As filed with the Securities and Exchange Commission on July 9, 1997
Registration No. 333__
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MARKETING SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0085608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 Corporate Pointe, Suite 780, Culver City, CA 90230
(310) 342-2800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Mr. J. Jeremy Barbera
Chairman of the Board and Chief Executive Officer
Marketing Services Group, Inc.
400 Corporate Pointe, Suite 780, Culver City, CA 90230
(310) 342-2800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Please send copies of communications to:
Alan I. Annex, Esq., Camhy Karlinsky & Stein, LLP
1740 Broadway, 16th Floor, New York, NY 10019-4315
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check to 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, check the following box and list the
Securities Act registration statement number of 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. |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
- --------------------------------- ----------------- --------------------- --------------------- --------------
<S> <C> <C> <C> <C>
Proposed maximum Proposed maximum Amount of
Title of Each Class of Amount to offering price aggregate offering Registration
Securities be Registered(1) per unit(2) price(2) Fee
to be Registered
- --------------------------------- ----------------- --------------------- --------------------- --------------
Common Stock, $.01 par value 6,146,824(3) 3.133 19,260,325 $5,836.46
- --------------------------------- ----------------- --------------------- --------------------- ==============
</TABLE>
1 This Registration Statement covers 4,886,897 shares owned by Selling
Shareholders and 305,577 shares issuable upon exercise of warrants. It also
includes such indeterminate number of shares of common stock as may be issued
upon conversion of an aggregate of $2,600,000 of Convertible Notes held by the
Selling Shareholders.
2 Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457 under the Securities and Exchange Act, as amended. The proposed
maximum offering price of the shares outstanding has been calculated on the
basis of the average bid and ask prices of Marketing Services Group, Inc. as
reported by the National Association of Securities Dealers, Inc. through its
Automated Quotation System on July 2, 1997. The proposed maximum offering price
per share of the warrants and notes has been calculated on the basis of the
average exercise prices of the underlying instruments. The proposed maximum
offering price of the common stock issuable upon conversion of the notes is
based upon the principal amount of the Notes.
3 Subject to adjustment as set forth in the notes.
The Company hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Company 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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JULY ___, 1997
PROSPECTUS
MARKETING SERVICES GROUP, INC.
6,146,824 Shares of
Common Stock
This Prospectus relates to 6,146,824 shares of common stock, par value
$.01 per share (the "Common Stock"), of Marketing Services Group, Inc. ("MSGI"
or the "Company") which may be offered for sale, from time to time, by certain
stockholders of the Company (the "Selling Stockholders"). The Company will not
receive any of the proceeds from the sale of the Common Stock by the Selling
Stockholders. See "Selling Stockholders." The Common Stock is quoted on The
Nasdaq SmallCap MarketSM under the symbol "MSGI." MSGI will not receive any
proceeds from the sale of the Shares. See "Plan of Distribution". The Selling
Stockholders will bear all commissions, discounts and other compensation paid to
brokers or dealers in connection with the sale of the Shares. See "Selling
Stockholders".
The Selling Shareholders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Shareholders. The Selling Shareholders and any broker-dealers
that participate in the distribution may under certain circumstances be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by such
broker-dealers and any profits realized on the resale of Shares by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Company and the Selling Shareholders may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify certain of the
Selling Shareholders with respect to the Shares against certain liabilities
including certain liabilities under the Securities Act. To the extent required,
the specified Shares to be sold, the names of the Selling Shareholders, the
public offering price, the names of any such broker-dealers, and any applicable
commission or discount with respect to any particular offer will be set forth in
a prospectus supplement. Each of the Selling Shareholders reserves the right to
accept or to reject, in whole or in part, any proposed purchase of the Common
Stock. See "Plan of Distribution".
See "Risk Factors" beginning on page 7 for a discussion of certain material
factors that should be considered by prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July ___, 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission, Washington, D.C. 20549 a
Registration Statement on Form S-3 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the securities offered
hereby and to the Company, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in the
Prospectus concerning the provisions of any document to which reference is made
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference. A copy of the
Registration Statement may be inspected without charge at the offices of the
Commission in Washington, D.C. 20549, and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of
the fees prescribed by the Commission.
