq
National Market transactions. See "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol "IDCC." On July 29, 2002, the last reported price of the
Company's Common Stock as reported by the Nasdaq Stock Market was $7.01 per
share.
The date of this Prospectus is _________, 2002
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation is unlawful. The delivery
of this Prospectus at any time does not imply that information contained herein
is correct as of any time subsequent to its date.
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TABLE OF CONTENTS
Page
----
Table of Contents.............................................................2
The Company...................................................................3
Risk Factors..................................................................4
Glossary of Terms............................................................13
Available Information........................................................17
Notice Regarding Arthur Andersen LLP.........................................18
Incorporation of Certain Documents by Reference..............................18
Selling Shareholders.........................................................19
Plan of Distribution.........................................................20
Legal Matters................................................................21
Experts......................................................................21
-2-
THE COMPANY
We specialize in the architecture, design and delivery of
wireless technology and product platforms. Our current technology development
programs are focused on creating intellectual property and hardware and software
products for the WCDMA specifications of the 3G standard. WCDMA is comprised of
two wideband technologies: FDD and TDD. (Please refer to the Glossary of Terms,
beginning on page 13, for a list and detailed description of the various
technical, industry and other defined terms that are used in this Prospectus.)
Over the course of our corporate history, we have amassed a substantial and
significant library of digital wireless systems experience and know-how and we
hold an extensive worldwide portfolio of patents in the wireless systems field.
We market our technologies and solutions capabilities
primarily to telecommunications equipment producers and related suppliers. Our
inventions are embedded into products targeted for the following wireless
telecommunications applications: mobile phones, personal digital assistants,
mobile computing devices, other terminal-end wireless devices, base stations and
other infrastructure equipment. In addition, we license our patents to equipment
manufacturers worldwide. We are continuing to broaden and deepen our extensive
patent portfolio and body of technical know-how related to wireless technologies
and systems through continuous invention and innovation, while also linking our
licensing activities to emerging product development efforts, particularly in
the area of WCDMA standards.
We develop advanced wireless technologies and products that
facilitate voice and data communications. We are currently developing WCDMA FDD
and WCDMA TDD technology platforms. Our strategic objective is to create
substantial long-term value as one of the leading developers and providers of
advanced air-interface and full SOC technology for the wireless communications
industry. We 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.
For the past ten years, we have been intensively involved in a
comprehensive patent licensing program with the ultimate objective of realizing
licensing revenues from use by third parties of inventions covered by ITC's
patent portfolio. ITC offers non-exclusive, royalty bearing patent licenses to
telecommunications manufacturers that manufacture, use or sell, or intend to
manufacture, use or sell, equipment that utilizes our extensive portfolio of
intellectual property. ITC has entered into 30 license agreements with 26
manufacturers, covering the manufacture, sale and use of products complying with
2G and/or 3G standards. Our license agreements are made on a paid-up, prepaid,
or royalty bearing basis, or a combination thereof. Prepayments are generally
made as advances against payment of future royalties. As sales of covered
products are made, the royalties due are calculated and either applied against
any prepayment, or paid in cash. Sometimes, the royalties due are applied in
full against the prepayment while other times they are applied in partial
satisfaction (e.g., 40%). In the later case, a royalty would be due for the
remaining amount not applied against the prepayment (e.g., 60%). Once the
prepayment is exhausted, royalties on sales of covered products under the
license agreement are payable based on the royalty formula applicable to the
particular license agreement. These formulas include flat dollar rates per unit,
percentage of sales, percentage of sales with caps, and other similar measures.
The formulas can also vary by other factors including territory, covered
standards, quantity, and dates sold.
-3-
In earlier years, the Company developed intellectual property
relating to 2G technologies. As a result, earlier licensing agreements cover the
2G patents generated from such technology development. ITC continues to seek to
license its 2G patents as such patents have not expired and 2G products are
predominant in today's market. However, the Company also has a significant
number of patents related to 3G technologies, and it is continuing to develop
3G technology, leading to the filing of additional 3G patent applications.
Therefore, ITC's licensing efforts have expanded to cover its 3G patent rights.
