<PAGE>
As filed with the Securities and Exchange Commission on July 7, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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PRIVATE MEDIA GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Nevada 87-0365673
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Carrettera de Rubi 22-26, 08190 Sant Cugat del Valles, Barcelona, Spain
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34-93-590-7070
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive office)
Berth H. Milton, Chief Executive Officer
Private Media Group, Inc.
Carrettera de Rubi 22-26
08190 Sant Cugat del Valles
Barcelona, Spain
34-93-590-7070
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(Name, Address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
Samuel S. Guzik, Esq.
Guzik & Associates
1800 Century Park East, Fifth Floor
Los Angeles, CA 90067
(310) 788-8600
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Approximate date of proposed sale to the public: From time to time after the
effective date of the Registration Statement.
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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]
Calculation of Registration Fee
<TABLE>
<CAPTION>
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Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered(2) price per share(1) price(1) registration fee
---------------------- --------------- ------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value 1,151,928 $9.625 $11,087,307 $2,909.31
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</TABLE>
(1) Estimated for the purpose of calculating the registration fee pursuant
to Rule 457(c) on the basis of the high and low price of the
Registrant's Common Stock on July 5, 2000.
(2) Included in this amount are 943,464 shares issuable upon exercise of
outstanding Options and Warrants. In addition to the shares set forth
in the table, the amount to be registered includes an indeterminate
number of shares issuable as a result of stock splits, stock dividends,
anti-dilution and similar provisions in accordance with Rule 416.
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.
<PAGE>
PROSPECTUS
1,151,928 SHARES OF COMMON STOCK
PRIVATE MEDIA GROUP, INC.
The stockholders of Private Media Group, Inc. listed below in the section
entitled "Selling Stockholders and Plan of Distribution" ("selling
stockholders") may offer and sell from time to time shares of our common stock
under this prospectus. These shares include 943,464 shares of common stock
which may be acquired by these stockholders by exercising stock options and
warrants and 208,464 shares of common stock issued to a selling stockholder in a
private transaction. The maximum number of shares of common stock which may be
resold under this prospectus is 1,151,928 shares.
Although we will be entitled to receive proceeds from the exercise of
options by the selling stockholders, we will not receive any part of the
proceeds from sales of common stock by the selling stockholders.
Our common stock is traded on the Nasdaq Stock Market, Inc. National Market
under the trading symbol "PRVT". On July 5, 2000, the last reported sales
price of our common stock on the Nasdaq National Market was $9 1/8.
All share amounts have been adjusted to reflect the company's three-for-one
stock dividend distributed to holders of record of the common stock on May 30,
2000.
THE PURCHASE OF OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," AT PAGE FIVE, FOR A DISCUSSION OF CERTAIN MATTERS THAT YOU SHOULD
CONSIDER BEFORE PURCHASING OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS................................................ 3
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS.................... 3
INFORMATION AVAILABLE TO YOU......................................... 3
THE COMPANY.......................................................... 5
USE OF PROCEEDS...................................................... 5
RISK FACTORS......................................................... 6
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION........................ 15
INDEMNIFICATION...................................................... 18
LEGAL MATTERS........................................................ 18
EXPERTS.............................................................. 18
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
U.S. Securities and Exchange Commission (the "SEC") utilizing a "shelf"
registration process. Under this shelf process, the selling stockholders may
sell up to 1,151,928 shares of our common stock, which they may acquire in the
future from us. This prospectus provides you with a general description of our
common stock which the selling stockholders may offer. When the selling
stockholders sell our common stock, we may provide, if necessary, a prospectus
supplement that will contain specific terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with the additional information described under the heading
"Information Available to You."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed under the captions "Risk Factors" and elsewhere
in this prospectus or in the information incorporated by reference constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Some of the forward-
looking statements can be identified by the use of forward-looking words such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimates," or "anticipates" or the negative of those words
or other comparable terminology. The discussion of financial trends, strategy,
plans or intentions may also include forward-looking statements. Forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those projected. These include factors discussed in this
prospectus, including information which we have incorporated into this
prospectus by reference.
INFORMATION AVAILABLE TO YOU
Private Media Group, Inc. ("Private", the "Company", "We" or "Us") files
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission ("SEC"). You can inspect and copy
the Registration Statement on Form S-3 of which this prospectus is a part, as
well as reports, proxy statements and other information filed by us, at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the SEC: 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
obtain copies of such material from the Public Reference Room of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can call
the SEC at 1-800-732-0330 for information regarding the operation of its Public
Reference Room. The SEC also maintains a World Wide Web site at
http:\\www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants (like Private) that file electronically.