The Company is subject to the informational reporting requirements of
the Securities Exchange Act, and accordingly, files, reports, proxy statements
and other information are filed with the Commission. Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1025, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at certain regional offices of the Commission, located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, IL 60621 and
7 World Trade Center, New York, NY 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission. In addition, the Commission maintains a website
that contains reports, proxy statements and other information filed with the
Commission. The address of such site is http://www.sec.gov.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon the written or oral request of any such person, a copy of any or all of the
documents incorporated by reference herein. See "Incorporation of Certain
Information by Reference." Such requests should be directed to Director,
Shareholder Relations, Marketing Services Group, Inc., 400 Corporate Pointe,
Suite 780, Culver City, CA 90230, (310) 342-2800.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The documents listed below are specifically incorporated by reference into the
prospectus:
1) Report on Form 10-K/A for the fiscal year ended June 30, 1996 filed
10/28/96
2) Report on Form 10-QSB for the quarter ended March 31, 1997 filed
5/14/97
3) Report on Form 10-QSB for the quarter ended December 31, 1996 filed
2/17/97 (Form 12b-25 notification filed 2/14/97)
4) Report on Form 10-QSB/A for the quarter ended September 30, 1996 filed
1/24/97
5) Report on Form 8-K regarding recapitalization of the Company's
capital stock filed 11/26/96
6) Report on Form 8-K regarding change of the Company's name filed
7/2/97
7) Report on Form 10-QSB for the quarter ended September 30, 1996 filed
11/24/96
8) Report on Form 8-K/A regarding the acquisition of Metro Services
Group, Inc. filed 11/1/96
9) Report on Form 8-K regarding the acquisition of Metro Services Group,
Inc. filed 10/11/96
10) Report on Form 8-K regarding sale of land filed 8/26/96
11) Report on Form 8-K/A regarding acquisition of Stephen Dunn &
Associates, Inc. filed 7/24/96
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing such documents. Any statement
contained in a document incorporated by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement in
this Prospectus or in any subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
<PAGE>
The Company will provide, without charge, to each person who receives
this Prospectus, upon written or oral request of such person, a copy of any of
the information that was incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference, unless
the exhibits are themselves specifically incorporated by reference). Such
requests should be made to Investor Relations, at Marketing Services Group,
Inc., 400 Corporate Pointe, Suite 780, Culver City, CA 90230 (310) 342-2800.
PROSPECTUS SUMMARY
The following contains a brief summary of certain information contained
elsewhere in this Prospectus or incorporated by reference herein. The summary is
necessarily selective and thus incomplete and is qualified in its entirety by
reference to the more detailed information included elsewhere in this
Prospectus. Certain capitalized terms used in the Prospectus Summary are defined
elsewhere in this Prospectus. This Prospectus contains certain forward-looking
statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1996 with
respect to the financial condition and business of the Company. The words
"estimate", "plan", "intend", "expect", and similar expressions are intended to
identify forward-looking statements. These forward-looking statements involve
and are subject to known and unknown risks, uncertainties and other factors
which could cause the Company's actual results, performance (financial or
operating) or achievements to differ from the future results, performance
(financial or operating) or achievements expressed or implied by such
forward-looking statements. Investors are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The Company
MSGI conducts its business through two wholly-owned operating subsidiaries:
Stephen Dunn & Associates, Inc. ("SD&A") and Metro Services Group, Inc.
("Metro"). SD&A was acquired by Alliance Media Corporation ("Alliance"), which
was simultaneously acquired by the Company, in April 1995. Metro was acquired by
the Company in October 1996. References to "MSGI" and the "Company" include
Marketing Services Group, Inc. (and predecessor entities) and its consolidated
subsidiaries, Alliance, SD&A and Metro, unless the context otherwise requires.
All share and per share information has been adjusted to reflect a one-for-four
reverse stock split of the Common Stock effected August 22, 1995. On December
23, 1996, the Company and certain of its securityholders effected changes in the
Company's outstanding capital stock and related securities as described below
under "The Recapitalization." All information herein gives effect to such
recapitalization.
MSGI provides database management services, custom telemarketing/telefundraising
services and other direct marketing services to a diverse group of approximately
600 clients located throughout the United States. These services include
customer and market data analysis, database creation and analysis, data
warehousing, merge/purge, predictive behavioral modeling, list processing,
brokerage and management, data enhancement, other direct marketing information
services and custom outbound telemarketing/telefundraising services. The Company
believes its expertise in applying these direct marketing tools increases the
productivity of its clients' marketing expenditures.
The Company's services have enabled it to become a leading provider of direct
marketing services to performing arts and cultural institutions in the United
States. The Company's clients include Lincoln Center for the Performing Arts,
Kennedy Center for the Performing Arts, Carnegie Hall, Boston Symphony, New York
University and numerous public broadcasting stations. In addition, the Company
renders database management and direct marketing services to such commercial
clients as The Shubert Organization, Crain Communications, The CIT Group,
Mitsubishi Electronics and UNOCAL. Since January 1996, the Company has begun
providing services to new clients including Walt Disney Company, Avery Dennison
and Countrywide Insurance. Giving effect to the Company's acquisition of Metro,
on a pro forma basis, revenues for the Company's fiscal year ended June 30, 1996
were $24.0 million.