The mailing address and telephone number of our principal
executive offices is as follows:
InterDigital Communications Corporation
781 Third Avenue
King of Prussia, Pennsylvania 19406
(610) 878-7800
RISK FACTORS
This section highlights specific risks with respect to an
investment in our Company. In analyzing this offering, prospective purchasers
should carefully consider these risks. We caution you that this Prospectus, as
well as the documents that we have filed with the Commission that are
incorporated by reference in this Prospectus, contain forward-looking statements
that are based on management's beliefs and assumptions and on information that
is currently available to us. You should carefully consider the risks and
uncertainties described below and in the documents filed with the Commission
that are incorporated herein by reference before purchasing the Common Stock.
Forward-looking statements relied upon by management reflect,
among other things, our current intentions and plans or expectations (i) to
broaden our patent portfolio and body of technical know-how, (ii) to link our
licensing activities to emerging product development efforts, (iii) to deliver
(either alone or through alliances) software and hardware products, and (iv) to
engage in technology transfers and license our intellectual property worldwide.
Words such as "objective" 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.
-4-
Our Technologies May Not Be Widely Deployed
-------------------------------------------
Our activities are focused on next-generation technologies and
products and therefore begin as research and development work. Accordingly, we
are subject to the risks typically associated with such activities. New
technological innovations generally require a substantial investment before they
are commercially viable, and we may make substantial, non-recoverable
investments in new technologies that may not result in meaningful revenues. For
example, in order to generate revenues and profits from sales of 3G products, we
must continue to make substantial investments and technological innovations. A
significant assumption in our strategic plan is that WCDMA will be widely
deployed in the 3G market (i.e., the market for advanced mobile wireless
products and services). WCDMA may not be deployed as widely as we expect which
could reduce revenue opportunities. A second significant assumption in our
strategic plan is that TDD will be adopted and widely used in the 3G market.
While our inventions and know-how can apply across a broad range of
technologies, our detailed technology and development efforts are primarily
focused on WTDD and FDD. Other digital wireless technologies, particularly
CDMA2000, FDD multi-carrier CDMA technology, W-LAN, FDD used in data
applications, FDD high speed downlink packet access, and NTDD are expected to be
competitive with WTDD. CDMA2000 has been deployed in parts of Asia and the
United States, and such deployment could cause CDMA2000 to gain significant
market share and reduce the opportunities for WCDMA. W-LAN, which enables users
to connect laptops and personal digital assistants to the Internet, is already
being marketed worldwide and is competitive with TDD. If the initial deployment
of FDD for data applications obtains significant market share, or if FDD high
speed downlink packet access gains market acceptance, the niche targeted for
WTDD could be reduced or eliminated. All of these competing technologies also
could impair multi-vendor and operator support for WTDD, key factors in defining
opportunities in the wireless market. There can be no assurance that our
technology will ultimately have market relevance or be selected by wireless
service providers for their networks or equipment manufacturers. If we determine
that WTDD will not be adopted at all or in a time period we expect, or adopted
in a manner which justifies our continuing investment in the technology, we may
change our strategic plan to reduce or eliminate such continuing investment
and/or to capture more lucrative market opportunities. Additionally, if WTDD is
not adopted and widely used, our strategic plan will require a significant shift
and a portion of our anticipated revenue may be impaired.
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.
-5-
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.
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.
-6-
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
-----------------------------------------------------------------------
2G products and services were introduced in the early 1990s,
taking advantage of new digital technology that greatly increased the capacity,
quality of service and flexibility of wireless networks. In 2001, 2.5G systems
(such as GPRS) began to be deployed offering substantially higher data rate
services. Deployment of 3G services is in its early stages, and is expected to
allow operators to take advantage of additional spectrum and, through the use of
higher data speeds, deliver richer voice and data applications to their
customers.
We are positioning our current development projects for the
emerging 3G market. These projects do not have direct bearing on the 2.5G or any
other market which might develop after the 2G market but prior to the
development of the 3G market. The 3G market has and may continue to develop at a
slower rate or pace than we have and do expect and may be of a smaller size than
we expect. For example, the potential exists for 3G preemption by the hangover
of 2.5G solutions now being bought, tested and fielded. In addition, there could
be fewer applications for our technology and products than we expect. Economic
conditions, customer buying patterns, timeliness of equipment development,
pricing of 3G infrastructure and mobile products, continued growth in
telecommunications services that would be delivered on 3G devices, and
availability of capital for and the high cost of infrastructure improvements
could also affect the rate and pace of 3G market development. Failure of the 3G
market to materialize to the extent or at the rate which we expect would reduce
our opportunities for sales and licensing and could materially adversely affect
our business, financial condition and operating results.