This prospectus provides you with a general description of the common stock
being registered. This prospectus is part of a Registration Statement that we
have filed with the SEC. This prospectus, which is a part of the Registration
Statement, does not contain all the information contained in the Registration
Statement. Certain items are contained in schedules and exhibits to the
Registration Statement
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as permitted by the rules and regulations of the Commission. Statements made in
this prospectus concerning the contents of any documents referred to in the
prospectus are not necessarily complete. With respect to each such document
filed with the Commission as an exhibit to the Registration Statement, please
refer to the exhibit for a more complete description, and each such statement is
qualified by such reference. To see more detail, you should read the exhibits
and schedules filed with our Registration Statement.
The SEC allows this prospectus to "incorporate by reference" certain other
information that we file with them, which means that we can disclose important
information to you by referring to those documents. The information incorporated
by reference is an important part of this prospectus, and information that we
file later with the SEC will automatically update and replace this information.
We incorporate by reference the documents listed below and any future filings
made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until all of the securities that we have
registered have been sold.
(1) Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999, filed with the Commission pursuant to the Exchange Act on
March 30, 2000 (File No. 0-25067);
(2) Our Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000;
(3) The description of our Common Stock contained in the Company's Report
on Form 8-A filed on November 16, 1998 (File No. 0-25067); and
(4) All other reports filed by us pursuant to Sections 13(a) or 15(d) of
the Exchange Act since December 31, 1999.
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment to this Registration Statement which indicates that all of the shares
of our Common Stock offered under this prospectus have been sold or which
deregisters all of such shares then remaining unsold, will be deemed to be
incorporated by reference in this Registration Statement and to be a part of
this prospectus from the date of filing of such documents.
If you make a request for such information in writing or by telephone, we
will provide to you, at no cost, a copy of any or all of the information
incorporated by reference in the Registration Statement of which this prospectus
is a part. Requests should be addressed to us as follows:
Private Media Group, Inc.
Carrettera de Rubi 22-26
08190 Sant Cugat del Valles
Barcelona, Spain
Attention: Johan Gillborg, Chief Financial Officer
Telephone: 34-93-590-7070
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
will not make an offer of the shares of our common stock in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents.
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THE COMPANY
We are engaged in the acquisition, refinement and delivery of adult feature
products and services, including a range of proprietary websites, DVDs, unrated
and adult feature magazines, videos and CD-Roms; the distribution and licensing
of our proprietary products and services on the Internet, including magazines,
videos, interactive services, adult novelty products and the Private Circle
fashion line; and TV Home Shopping for our proprietary and licensed products.
Our principal executive offices are located at Carrettera de Rubi 22-26,
08190 Sant Cugat del Valles, Barcelona, Spain, telephone 34-93-590-7070.
USE OF PROCEEDS
All net proceeds from the sale of the shares of our Common Stock will go to
the selling stockholders who offer and sell their shares. Accordingly, we will
not receive any of the proceeds from the sales of the shares of our common stock
by the selling stockholders.
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties below are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
us, or that we currently deem immaterial, may also impair our business
operations. 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 decline, and
you may lose all or part of your investment.
Our Future Capital Requirements and Needs for Additional Financing are Uncertain
We believe that current and future available capital resources, including
cash flow from operations, will be adequate to fund our working capital
requirements based upon our present level of operations for the 12 month period
following the date of this Prospectus. However, future events may cause us to
seek additional capital sooner. In addition, we intend to expand our business
activities in the next 12 months, which will require additional sources of
funding. If additional capital resources are required, these funds may not be
available on favorable terms, or at all. If we raise additional capital through
the sale of equity or convertible debt securities, the issuance of these
securities could result in dilution to existing shareholders. The
unavailability of funds could have a material adverse effect on our financial
condition, results of operations and our ability to expand operations.
We May Have Difficulty Managing Growth
We expect to be entering a period of significant growth. This growth, if
effected, will expose us to increased competition, greater overhead, marketing
and support costs and other risks associated with entry into new markets and
development of new products. To manage growth effectively, we will need to
continue to improve and expand our operational, financial and management
information systems and telecommunications systems and to hire and manage
additional personnel. We may not be able to successfully manage this rapidly
evolving business. Our failure to adequately manage anticipated growth would
have a material adverse effect upon our operating results.
We are Dependent Upon the Future Growth of the Internet and the Internet
Structure
The growth of our Internet operations has been driven in part by the rapid
technological change in those markets and increased use of the Internet. Such
rapid technological change may not continue and the telecommunications
infrastructure may not be developed to support the high-volume adoption of these
technologies.