Industry Overview
The use of direct marketing by businesses to target and communicate with
customers has increased over the last few years due in part to the relative cost
efficiency of direct marketing compared to mass marketing methods, as well as
the rapid development of more powerful and more cost-effective information
technology and data capture capabilities. According to the Direct Marketing
Association (the "DMA"), expenditures for direct marketing services in 1995 were
approximately $134.0 billion, the largest component of which, $54.1 billion, was
attributable to telemarketing. The DMA has estimated that annual telemarketing
expenditures may grow to $78.9 billion by the year 2000. According to other
industry sources, total expenditures for database management services in the
United States, including services used by direct marketing and other industries,
were estimated to have been $3.2 billion in 1993 and are projected to grow at a
compound annual rate of 29% through 1998.
The direct marketing industry is extremely fragmented. According to industry
sources, there are almost 11,000 direct marketing service and database service
businesses in the United States. The Company believes that most of such
businesses are small, specialized companies which offer limited services and/or
limited expertise and industry specialization. However, industry consolidation
has increased in the last few years resulting in a greater number of large
companies providing services similar to those provided by the Company. The
Company believes that much of this consolidation is due to: (i) economies of
scale in hardware, software and other marketing resources; (ii) cross-selling
services; and (iii) coordinating various components of direct marketing and
media programs within a single, reliable environment. The Company believes these
trends are likely to continue due, in part, to client demand for more
cost-effective service to perform increasingly complex functions.
Strategy
MSGI's strategy to enhance its position as a value-added premium provider of
database management, custom telemarketing/telefundraising services and other
direct marketing services is to:
Increase revenues by expanding the range of direct marketing services offered
and by cross-selling;
Deepen market penetration in new industries and market segmets as well as those
currently served by the Company;
Develop existing and create new proprietary database software and database
management applications;
Increase capacity for telemarketing/telefundraising services and enhance
on-site data and calling systems; and
Pursue strategic acquisitions, joint ventures and marketing alliances to
expand direct marketing services offered and industries served.
The Company's principal executive offices are located at 400 Corporate
Pointe, Suite 780, Culver City, California 90230 and its telephone number is
(310) 342-2800.
<PAGE>
The Offering
Common Stock Offered by the Selling
Stockholders 6,146,824 shares, representing 4,886,897
shares owned by SellingStockholders,305,577
shares issuable upon exercise of warrants
owned by Selling Stockholders and 954,350
shares issuable upon conversion of
convertible notes.
Common Stock Outstanding 11,426,764 shares(1)(2)
Dividend Policy The Company intends to retain future
earnings, if any, to finance the growth
and development of its business and
therefore does not anticipate paying cash
dividends on the Common Stock in the
foreseeable future. See "No Intention to Pay
Dividends."
The Nasdaq SmallCap MarketSM
Symbol MSGI
Risk Factors See "Risk Factors" beginning on page 7 for
a discussion of certain material factors that
should be considered by prospective
purchasers of the Common Stock.
(1) Does not include up to 4,529,789 shares of Common Stock issuable upon
conversion or exercise of certain securities or other contractual rights, as
follows: (i) all other outstanding options, warrants and other contractual
rights, which are currently exercisable for an aggregate of 3,463,915 shares of
Common Stock; (ii) the promissory notes issued to the former shareholders of
Metro (the "Metro Notes") in connection with the Company's acquisition of Metro,
which are currently convertible into an aggregate of 185,874 shares of Common
Stock; and (iii) 6% convertible notes which are currently convertible into an
aggregate of 880,000 shares of Common Stock.
(2) Includes 3,168,857 shares of Common Stock issued in connection with the
Recapitalization. See "The Recapitalization."
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of risk.
Prospective investors should carefully consider all of the information in this
Prospectus including the following risk factors.