-7-
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 Arrangements with Third Parties Which Could Expire, Adversely Affecting
Our Cash Flow And Our Ability to Achieve or Sustain Acceptable Levels of
Profitability
-------------------------------------------------------------------------------
Revenues attributable to Nokia, a strategic engineering
partner, comprised approximately 42% of total revenue in 2001. In the third
quarter of 2001, we amended our development program agreement with Nokia to,
among other things, provide for Nokia's funding of the project up to a maximum
of approximately $58 million. Under the amendment, generally, Nokia is obligated
to pay for the work based on negotiated commercial rates and to reimburse
certain expenses, all up to a maximum of approximately $58 million. Nokia is
obligated to pay the maximum amount when billable amounts equal or exceed the
maximum and we effect certain deliverables to Nokia. We are obligated to
complete the scope of work at our own expense to the extent that billable
amounts exceed the maximum. Previous to the amendment, revenue had been reported
on a time and materials basis and we had billed Nokia approximately $46 million
under the contract leaving approximately $12 million of revenue to be
recognized. After the amendment, we recognize revenue under the contract on a
percentage of completion basis. Of the $12 million remaining under the contract
after the amendment, approximately $6.2 million was recognized in 2001, and we
expect to recognize a substantial portion of the balance of $5.8 million in
2002. The Nokia development project ends when the contractual scope of work has
been completed, which we expect to occur in the first part of 2003. Certain
royalty-free licenses granted under the contract continue after the development
work has been completed. We have not, at this time, entered into any
arrangements with Nokia to extend the work covered by this development project
and there should be no expectation that we will do so in the future. To the
extent that 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.
Revenues attributable to Sharp, one of our TDMA patent
licensees, comprised approximately 30% of total revenue in 2001. Our 2G patent
license agreement with Sharp is royalty-bearing, non-exclusive, and generally
non-transferable. It covers Sharp's sale of PDC and PHS products on a world-wide
basis through mid 2003, at which time it expires. 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. If we are
not able to secure sufficient cash flow or revenues from alternative sources,
and if we maintain or increase current expenditure levels, the inability to
extend the license could materially adversely affect both our cash flow and our
ability to achieve or sustain acceptable levels of profitability for the years
beyond 2002.
-8-
We Rely and Intend to Rely on Relationships with Third Parties
--------------------------------------------------------------
The successful execution of our strategic plan is partially
dependent on the establishment and success of relationships with equipment
producers and other industry participants. Our plan contemplates that these
third parties will give us access to product capability, markets and additional
libraries of technology. We currently have a limited number of such third party
relationships. To date we have not entered into any semi-conductor partnership
relating to our TDD technology. We have only one semi-conductor partner in our
FDD technology development effort, Infineon, and if we commence a FDD Access
Stratum development effort with another semiconductor company for terminal unit
applications, Infineon may engage a third party for the development or
modification of a new FDD Access Stratum. Our failure to enter into such
additional relationships, either on acceptable terms or at all, or our failure
to successfully execute such relationships, could impair our ability to
introduce portions of our technology and resulting products. 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 the
Joint 3G Protocol Stack under our co-development agreement with Infineon (which
has a duration not to exceed nine years after the first sale, if any, of the
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.
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.
-9-
Our Revenue in the Short and Long Term Depends Upon Our Success in Enforcing
Patent Rights and Protecting Other Intellectual Property
--------------------------------------------------------
Our strategic plan depends, over the next several years, upon
our continued ability to generate patent licensing revenue related to the sale
by third parties of handsets and infrastructure compliant with the TDMA digital
cellular standards in use today, among them GSM, IS-54/136, PDC and PHS. Our
ability to collect such revenue is subject to a number of risks. First, major
telecommunications equipment manufacturers have challenged, and we expect will
continue to challenge, the validity of ITC's patents. In some instances, certain
of ITC's patent claims have been declared invalid or substantially narrowed.
While ITC continues to maintain a worldwide portfolio of patents that it
believes are valid and infringed, and while we intend to vigorously defend and
enforce such patents, we cannot assure that the validity of our patents will be
maintained or that any of our key patents will be determined to be applicable to
any 2G or 3G product. Any significant adverse finding as to the validity or
scope of ITC's key patents could result in the loss of patent licensing revenue
from existing licensees and could substantially impair our ability to secure new
patent licensing arrangements. Additionally, while we license a portfolio of
patents, 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 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.
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.
-10-
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.
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.