Our future success also depends, in part, upon the continued growth of the
Internet. Such growth is a recent phenomenon and the current rate of growth may
not be sustained in future periods. Factors that could negatively influence the
growth of the Internet in the future include:
. the availability of the Internet infrastructure to support its
growth;
. delays in the development or adoption of new standards and protocols
required to handle
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increased levels of Internet activity; and
. increased governmental regulation.
Any of these factors could materially adversely affect our results of
operations.
We are Dependent Upon Key Employees
Our future success will depend, to a significant degree, on the
continued services of our executive officers and other key personnel, including
Berth Milton, Marten Kull, Javier Sanchez and Johan Gillborg, and upon our
ability to continue to attract motivate and retain highly qualified and talented
personnel, including software development technical personnel. In particular, we
are dependent upon the management services of Mr. Berth Milton and Mr. Marten
Kull. Although we intend to acquire key-man life insurance on the lives of
Messrs. Milton and Kull naming us as beneficiary, we have not yet procured such
insurance and there is no assurance that we will be able to obtain such
insurance in the future.
Mr. Milton is the founder of our principal operating division, Milcap
Media Group, and has managed its business and marketing operations since the
acquisition of the trademark Private from his father in 1990. Mr. Milton is also
the Chief Executive Officer and a Director of Private Media Group, Inc. and the
chief executive officer of Milcap Media Group S.L. ("MMG") in Barcelona, Spain.
The loss of the services of Mr. Milton could have a material adverse effect on
our business and operating results. We have no assurance that we will be
successful in retaining his services in the future.
Mr. Kull has managed our production and marketing operations since the
inception. Mr. Kull has a long term employment agreement with us. Competition
for employees like Mr. Kull is intense and the process of locating key marketing
and technical personnel with the combination of skills and attributes required
to execute the Company's strategy is often lengthy. The loss of the services of
Mr. Kull could have a material adverse effect on our business and operating
results We have no assurance that we will be successful in retaining him in the
long run. Mr. Kull is subject to a non-competition agreement.
The loss of the services of any of our executive officers or other
key personnel, including Messrs. Marten Kull, Javier Sanchez and Johan
Gillborg, could also have a material adverse effect on our business and
operating results. As we do not presently have employment agreements with these
individuals, there can be no assurance that we will be successful in retaining
such personnel.
Our Business is Highly Competitive
Our business is highly competitive. All aspects of our business,
including price, promptness of service, and product quality are significant
competitive factors. Our ability to successfully compete with respect to each
factor is important to our profitability. We compete with a number of other
businesses that may have greater technical and human resources. These companies
may develop products or services that may be more effective than our products or
services. They may also be more successful than us in marketing their products
or services. Some of the our current and potential competitors have
significantly greater market presence, name recognition and financial and
technical resources than us.
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Also, many of our competitors have longstanding market positions and established
brand names in their respective markets. To the extent that current and
potential competitors compete on the basis of price, this could result in lower
margins for our products. Although we place a high value upon our demonstrated
ability to provide quality service to our customers in order to be competitive
in the market place, we may not be able to compete successfully against current
and new competitors as our markets continue to evolve.
We are Subject to Rapidly Changing Technology
We are engaged in businesses that have experienced tremendous
technological change over the past few years. Therefore, we face all risks
inherent in businesses that are subject to rapid technological advancement. This
includes the possibility that a technology that we have invested heavily in may
become obsolete. This in turn may require us to invest in new technology. Our
inability to identify, fund the investment in, and commercially exploit new
technology could have an adverse impact on our financial condition. Our ability
to implement our business plan and to achieve the results projected by us will
be dependent, to some extent, upon our ability to predict technological advances
and implement strategies to take advantage of such changes. Our future
profitability will depend upon our ability to adjust to such new developments.
New technological discoveries may render our equipment uneconomical or obsolete.
In order to minimize such risks, we subcontract and intend to continue to
subcontract capital intensive or technically complex businesses such as editing,
video and CD-Rom duplication, DVD replication and other similar business.
However, we may not have access to these subcontractors when their services are
required, and their services may not be available on favorable terms.
The Markets In Which We Compete are Subject to Change
Our video and film operations compete with pay-per-view cable television
systems, in which cable television subscribers pay a fee to see a movie or other
program selected by the subscriber. Existing pay-per-view services offer a
limited number of channels and programs and are generally available only to
households with a converter to unscramble incoming signals. Recently developed
technologies, however, permit certain cable companies, direct broadcast
satellite companies, telephone companies and other telecommunications companies
to transmit a much greater number of movies to homes in more markets as
frequently as every five minutes. Ultimately, further improvements in these
technologies or the development of other technologies could lead to the
availability of a broad selection of movies to consumers on demand at low
prices, which could substantially decrease the demand for video purchases or
rentals. This could have a material adverse effect on our financial condition
and results of operations.