Limited Business History; Absence of Combined Operating History; Lack of
Consolidated Profitable Operations
MSGI may be considered to be a new company without an operating history because
of: (i) the recent date of the acquisitions of MSGI's operating subsidiaries,
Metro and SD&A; (ii) the change in MSGI's management and its board of directors
(the "Board of Directors" and each member thereof individually a "Director")
arising out of the Company's acquisition of Alliance on April 25, 1995; (iii)
the related sale in March 1995 of the Company's then principal operating
business, Sports-Tech International, Inc. ("STI"); and (iv) a further change in
executive management in April 1997. Accordingly, there can be no assurance that
the Company will be able to successfully manage or integrate Metro and SD&A and
their separate operations, employees and management or that the Company's
overall operations will be successful. As of June 30, 1996 and March 31, 1997,
the Company had an accumulated deficit of $6,125,500 and $16,837,311,
respectively. On a consolidated basis, the Company had losses from operations of
$0.5 million, $1.3 million and $4.0 million for the years ended June 30, 1996
and 1995 and the nine months ended March 31, 1997, respectively. The Company
generated losses due, in part, to costs in fiscal 1995 and 1996 and the first
nine months of fiscal 1997 associated with increased legal, accounting and
administrative expenses related to identifying, evaluating and negotiating
potential acquisitions consistent with the Company's growth strategy and with
the obtaining of financing for such acquisitions, some of which acquisitions and
financing were never consummated. In addition, in the first quarter of fiscal
1997, the Company incurred a non-recurring, non-cash charge of $1.7 million to
compensation expense relating to options granted to two principal executive
officers. Such charge was incurred because the exercise price of each such
option, which was based upon the market price of the Common Stock on May 30,
1996 (the date which the Company intended as the effective date of the grant)
rather than the market price on September 26, 1996 (the actual effective date of
the grant), was lower than the market price of the Common Stock on September 26,
1996. In the third quarter of fiscal 1997, the Company expensed restructuring
costs of $1.0 million in connection with reducing corporate staffing, closing
its corporate office and making two executive management changes, and expensed
$1.3 million related to a withdrawn underwritten public offering. Although
expenses related to the Company's growth strategy are likely to continue as the
Company pursues new acquisitions, the Company believes that by reducing overhead
and administrative expenses and by including earnings generated by Metro and
increasing earnings generated by SD&A, which reported net income of $0.4 million
and $1.2 million, respectively, for the year ended June 30, 1996 (which in the
case of Metro is unaudited) net income (loss) of ($0.1) and $0.4, respectively,
for the nine months ended March 31, 1997 (which in the case of Metro, the
inclusion of three months ended September 30, 1996 is unaudited), the Company
has the ability to become profitable. No assurance can be given as to whether or
when the Company will be able to attain profitability.
Risks Associated with Acquisition and Growth Strategy
As a key component of its growth strategy, the Company has pursued and intends
to continue to pursue acquisitions of companies that provide direct marketing,
interactive and other media services. The Company acquired SD&A in April 1995
and Metro in October 1996, for a total of approximately $15.0 million (not
including any earn-out or other contingent payments that may be payable after
the date of this Prospectus in connection therewith), and seeks to acquire
additional companies. Execution of its growth strategy requires the Company's
management to, among other things: (i) identify new industries and market
segments to which the Company can provide its direct marketing services and in
which the Company can successfully compete; (ii) identify acquisition candidates
who are willing to be acquired at prices acceptable to the Company; (iii)
consummate identified acquisitions; and (iv) obtain financing for future
acquisitions. Certain risks are inherent in an acquisition strategy, such as
dilution of outstanding equity securities, increased leverage and debt service
requirements and the difficulty in combining different company cultures and
facilities, any of which could materially adversely affect the Company's
operating results or the market price of the Common Stock prevailing from time
to time. The success of any completed acquisition will depend in part on the
Company's ability to effectively integrate the acquired business, which
integration may involve unforeseen difficulties and may require a
disproportionate amount of management's attention and the Company's financial
and other resources.
The Company is currently considering several acquisitions of companies that have
a client base in certain targeted industries and/or a business focus on direct
marketing services that complement or expand the Company's current range of
direct marketing services in order to enlarge its core competencies, enable it
to enter new industries and market segments and increase its potential for
cross-selling. No agreement, definitive or otherwise, with respect to any of
such potential acquisitions has been reached. From time to time the Company has,
and in the future may continue to, enter into negotiations with respect to
potential acquisitions for these purposes, some of which have resulted or may
result in preliminary agreements. In the course of the Company's negotiations
and/or due diligence, these negotiations and/or preliminary agreements may be
abandoned or terminated. No assurance can be given that the Company will
complete the acquisitions currently under consideration, that additional
suitable acquisition candidates will be identified, that such future
acquisitions will be financed and made on acceptable terms, or that future
acquisitions, if completed, will be successful.
The Company's business has changed significantly since the Company's
acquisitions of Alliance and SD&A, which has placed demands on the Company's
administrative, operational and financial resources. Any continued growth of the
Company's client base and its services could place an additional strain on its
capacity, management and operations. The Company's future performance and
profitability will depend in part on its ability to successfully implement
improved financial and management systems, to add capacity as and when needed
and to hire qualified personnel to respond to changes in its business. The
failure to implement such systems, add any such capacity or hire such qualified
personnel may have a material adverse effect on the Company's business,
financial condition and results of operations.