-11-
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.
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.
-12-
Our Stock Price is Volatile
---------------------------
Historically, market prices for securities of companies
involved in the wireless telecommunications industry have been volatile. In
addition, market prices for the Common Stock have historically been particularly
volatile due, in part, to the Company's history of quarterly fluctuations of
revenues and operating results. Announcements of, among other things,
technological innovations or new commercial products by the Company or its
competitors, developments concerning proprietary technologies, results of patent
enforcement activities, regulatory developments in both the United States and
other countries, and global and national economic and political factors, as well
as period-to-period fluctuations in financial results, may have a significant
impact on the market price of the Common Stock.
GLOSSARY OF TERMS
Access Stratum
Layers of a software stack used by devices to gain access to a network.
Air Interface
The modulation standard of a wireless network that defines the wireless
interface between a terminal unit and the base station.
Bandwidth
A range of frequencies that can carry a signal on a transmission medium,
measured in Hertz and computed by subtracting the lower frequency limit from the
uppper frequency limit.
Base Station
The central radio transmitter/receiver that maintains communications with
subscriber-equipment sets within a given range (typically, a cell site).
CDMA
"Code Division Multiple Access". A method of digital spread spectrum technology
wireless transmission that allows a large number of users to share access to a
single radio channel by assigning unique code sequences to each user.
CDMA2000
A family of IMT-2000 standards, as amended, which evolved from narrow-band CDMA
technologies (i.e., IS-95 and cdmaOne) and, include without limitation CDMA2000
1X, CDMA 1X EV-DO, CDMA-2000 1X_EV-DV and CDMA2000 3X.
-13-
Chip
An electronic circuit that consists of many individual circuit elements
integrated into a single substrate.
Digital
Information transmission where the data is represented in discrete numerical
form.
Duplex
A characteristic of data transmission; either full duplex or half duplex. Full
duplex permits simultaneous transmission in both directions of a communications
channel. Half duplex means only one side can transmit at a time.
FDD
"Frequency Division Duplex". A duplex operation using a pair of frequencies, one
for transmission and one for reception.
Frequency
The rate at which an electrical current alternates, usually measured in Hertz.
GPRS
"General Packet Radio Systems". A packet-based wireless communications service
that enables high-speed wireless Internet and other data communications via GSM
networks.
GSM
"Global System for Mobile Communications". A digital cellular standard, based on
TDMA technology, specifically developed to provide system compatibility across
country boundaries.
Hertz
The unit of measuring radio frequency (one cycle per second).
High Speed Downlink
A high speed means of transmitting data from a 3G WCDMA communications
infrastructure to compatible terminal equipment.
ITC
"InterDigital Technology Corporation", our wholly-owned Delaware subsidiary.
IS-54
The original TDMA digital cellular standard in the United States. Implemented in
1992 and then upgraded to the IS-136 digital standard in 1996.
-14-
IS-136
A United States standard for digital TDMA technology.
Joint 3G Protocol Stack
The FDD software for Terminal unit applications to be developed under our
co-development agreement with Infineon.
MHz
"MegaHertz", millions of Hertz.
Multi-carrier
The use of multiple carrier channels to support the transmission of traffic.
Multiple Access
A methodology (e.g., FDMA, TDMA, CDMA) by which multiple users share access to a
transmission channel. Most modern systems accomplish this through "demand
assignment" where the specific parameter (frequency, time slot, or code) is
automatically assigned when a subscriber requires it.
NTDD
Narrowband, low chip rate, TDD.
PDC
"Personal Digital Cellular". The standard developed in Japan for TDMA digital
wireless mobile radio communications systems.
PHS
"Personal Handyphone System". A digital cordless telephone system and digital
network based on TDMA. This low-mobility microcell standard was developed in
Japan.
Platform
The base technology of a system's hardware and software that defines how the
system is operated and determines other kinds of software that can be used.
Protocol
A formal set of conventions governing the format and control of interaction
among communicating functional units.
2G
"Second Generation". A generic term usually used in reference to voice-oriented
digital wireless products, primarily mobile handsets which provide basic voice
services.
2.5G
A generic term usually used in reference to fully integrated voice and data
digital wireless devices offering higher data rate services and enhanced
Internet access.
SOC
"System-on-a-chip". The embodiment on a single silicon chip of the essential
components that comprise the operational core of a digital system.
-15-
Standards
Specifications that reflect agreements on products, practices, or operations by
nationally or internationally accredited industrial and professional
associations or governmental bodies.