We Face Certain Risks Relating to Our Proprietary Rights
We rely on a combination of copyright and trademark laws, trade secrets,
software security measures, license agreements and non-disclosure agreements to
protect our proprietary products. Despite these precautions, it may be possible
for unauthorized third parties to copy aspects of, or otherwise obtain and use,
our products without authorization, or to substantially use our concepts and
market them, trading on our established customer base. In addition, we cannot be
certain that others will not develop substantially equivalent or superseding
products, thereby substantially reducing the value of our
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proprietary rights. Confidentiality agreements with our employees or any
license agreements with our customers may not provide meaningful protection for
our proprietary information in the event of any unauthorized use or disclosure
of such proprietary information.
We do not believe that our products infringe the proprietary rights of
third parties, and we are not currently engaged in any material intellectual
property litigation or proceedings. Nonetheless, in the future we could become
the subject of infringement claims or legal proceedings by third parties with
respect to current or future products. In addition, we may initiate claims or
litigation against third parties for infringement of our proprietary rights or
to establish the validity of our proprietary rights. Any such claims could be
time-consuming, result in costly litigation, cause product shipment delays or
lead to our entering into royalty or licensing agreements rather than disputing
the merits of such claims. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject us to significant liabilities to third
parties, require expenditure of significant resources to develop non- infringing
technology, require disputed rights to be licensed from others or require us to
cease the marketing or use of certain products, any of which could have a
material adverse effect on our business and operating results. To the extent we
may desire, or are required, to obtain licenses to patents or proprietary rights
of others, there can be no assurance that any such licenses will be made
available on terms acceptable to us, if at all.
Enforcement of Civil Liabilities Against the Company and its Management May be
Difficult
Private Media Group, Inc. is a corporation organized under the laws of
the State of Nevada. Its agent for service of process in the United States is
Gateway Enterprises, Inc., whose address is 3230 Flamingo Road, Suite 156, Las
Vegas, Nevada 89121. Presently, most of our Directors and officers reside
outside the United States. As a result, it may not be possible for investors to
effect service of process within the United States upon such persons or to
enforce, in courts outside the United States,judgments against these persons
obtained in United States courts based upon the civil liability provisions of
the federal securities laws of the United States. Furthermore, since
substantially all of our assets are located outside the United States, any
judgment obtained in the United States against us may not be collectible within
the United States.
There are Risks Associated With Our Foreign Operations
Substantially all of our operations are presently conducted in
numerous countries outside the United States. In addition, our growth strategy
provides for increased services to foreign customers and to domestic customers
distributing programming to international markets. As a consequence of the
global nature of our business we will be exposed to market risks from changes in
interest rates and foreign currency exchange rates which may adversely affect
our results of operations and financial condition. By virtue of our significant
operations outside the United States, we will be subject to the risks normally
associated with cross-border business transactions and activities, including
those relating to delayed payments from customers in certain countries or
difficulties in the collection of receivables generally. In addition, we will be
exposed to the risk of changes in social, political and economic conditions in
the countries where we engage in business. Political and economic instability
could adversely affect our business activities and operations in these regions.
Unexpected changes in regulatory requirements, tariffs and other trade barriers
and price or exchange controls could limit operations and
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make the repatriation of profits difficult. In addition, the uncertainty of the
legal environment could limit our ability to enforce effectively or rights in
certain markets. We do not believe that any of such risks have had a material
impact on our business operations or financial condition in the past. However,
these risks could have a material adverse impact in the future.
Our Business Involves the Provision of Sexually Explicit Content
We are engaged in the business of providing sexually explicit products
worldwide. Many people may regard our primary business as unwholesome. Certain
investors, investment banking entities, market makers, lenders, and others in
the investment community may refuse to participate in the market for our Common
Stock, financings, or other activities due to the nature of our primary
business. These refusals may negatively impact the value of our Common Stock and
our opportunities to attract market support. Federal and State governments,
along with various religious and children's advocacy groups, consistently
propose and pass legislation aimed at restricting provision of, access to, and
content of adult entertainment. These groups also may file lawsuits against
providers of adult entertainment, encourage boycotts against such providers, and
mount negative publicity. In this regard, our magazines, and certain
distribution outlets and advertisers, have from time to time been the target of
certain groups who seek to limit its availability because of its content. In
our 36-year history, we have never sold a product that has been judged to be
obscene or illegal worldwide, including the U.S. However, we continue to remain
subject to future legal attacks.