Competition
Many of the Company's services, and service capabilities that the Company may
acquire, are sold in highly competitive markets in the United States, including
the markets for planning and developing direct marketing strategies and the
implementation of various direct marketing programs that include gathering
information and tracking and analysis of direct marketing campaigns. In
addition, many formats, including television, radio and newspapers, compete for
the marketing expenditures of the Company's clients. The Company competes with a
number of entities, or divisions of entities, many of which have more extensive
financial, technical, marketing and other resources than the Company and may be
able to respond more quickly to new or emerging technologies and other
competitive pressures. Some of these entities have growth strategies that
involve the acquisition of companies which the Company may have identified as
acquisition candidates. The Company also competes with in-house telemarketing
and direct mail operations of certain of its clients or potential clients.
Rapid Technological Change
The market for the Company's services is characterized by rapidly changing
technology and frequent new and enhanced services. The Company believes that its
future success will be highly dependent upon its ability to enhance existing
services and to develop and introduce new services to respond to changing client
needs. There can be no assurance that the Company can successfully identify,
develop and bring new and enhanced services to market in a timely manner, that
such services will be commercially successful or that services or technologies
developed by others will not render the Company's services non-competitive.
Limited Proprietary Protection
The Company holds no registered patents, trademarks or copyrights. The Company
depends in part upon its know-how and proprietary applications of computer
programs and database information systems to differentiate its services from
those of its competitors. The Company also relies on a combination of contract
rights (including non-competition agreements with key employees) and trade
secret laws to protect its know-how. There can be no assurance, however, that
competitors will not obtain unauthorized access to the Company's know-how or
that the Company's contractual or legal remedies will be sufficient to protect
the Company's interests.
Risk of Equipment Failure
SD&A maintains a telemarketing calling center in Berkeley, California which
contributed 17% and 20% of the Company's telemarketing and telefundraising
revenues in fiscal 1996 and the first nine months of fiscal 1997, respectively.
Although SD&A maintains business interruption insurance and has not had a major
failure of equipment at its Berkeley calling center, the risk of such failure
does exist and, if the Company's back-up procedures prove inadequate, such
failure could have a material adverse effect on the Company's business.
Similarly, Metro maintains extensive computer processing equipment at its
facilities in New York City, which equipment represents the substantial majority
of its data services capability. Although back-up client files and databases are
maintained off-site and Metro maintains business interruption insurance and has
not had a major failure of its equipment, the risk of such failure does exist
and, if Metro's back-up systems and databases prove inadequate, such failure
could have a material adverse effect on the Company's business.
Cyclicality
The direct marketing services industry relies upon marketing expenditures by
clients. Such expenditures are dependent upon the level of economic activity, in
general, and the specific industry of the client in respect of cyclical effects
that may bear upon that industry. Various segments of the direct marketing
industry, such as business to business or business to consumer activity, may be
affected by business cycle conditions. Insofar as marketing budgets are related
to availability of funds and general economic conditions, product manufacturers
or service providers may choose to reduce expenditures for direct marketing
services.
Reliance upon Subsidiaries
The parent company's assets consist primarily of the stock of its subsidiaries.
Accordingly, the Company's ability to meet its cash obligations is partially
dependent upon the ability of its subsidiaries to make cash distributions to the
Company. No assurance can be given that any or all of its subsidiaries will be
able to make such cash distributions, or, if made, that such distributions will
be adequate to meet the Company's financial obligations. Accordingly the Company
may be dependent upon external financing to continue its business plan.
Dependence on Labor Force
As is common in the telemarketing industry, the Company's
telemarketing/telefundraising services are labor-intensive and historically have
been characterized by a high level of personnel turnover. Unskilled and
semi-skilled employees typically work part-time and receive relatively modest
hourly wages; skilled employees commonly work full-time and command higher
wages. Increases in the turnover rate would result in higher recruiting and
training costs. If the Company were unable to recruit and retain a sufficient
number of employees, it would be forced to limit its growth or possibly modify
its operations. The Company may not be able to continue to hire and retain a
sufficient number of qualified personnel, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
Dependence upon Key Personnel
The Company's decentralized management philosophy delegates day-to-day operating
decisions to the subsidiary managers. As a result, the Company is highly
dependent upon the effectiveness of a small group of people at the subsidiary
level and a small group of people at the corporate level. The loss of any key
person could have a significant bearing upon the Company's profitability, its
ability to consummate future acquisitions and its ability to finance, manage or
develop marketing programs. The Company's operational success is contingent upon
its ability to retain and expand its staff of qualified personnel on a timely
basis. There can be no assurance that adequate replacements could be found if
the Company were to lose the services of any key employees. The Company is also
dependent upon the specialized skills of certain other personnel and may need to
hire additional skilled personnel if it experiences growth in its business.
Competition for such personnel is intense and the inability to attract or
maintain qualified employees could materially and adversely affect the Company's
business, financial condition and results of operations.
The Company does not maintain key person life insurance.