Technology Transfer
The sale, license or other transfer of technology rights.
Terminal
Equipment at the end of a communication circuit. Often referred to as an
end-user device or handset. Terminal units include mobile phone handsets,
personal digital assistants, computer laptops and telephones.
TDD
"Time Division Duplexing". A duplex operation using a single frequency, divided
by time, for transmission and reception.
TDMA
"Time Division Multiple Access". A method of digital wireless transmission that
allows a multiplicity of users to share access (in a time ordered sequence) to a
single channel without interference by assigning unique time segments to each
user within the channel.
3G
"Third Generation". A generic term usually used in reference to the next
generation digital mobile devices and network, which provides high speed data
communications capability along with voice services.
3G Products
Products compliant with the standards adopted for 3G.
W-CDMA
"Wideband Code Division Multiple Access" or "Wideband CDMA". The next generation
of CDMA technology optimized for high speed packet-switched data and
high-capacity circuit switched capabilities.
Wideband
A communications channel with a user data rate higher than a voice-grade
channel; usually 64kpbs to 2mbps.
Wireless
Radio-based systems that allow transmission of information without a physical
connection, such as copper wire or optical fiber.
Wireless LAN (W-LAN)
"Wireless local area network". A collection of devices (computers, networks,
portables, mobile equipment, etc.) linked wirelessly over a limited area.
WTDD
"Wideband TDD" or "Wideband Time Division Duplex".
-16-
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3
with the Commission relating to the Shares offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby.
We are subject to the informational requirements of the
Securities and Exchange Act of 1934 (the "Exchange Act"). In accordance with the
Exchange Act, we file annual, quarterly and special reports and other
information with the Commission. Statements contained in this Prospectus
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is hereby made to the copy of the document filed as an
exhibit to the registration statement.
You can inspect and copy the reports, proxy statements, and
other information that we file with the Commission at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can also obtain copies
of such material by mail at prescribed rates from the Commission's Public
Reference Section at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may also access such material at the Commission's home page on
the Internet at http://www.sec.gov.
Our Common Stock is traded as "National Market Securities" on
the Nasdaq National Market. Materials that we file can be inspected at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006. Prior to April 26, 2000,
our Common Stock was listed on the American Stock Exchange. Thus, certain
reports, proxy statements and other information concerning the Company
previously filed may also be inspected at the offices of the American Stock
Exchange, Inc., 9801 Washingtonian Blvd., Gaithersburg, MD 20878.
In addition, we will provide without charge to each person to
whom this Prospectus is delivered, upon either the written or oral request of
such person, the Annual Report for the Company's latest fiscal year and a copy
of any or all of the documents incorporated herein by reference other than
exhibits to such documents. Such requests should be directed to InterDigital
Communications Corporation, 781 Third Avenue King of Prussia, Pennsylvania
19406, Attention: General Counsel; telephone number (610) 878-7800.
-17-
NOTICE REGARDING ARTHUR ANDERSEN LLP
Section 11(a) of the Securities Act provides that if any part
of a registration statement at the time it becomes effective contains an untrue
statement of a material fact or an omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
any person acquiring a security interest pursuant to such registration statement
(unless it is proved to be that at the time of such acquisition such person knew
of such untruth or omission) may sue, among others, every accountant who has
consented to be named as having prepared or certified any part of the
registration statement or as having prepared or certified any report or
valuation which is used in connection with the registration statement with
respect to the statement in such registration statement, report or valuation
which purports to have been prepared or certified by the accountant. On April
16, 2002, we announced that we had made a determination to engage
PricewaterhouseCoopers LLP ("PwC") to serve as the Company's independent public
accountants and no longer engage Arthur Andersen LLP ("Arthur Andersen") in such
capacity. Our consolidated balance sheets as of December 31, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years ended December 31, 2001, have been audited by
Arthur Andersen, as stated in their report dated February 14, 2002, included in
our Form 10-K for the year ended December 31, 2001, which is incorporated by
reference in the Registration Statement. Prior to the date of this prospectus,
the Arthur Andersen engagement partner and engagement manager who reviewed our
most recent audited financial statements resigned from Arthur Andersen. As a
result, after reasonable efforts, we have been unable to obtain Arthur
Andersen's written consent to the incorporation by reference into the
Registration Statement of its audit reports with respect to our financial
statements. Under these circumstances, Rule 437a under the Securities Act
permits us to file the Registration Statement without a written consent from
Arthur Andersen. Accordingly, Arthur Andersen will not be liable to you under
Section 11(a) of the Securities Act because it has not consented to being named
as an expert in the registration statement. In addition, the ability of Arthur
Andersen to satisfy any claims (including claims arising from Arthur Andersen's
provision of auditing and other services to us) may be limited as a practical
matter due to recent events regarding Arthur Andersen.