We are Subject to Certain Risks Relating to Performers
Our film, video and photo productions are subject to various U.S. and
foreign regulations which govern the terms and conditions under which sexually
explicit media productions may occur. Accordingly, we have adopted practices
and procedures intended to ensure compliance with these regulations. In this
regard, when we engage in the production of videos, films and photo sets, we
contract directly with the video or film directors or the photographer, and we
have no direct contractual relationship with performers or models. Generally,
these productions do not take place at our facilities. However, each of the
agreements between us and the director or photographer, require the director or
photographer to obtain written representations and documents from the models and
performers to ensure that the production will comply with applicable laws
governing sexually media productions, including information relating to age and
health, and to furnish such information to us. Although these measures are
intended to protect us from liability under applicable U.S. and foreign laws
governing sexually explicit media productions, and in its 36-year history, we
have never sold a product that has been judged to be illegal worldwide,
including the U.S., there can be no assurance that such sales will not be
subject to successful legal attacks in the future.
Our Operating Results May Fluctuate
Our quarterly operating results may fluctuate significantly depending
upon a number of factors, including:
. the introduction of new products by our competitors,
. regulatory actions,
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. market acceptance of our products,
. adoption of new technologies, and
. manufacturing and distribution costs and capabilities.
We Do Not Anticipate Paying Dividends in the Future
Private Media Group, Inc. has never paid dividends on its Common Stock
and does not anticipate payment of dividends in the foreseeable future. We
intend to retain earnings for the foreseeable future for use in the operation
and expansion of our business.
The Price of Our Common Stock May be Volatile
The securities markets have from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. In addition, the market prices of the common stock of
many publicly traded companies, especially those companies deriving a portion of
their revenues from Internet commerce, have in the past been, and can in the
future be expected to be, especially volatile. Future events which may have an
impact on the price of our common stock include:
. announcements of new products or technical innovations by us or
our competitors,
. developments or disputes concerning proprietary rights,
. publicity regarding actual or potential results relating to
products under development by us or our competitors,
. regulatory developments in both the United States and foreign
countries,
. other external factors, and
. period to-period fluctuations in our financial results.
Outstanding Options and Warrants Could Have an Adverse Effect
As of May 31, 2000, we had a significant number of outstanding
warrants and options, including 525,000 Common Stock Warrants exercisable at
$1.33 per share and Options under the 1999 Employee Stock Option Plan, which has
3,600,000 available option shares. The holders thereof have, at nominal cost,
the opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership, with a resulting dilution in the
interest of other security holders. As long as these warrants and options remain
unexercised, our ability to obtain additional capital may be adversely affected.
Moreover, the warrant holders may be expected to exercise the warrants at a time
when we would, in all likelihood, be able to obtain any needed capital through a
new offering of our securities on terms more favorable to us than those provided
by the existing warrants and options.
There are Risks Relating to the Issuance of Additional Shares of Common Stock
Our Articles of Incorporation currently authorize the Board of
Directors to issue up to 100,000,000 shares of Common Stock. The power of the
Board of Directors to issue shares of Common Stock or warrants to purchase
shares of Common Stock is subject to shareholder approval in only limited
instances. Accordingly, any additional issuance of our Common Stock may have
the effect of further
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diluting the equity interest of shareholders.
There are Risks Relating to the Issuance of Additional Shares of Preferred Stock
Our Board of Directors has the authority to issue up to 10,000,000
shares of Preferred Stock, of which 7,000,000 are currently issued and
outstanding, and to determine the price, and the other rights, preferences,
privileges and restrictions, without any further vote or action by our
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. If Preferred Stock is issued, it may rank
senior to our Common Stock in respect of the right to receive dividends and to
participate in distributions or payments in the event of any liquidation,
dissolution or winding up of the Company. The provisions in the Articles of
Incorporation authorizing preferred stock could have the effect of delaying,
deferring or preventing a change of control of the Company, and could adversely
affect the voting and other rights of the holders of the Common Stock, including
the loss of voting control to others. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire control of the Company. We presently have outstanding
7,000,000 shares of $4.00 Series A Preferred Stock, which has certain rights,
preferences and privileges which could adversely affect the holders of the
Common Stock. We currently have no current plans to issue additional shares of
Preferred Stock.
There are Risks Associated With Potential Acquisitions of Business Enterprises
Our business plan as presently formulated contemplates growth through
additional acquisitions of existing business enterprises in near the future,
principally through the issuance of securities. We do not plan to limit such
potential acquisitions to any particular industry. We may not be able to
integrate such businesses into our operations or operate these businesses on a
profitable basis in the future. In addition, future acquisition opportunities
may not become available, or may not be accomplished on favorable terms.