Possible Decline in Effectiveness of Telemarketing
Although the telemarketing industry has grown significantly in the last five
years, advances in new forms of direct marketing, such as the development of
interactive commerce through television, computer networks, interactive media
(including the Internet) and other media, could have an adverse effect on the
demand for telemarketing as a form of direct marketing. As the industry
continues to grow, telemarketing's effectiveness as a direct marketing tool may
also decrease as a result of consumer saturation and consumer resistance to
telemarketing generally. Although the Company attempts to monitor industry
trends and to respond accordingly, the Company may not be able to anticipate and
successfully respond to such trends in a timely manner.
Dependence on Telephone and Postal Service
Certain aspects of the direct marketing services industry depend upon services
provided by various local and long distance telephone companies and the United
States Postal Service ("USPS"). Possible future modifications by the USPS of its
rate structure or increases in the rates currently paid by the Company for local
and long distance telephone service could have an adverse effect on the
Company's operating expenses which, in turn, may materially adversely affect its
operating results, to the extent that the Company is unable to pass any such
increase through to its clients. Any significant interruption or capacity
limitation in any such services could also have an adverse effect on the
Company's business, financial condition and results of operations.
Amortization of Intangible Assets
Approximately $15.6 million, or 72%, of the Company's total assets as of March
31, 1997 consisted of goodwill and other intangible assets arising from the
Company's acquisitions of Metro and SD&A. Such goodwill and other intangible
assets represent the difference between the aggregate purchase price for the
assets acquired and the amount of such purchase price allocated to the tangible
assets so acquired. The goodwill is amortized over a 40 year period and the
other intangible assets are amortized over a three- or five-year period,
depending on the intangible asset, with the amounts amortized in a particular
period constituting non-cash expenses that would decrease the Company's net
income (or increase its net loss) in that period. The reduction in net income
(or increase in net loss) resulting from the amortization of goodwill as a
result of past or possible future acquisitions may have an adverse impact upon
the market price of the Common Stock prevailing from time to time.
Fluctuations in Quarterly Operating Results
The Company's revenues and operating results are subject to significant
fluctuation between fiscal quarters. A significant portion of the Company's
quarterly revenues is derived from new projects and contracts for direct
marketing services, the timing of which is subject to a variety of factors
outside the Company's control, such as client marketing budgets and
modifications in client strategies. In part due to certain seasonal marketing
patterns and subscriptions, the Company generated net losses during the second
and third quarters of fiscal 1996 and the first three quarters of fiscal 1997.
Metro (which was not acquired until October 1996) generated net losses during
its fiscal equivalent of the Company's third quarter of fiscal 1996. The Company
cannot predict the degree to which, on a consolidated basis, these trends will
continue. Additionally, the Company periodically incurs cost increases due to
both hiring and training of new employees and computer capacity upgrades in
anticipation of future growth. In addition, the size, timing and integration of
possible future acquisitions may cause substantial fluctuations in operating
results from quarter to quarter. As a result, operating results for any fiscal
quarter may not be indicative of the results that may be achieved for any
subsequent fiscal quarter or for a full fiscal year. These fluctuations could
adversely affect the market price of the Common Stock.
Offering Cost Charge, Executive Management Changes and Need for Financing
On October 17, 1996, the Company filed a Form SB-2 registration statement (the
"Registration Statement") with the Securities and Exchange Commission relating
to an underwritten public offering (the "Offering"). On February 11, 1997, the
Company withdrew its Registration Statement on Form SB-2. At that time, the
Company had intended to refile the Registration Statement and had deferred the
costs of the Offering. In March, 1997 the Company decided not to refile the
Registration Statement. In connection with this decision, in the quarter ended
March 31, 1997, the Company recognized Offering costs of $1.3 million, of which
approximately $300,000 are unpaid and subject to deferred payment. In addition,
in conjunction with corporate restructuring, the Company entered into settlement
agreements with the former CEO and COO of the Company, of which approximately
$500,000 remains payable under deferred payment agreements through October,
1998. The Company has obtained capital through privately negotiated convertible
debt financing and inducements for the early exercise of warrants and believes
that amounts raised to-date, combined with the ability to use Metro's credit
line and/or dividend its earnings, will be sufficient to pay these costs, fund
capital expenditures and retire portions of the debt incurred on the acquisition
of Metro and the payment of the convertible debt, if required. In addition, the
Company is continuing to pursue additional capital through privately negotiated
equity financing. There can be no assurance that adequate funding will be
available or, if available, on terms acceptable to the Company.