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 filed with the Commission
on January 17, 2002, April 16, 2002, June 4, 2002 and July 12, 2002; and
(d) the description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on April
25, 2000, together with Amendment No. 1 on Form 8-A/A filed with the Commission
on May 2, 2000, and including any amendments or reports filed for the purpose of
updating such description in which there is described the terms, rights and
provisions applicable to our Common Stock.
-18-
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling
Shareholders and certain information regarding the beneficial ownership of the
Company's Common Stock held by the Selling Shareholders as of March 27, 2002*,
and as adjusted to reflect the sale of the shares offered by this Prospectus:
Beneficial Ownership
Number of After Offering
Shares ------------------------------
Beneficially Percent of
Owned Prior Number of Class (if
to Shares Number of greater
Name Offering Offered Shares than 1%)
---- ---------- --------- ------------- ----------
George Calhoun 90,000(1) 90,000(1) -- --
LibertyView Fund, LLC 27,050(2) 27,050(2) -- --
LibertyView Plus Fund, L.P. 88,200(3) 88,200(3) -- --
CPR (USA) Inc., f/k/a Paresco, 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.
-19-
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.
-20-
LEGAL MATTERS
The validity of the Common Stock registered hereunder has been
passed upon for the Company by Lawrence F. Shay, Esq., 781 Third Avenue, King of
Prussia, Pennsylvania 19406. Mr. Shay is General Counsel, Vice President and
Corporate Secretary of the Company, and Mr. Shay owns 1,421 shares of Common
Stock and options to purchase 50,000 shares of Common Stock.
EXPERTS
We have not been able to obtain, after reasonable efforts, the
written consent of Arthur Andersen to our naming it in this Prospectus as having
certified our consolidated financial statements for the three years ended
December 31, 2001, as required by Section 7 of the Securities Act. Accordingly,
Arthur Andersen will not have any liability under Section 11 of the Securities
Act for false and misleading statements and omissions contained in this
prospectus, including the financial statements, and any claims against Arthur
Andersen related to any such false and misleading statements and omissions may
be limited.
-21-
InterDigital Communications Corporation
-------------
PROSPECTUS
-------------
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 Pennsylvania Business Corporation
Law of 1988 (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 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
CONSENT OF LAWRENCE F. SHAY, ESQ.
As General Counsel, Vice President and Corporate Secretary of
the Company, I hereby consent to the incorporation by reference in the
Registration Statement on Form S-3 of InterDigital Communications Corporation,
Registration No. 333-85692, of my legal opinion dated April 5, 2002 concerning
the validity of the shares offered under such Registration Statement, and I
further consent to the use of my name under the section captioned "Legal
Matters" in the Prospectus which is a part of such Registration Statement.
/s/ Lawrence F. Shay
-------------------------------
Lawrence F. Shay
Vice President, General Counsel
and Corporate Secretary
King of Prussia, Pennsylvania
July 30, 2002
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in King of Prussia, Pennsylvania, on
July 30, 2002.
INTERDIGITAL COMMUNICATIONS CORPORATION
By: /s/ Howard E. Goldberg
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Howard E. Goldberg, Director,
President and Chief Executive
Officer (Principal Executive
Officer)
By: /s/ R. J. Fagan
-----------------------------------
Richard J. Fagan, Executive Vice
President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities indicated and on the dates indicated.
Date: July 30, 2002 *
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Harry G. Campagna, Chairman of the Board
Date: July 30, 2002 /s/ Howard E. Goldberg
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Howard E. Goldberg, Director, President
and Chief Executive Officer
Date: July 30, 2002 *
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D. Ridgely Bolgiano, Director
Date: July 30, 2002 *
----------------------------------------
Steven T. Clontz, Director
Date: July 30, 2002 *
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Joseph S. Colson, Jr., Director
Date: July 30, 2002 *
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Robert S. Roath, Director
By: /s/ Howard E. Goldberg
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* Howard E. Goldberg
Attorney-in-Fact
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