Acquisitions may not result in profitable operations in the future. Because we
may issue securities as full or partial payment for an acquisition, fluctuations
in the Common Stock may have an adverse effect on our ability to make additional
acquisitions. Moreover, future issuances of our securities could have a dilutive
effect on existing shareholders. Generally, our shareholders will not be
required to vote on or approve acquisitions.
The Company is Controlled by Existing Management and Stockholders
As of May 31, 2000, our officers and directors beneficially owned or
control more than 50% of the issued and outstanding stock. Therefore present
shareholders control sufficient shares to elect most or all members of the Board
of Directors and thereby control the management of the Company.
The Liability of Directors and Officers is Liability Limited
Under Nevada law, we are required to indemnify our officers and
directors against liability to the Company or its stockholders in any proceeding
in which the officer or director wholly prevails on the merits. Generally, we
may indemnify officers and directors against such liability if the officer or
director acted in good faith believing his or her actions to be in the best
interests of the Company, unless the
-12-
<PAGE>
director or officer is adjudged liable to the Company. Furthermore, under our
Articles of Incorporation, a director or officer has no liability for monetary
damages for breach of fiduciary duty unless such person committed fraud or
engaged in intentional misconduct.
Possible Illiquidity of Trading; Penny Stock Rule
Our Common Stock is currently listed on the Nasdaq Stock Market. However,
there can be no assurance that our Common Stock will continue to be listed on
the Nasdaq Stock Market. If we are unable to maintain listing standards, then
trading, if any, in the Common Stock would be conducted in the over-the-counter
market on the OTC Bulletin Board, established for securities that do not meet
the Nasdaq Stock Market or other exchange listing requirements. As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Common Stock. In addition, depending on
several factors including the future market price of the Common Stock, Common
Stock could become subject to the "penny stock" rules that impose additional
sales practice and market making requirements on broker-dealers who sell and/or
make a market in such securities, which could adversely affect the ability or
willingness of the purchasers of Common Stock to sell their shares in the
secondary market. If the Common Stock is delisted from the Nasdaq Stock Market
or the trading price of the Common Stock is less than $5.00 per share, these
securities would likely be subject to the low priced security or so-called
"penny stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors. For any transaction involving a penny
stock, unless exempt, the rule requires:
. that a broker or dealer approve a person's account for
transactions in penny stocks; and
. the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny
stocks, the broker or dealer must:
. obtain financial information and investment experience and
objectives of the person; and
. make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prepared by the Commission relating to the
penny stock market which, in highlighted form, ets forth the basis on which the
broker or dealer made the suitability determination Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading, and about commissions payable to both the broker-dealer
and the investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
-13-
<PAGE>
Potential Sales of Restricted Stock
Of the 26,979,891 shares of Common Stock outstanding on May 31, 2000, more
than 12,000,000 were initially issued as "restricted securities," as that term
is defined in Rule 144 as promulgated by the Securities and Exchange Commission
under the Securities Act. As restricted shares, these shares may be resold only
pursuant to an effective registration or under the requirements of Rule 144 or
other applicable exemption from registration under the Act as required under
applicable State securities laws.
Rule 144 provides in essence that a person not affiliated with the issuer
who has held restricted securities for a period of one year, under certain
conditions, may sell every three months, in brokerage transactions, a number of
Shares which does not exceed the greater of one percent of a corporation's
outstanding Common Stock or the average weekly trading volume during the four
calendar weeks prior to the sale. There is no limit on the amount of restricted
securities that may be sold by a non-affiliate after the restricted securities
have been held by the owner for a period of two years. A sale under Rule 144 or
any other exemptions from the Act, if available, or subsequent registrations of
Common Stock of the current shareholders, may have a depressive effect upon the
price of the Common Stock.
In addition, Private may register "restricted securities" from time to
time. The sale of these otherwise restricted securities could adversely affect
the market for Private's Common Stock.
-14-
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the shares of Common Stock of the Company covered by this
Prospectus may be sold for the account of the selling stockholders named in the
table below and their pledgees, donees, transferees and other successors in
interest (the "Selling Stockholders").
The shares being offered by the Selling Stockholders or their
respective pledgees, donees, transferees or other successors in interest, may be
sold in one or more transactions (which may involve block transactions) on the
Nasdaq National Market or on such other market on which the Common Stock may
from time to time be trading, or in privately negotiated transactions. The sale
price to the public may be the market price prevailing at the time of sale, a
price related to such prevailing market price, a negotiated price, or such other
price as the Selling Stockholders determine from time to time. The shares may
also be sold pursuant to Section 4(1) of the Securities Act or Rule 144
thereunder rather than pursuant to this Prospectus.