Possible Need for Additional Financing
In addition to the management challenges presented by the continued
implementation of the Company's growth strategy, future growth may require
significant capital for capital expenditures and acquisitions. The Company's
acquisition of SD&A was financed with seller financing and the Company's
acquisition of Metro was financed with both seller financing and equity. No
assurance can be given that the Company will be able to finance possible future
acquisitions on those or any other terms. Although the Company estimates that
cash generated from operations will be sufficient to finance its current
operations through fiscal 1998, there can be no assurance that the Company will
not require additional capital at an earlier date, especially in light of the
Company's acquisition program. The Company may, from time to time, seek
additional funding through public or private financing, including debt or equity
financing. There can be no assurance that adequate funding will be available as
needed or, if available, on terms acceptable to the Company. If additional funds
are raised by issuing equity securities, existing stockholders may experience
dilution. Insufficient funds may require the Company to scale back or eliminate
possible future acquisitions. The Company is currently seeking capital to
finance capital expenditures for additional data processing and telemarketing
capacity.
Lack of Long-Term Contracts
The Company's contracts or other arrangements with its clients are generally
entered into on a project by project basis. Moreover, if the Company were to
lose a long-standing client, replacing such client with a comparable client may
require significant lead time. In addition, new client programs often begin with
a pilot project that is smaller in scale and more limited in scope and has a
smaller marketing budget than projects conducted with long-standing clients.
Although the Company believes that historically SD&A and Metro have achieved
satisfactory levels of client retention, no assurance can be given that the
Company will be able to do so in the future.
Possible Limitation on Ability to do Business with Certain Potential Clients
The Company may determine from time to time in the exercise of its business
judgment that it is not prudent to pursue business opportunities with or accept
business from competitors of existing or potential clients or from groups which
may have interests adverse to interests of the Company's clients. Although to
date such considerations have not significantly impaired the Company's ability
to do business with new clients, no assurance can be given that these
considerations will not increase in the future and reduce opportunities that
would otherwise be available to the Company.
Shares Eligible for Future Sale
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the market price
of the Common Stock prevailing from time to time. The Company has 11,426,764
shares of Common Stock outstanding. Up to an additional 4,529,789 shares of
Common Stock are issuable upon the conversion or exercise of outstanding
securities or other contractual rights, the majority of which are currently
exercisable or convertible.
Of the Common Stock outstanding prior to this Prospectus, approximately
2,000,000 shares were freely tradable without restriction under the Securities
Act or are eligible for sale in the public market without regard to the
availability of current public information, volume limitations, manner of sale
restrictions or notice requirement under Rule 144(k) ("Freely Tradable Shares"),
except for any such shares held by or purchased from persons deemed to be
"affiliates" of the Company which are subject to certain resale limitations
pursuant to Rule 144 under the Securities Act. As of the date of this
Prospectus, the remaining shares of Common Stock outstanding are either
registered herein or are eligible for sale pursuant to Rule 144 under the
Securities Act.
No prediction can be made as to the effect, if any, that future sales of
additional shares of Common Stock or the availability of such shares for sale,
either pursuant to exercised registration rights or under Rule 144, will have on
the market price of the Common Stock prevailing from time to time. The
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect the market price of the Common Stock prevailing from
time to time and could impair the ability of the Company to raise capital
through the sale of its equity securities.
Market for Common Stock; Possible Volatility of Stock Price
Although the Common Stock is quoted on The Nasdaq Stock MarketSM, at times the
Common Stock has been and may be thinly traded. Such quotation does not provide
any assurance that an active public market for the Common Stock will develop or
be sustained. If an active public market does not develop or is not sustained,
the market price and liquidity of the Common Stock may be adversely affected. In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of companies. These fluctuations as well as general
economic and market conditions may adversely affect the market price of the
Common Stock prevailing from time to time.
Government Regulation and Privacy Issues
The telemarketing industry has become subject to an increasing amount of federal
and state regulation during the past five years. The federal Telephone Consumer
Protection Act of 1991 (the "TCPA") limits the hours during which telemarketers
may call consumers and prohibits the use of automated telephone dialing
equipment to call certain telephone numbers. The federal Telemarketing and
Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") broadly
authorizes the Federal Trade Commission (the "FTC") to issue regulations
prohibiting misrepresentations in telemarketing sales. The FTC's new
telemarketing sales rules prohibit misrepresentations of the cost, terms,
restrictions, performance or duration of products or services offered by
telephone solicitation, prohibit a telemarketer from calling a consumer when
that consumer has instructed the telemarketer not to contact him or her,
prohibit a telemarketer from calling prior to 8:00 a.m. or after 9:00 p.m. and
specifically address other perceived telemarketing abuses in the offering of
prizes and the sale of business opportunities or investments. Violation of these
rules may result in injunctive relief, monetary penalties or disgorgement of
profits and can give rise to private actions for damages. While the FTC's new
rules have not caused the Company to alter its operating procedures, additional
federal or state consumer-oriented legislation could limit the telemarketing
activities of the Company or its clients or significantly increase the Company's
costs of regulatory compliance.