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the shares will
do so for their own account and at their own risk. It is possible that a
Selling Stockholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of
the shares offered hereby will be issued to, or sold by, the Selling
Stockholders. The Selling Stockholders and any brokers, dealers or agents, upon
effecting the sale of any of the shares offered hereby, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations thereunder.
The Selling Stockholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any other such person. The foregoing
may affect the marketability of the shares.
Listed below are (i) the names of each Selling Stockholder and their
office or position with the Company, (ii) the total number of shares
beneficially owned and the number of shares to be sold in this offering by each
Selling Stockholder as of May 31, 2000, and (iii) the percentage of Common Stock
owned by each Selling Stockholder after this offering:
-15-
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock to be Common Stock
Shares of Offered for Owned
Common Stock Selling After
Owned Stockholder's Completion of
Prior to Offering* Account* Offering(1)
------------------ ------- -----------
Name Number Number Percent
----- ------ ------ -------
<S> <C> <C> <C>
Berth H. Milton, President
Director (3) 23,474,982 21,000 23,453,982 48.8%
Javier Sanchez, Chief
Operating Officer (4) 157,500 30,000 127,500 **
Johan Gillborg, Chief
Financial Officer (5) 225,000 105,000 120,000
Marten Kull, Chief
Marketing Officer (6) 345,000 225,000 120,000 **
Bo Rodebrant, Director (7) 58,500 7,500 51,000 **
Banca Privada d'Andorra 70,500 70,500 - **
Nicolai Milton Floeter (8) 12,000 12,000 - **
Robert L. Tremont,
Director(9) 9,000 9,000 - **
Christina Akesson 7,500 7,500 - **
Gunilla Sundberg 58,500 7,500 51,000 **
Daniel Deskovic 11,250 7,500 3,750 **
Michael Backstrom 22,500 7,500 15,000 **
Gabriel Hjerstedt 6,000 6,000 - **
Frank Pijenburg 49,500 6,000 43,500 **
Mikael Kraft 13,500 3,000 10,500 **
David Sears 105,000 105,000 - **
Danny Cook 52,500 22,500 30,000 **
Qamilla Carlsson 52,500 22,500 30,000 **
Indigo Island Ltd.(10) 30,000 30,000 - **
Pelican Point Ltd.(11) 30,000 30,000 - **
A.J.J.M. Heesbeen Beher
BV(12) 416,928 416,928 - **
</TABLE>
___________________________________________
*Assumes the exercise of all Options and Warrants.
**Less than one percent.
(1) Assumes the sale of all shares offered pursuant to this Prospectus.
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange
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<PAGE>
Commission, and includes generally voting power and/or investment power
with respect to securities. Shares of Common Stock which may be acquired
upon exercise or conversion of warrants or Preferred Stock which are
currently exercisable or exercisable within 60 days of May 31, 2000, are
deemed outstanding for computing the beneficial ownership percentage of
the person holding such securities but are not deemed outstanding for
computing the beneficial ownership percentage of any other person. Except
as indicated by footnote, to the knowledge of the Company, the persons
named in the table above have the sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Includes 21,000,000 shares of Common Stock issuable upon conversion of
7,000,000 of the Company's $4.00 Series A Convertible Preferred Stock and
451,482 shares of Common Stock which have accrued as dividends on the
Preferred Stock. Mr. Milton is indirectly the beneficial owner of the
7,000,000 $4.00 Series A Convertible Preferred Stock and 451,482 shares of
Common Stock owned of record by Slingsby Enterprises Limited. Also
includes (i) 1,875,000 shares of Common Stock owned by Bajari Properties
Limited, of which Mr. Milton is the sole shareholder, and (ii) 21,000
shares of Common Stock issuable upon exercise of Warrants owned by Mr.
Milton.
(4) Includes 30,000 shares of Common Stock issuable upon exercise of Warrants
owned by Mr. Sanchez.
(5) Includes 105,000 shares of Common Stock issuable upon exercise of Warrants
owned by Mr. Gillborg.
(6) Includes 225,000 shares of Common Stock issuable upon exercise of Warrants
owned by Mr. Kull.
(7) Includes 7,500 shares of Common Stock issuable upon exercise of Warrants
owned by Mr. Rodebrant.
(8) Nicolai Milton Floeter is the son of Berth H. Milton. Mr. Milton disclaims
beneficial ownership of these shares.
(9) Includes 9,000 shares of Common Stock issuable upon exercise of Warrants
owned by Mr. Tremont.
(10) Includes 30,000 shares of Common Stock issuable upon exercise of Warrants
owned by Indigo Island Limited.
(11) Includes 30,000 shares of Common Stock issuable upon exercise of Warrants
owned by Pelican Point Ltd.
(12) Includes 208,464 shares of Common Stock issuable upon exercise of Warrants
owned by A.J.J.M. Heesbeen Beher BV.
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<PAGE>
INDEMNIFICATION
The Company has the power to indemnify its directors and officers
against liability for certain acts pursuant to the laws of Nevada, being the
Company's state of incorporation. In addition, under the Articles of
Incorporation of the Company, no director, officer or agent is personally liable
to the corporation or its stockholders for monetary damages arising out of a
breach of such person's fiduciary duty to the Company, unless such breach
involves intentional misconduct, fraud or a knowing violation of law, or the
payment of an unlawful dividend. The Company also maintains a standard form of
officers' and directors' liability insurance policy that provides coverage to
the Company and its officers and directors for certain liabilities.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of
Common Stock offered hereby will be passed upon for the Company by Guzik &
Associates, Los Angeles, California. Samuel S. Guzik, a principal of this firm,
beneficially owns 75,000 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company and subsidiaries
at December 31, 1999 and for each of the two years in the period ended December
31, 1999, incorporated by reference in this Prospectus and Registration
Statement, have been audited by Ernst & Young AB, independent auditors, as set
forth in their report appearing in such financial statements, and have been
incorporated in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
-18-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses payable by the Registrant
in connection with the sale and distribution of the securities being registered
hereby. All amounts are estimated except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
SEC registration fee................... $ 2,909.31
Blue Sky fees and expenses............. 1,000.00
Accounting fees and expenses........... 1,000.00
Legal fees and expenses................ 7,500.00
Printing and engraving expenses........ 1,000.00
Registrar and Transfer Agent's fees.... 500.00
Miscellaneous fees and expenses........ 500.00
Total.................................. $14,409.31
</TABLE>
Item 15. Indemnification of Directors and Officers
The Company has the power to indemnify its directors and officers
against liability for certain acts pursuant to the laws of Nevada, being the
Company's state of incorporation. In addition, under the Articles of
Incorporation of the Company, no director, officer or agent is personally liable
to the corporation or its stockholders for monetary damages arising out of a
breach of such person's fiduciary duty to the Company, unless such breach
involves intentional misconduct, fraud or a knowing violation of law, or the
payment of an unlawful dividend. The Company also maintains a standard form of
officers' and directors' liability insurance policy that provides coverage to
the Company and its officers and directors for certain liabilities.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
*4.1 Articles of Incorporation
*4.2 Amended and Restated Bylaws
*4.3 Specimen Common Stock Certificate
*4.4 Certificate of Designation re Preferred Stock
5.1 Opinion of Guzik & Associates.
23.1 Consent of Ernst & Young AB
**23.2 Consent of Guzik & Associates.
24.1 Power of Attorney (Included in Signature Page in Part II)
------------------------------------------------
* Incorporated by reference from the registrant's Registration Statement on
Form SB-2 (SEC File No. 333-62075).
** Included in Exhibit 5.
(b) Financial Statement Schedules
None.
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 of 1933;
(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
II-2
<PAGE>
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
end 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 a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement which, individually
or in the aggregate, represent a fundamental change in
the information set forth in the registration statement.
(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) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is
II-3
<PAGE>
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.
(d) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Sant Cugat del Valles, Spain, on the 6th day of July,
2000.
PRIVATE MEDIA GROUP, INC.
By /s/ Berth H. Milton
--------------------------------------
Berth H. Milton,
Chief Executive Officer
KNOW BY ALL MEN THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Berth H. Milton and Johan Gillborg or
either of them, his true and lawful attorney-in-fact and agent, with full power
of substitution, for him and his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Berth H. Milton Chief Executive Officer July 6, 2000
-------------------- (Chief Executive Officer)
/s/ Johan Gillborg Chief Financial Officer July 6, 2000
-------------------- (Principal Financial Officer and
Johan Gillborg Principal Accounting Officer.
/s/ Bo Rodebrant Director July 6, 2000
--------------------
Bo Rodebrant
/s/ Robert Tremont Director July 6, 2000
--------------------
Robert Tremont
II-5
<PAGE>
EXHIBIT INDEX
(a) Exhibits:
*4.1 Articles of Incorporation
*4.2 Amended and Restated Bylaws
*4.3 Specimen Common Stock Certificate
*4.4 Certificate of Designation re Preferred Stock
5.1 Opinion of Guzik & Associates.
23.1 Consent of Ernst & Young AB
**23.2 Consent of Guzik & Associates.
24.1 Power of Attorney (Included in Signature Page in Part II)
------------------------------------------------
* Incorporated by reference from the registrant's Registration Statement on
Form SB-2 (SEC File No. 333-62075).
** Included in Exhibit 5.
(b) Financial Statement Schedules
None.