Several of the industries which the Company intends to serve, including the
financial services and healthcare industries, are subject to varying degrees of
government regulation. Although compliance with these regulations is generally
the responsibility of the Company's clients, the Company could be subject to a
variety of enforcement or private actions for its failure or the failure of its
clients to comply with such regulations.
In addition, the growth of information and communications technology has
produced a proliferation of information of various types and has raised many new
issues concerning the privacy of such information. Congress and various state
legislatures have considered legislation which would restrict access to, and the
use of, credit and other personal information for direct marketing purposes. The
direct marketing services industry, including the Company, could be negatively
impacted in the event any of these or similar types of legislation are enacted.
No Intention to Pay Dividends
The Company does not intend to pay any cash dividends on its Common Stock for
the foreseeable future. The Company has not paid cash dividends on any of its
capital stock in at least the last six years. It is anticipated that future
earnings, if any, will be used to finance future growth of the Company. In
addition, there can be no assurance that operations will generate sufficient
revenues to enable the Company to declare or pay dividends.
Certain Anti-Takeover Provisions
The Amended and Restated Articles of Incorporation of the Company, as amended
(the "Restated Articles"), the by-laws of the Company, as amended (the
"By-Laws"), and certain employment agreements between the Company and certain
executives may have the effect of hindering, delaying or deterring a third party
acquisition of the Company which may, in turn, adversely affect the market price
of the Common Stock. Pursuant to the terms of the Restated Articles, certain
business combinations and reclassifications involving the Company require the
approval of the holders of 75% of the outstanding Common Stock and the holders
of a majority of the outstanding Common Stock not held by the potential
acquiror. In addition, the Restated Articles establish a classified Board of
Directors and provide that Directors may only be removed upon the affirmative
vote of 75% of the outstanding Common Stock. Furthermore, upon a change in
control of the Company, each of the Company's Chief Executive Officer and
President has the right to terminate his respective employment contract,
whereupon he becomes entitled to severance payments equal to two years salary.
The Company has unissued preferred stock, which could be issued to a third party
selected by current management, or used as the basis for a stockholders' rights
plan, which could have the effect of deterring a potential acquiror. Pursuant to
the Restated Articles, shares of the Company's preferred stock may be issued in
the future without further stockholder approval and upon such terms and
conditions, and having such rights, privileges and preferences (including the
right to vote and the right to convert into Common Stock) as the Board of
Directors may determine. Furthermore, certain provisions of the By-Laws may have
the effect of limiting or delaying a change in control of the Company.
The effect of such provisions, together with certain provisions of Nevada law
limiting the voting rights of an acquiror of a controlling interest in a Nevada
corporation (such as the Company), as well as restrictions on certain business
combinations (including certain mergers and exchanges), may be to reduce the
probability of, or the premiums that stockholders would receive in connection
with, an acquisition of the Company.
Risk of Dilution
Up to 4,529,789 shares of Common Stock are issuable upon conversion or exercise
of certain securities of or other contractual rights granted by the Company, as
described in footnote (1) to "Prospectus Summary -- The Offering." No assurance
can be given that these options, warrants or contractual rights will or will not
be exercised in whole or in part or at all. However, if all of such options,
warrants and other contractual rights having exercise prices at or below the
current market price per share were exercised, purchasers of Common Stock would
experience immediate substantial dilution in percentage voting power, pro forma
net tangible book value, and earnings (loss), in each case per share of Common
Stock offered hereby.
The Company's acquisitions of SD&A and Metro involved, and possible future
acquisitions may involve, the issuance of additional Common Stock and/or
payments based on earnings formulas which could require the issuance of
additional Common Stock. Moreover, certain employees and Directors of the
Company have received, and may receive, options to purchase Common Stock at the
discretion of the Board of Directors. No assurance can be given that any future
share issuances will be at a valuation that would avoid potential dilution to
existing stockholders.
Special Note Regarding Forward-Looking Statements
Certain Statements in the Prospectus Summary and under the caption "Risk
Factors" and elsewhere in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following general economic and business conditions: industry
capacity; direct marketing and other industry trends; demographic changes;
competition; the loss of any significant customers; changes in business strategy
or development plans; availability and successful integration of acquisition
candidates; availability, terms and deployment of capital; advances in
technology; quality of management; business abilities and judgment of personnel;
availability of qualified personnel; changes in, or the failure to comply with,
government regulations; computer, telephone and postal costs; and other factors
discussed in this Prospectus.
USE OF PROCEEDS
The Company will not receive any of the proceeds of the sale of the shares
offered hereby. The Company may receive approximately $4.6 million from the
exercise of certain warrants, or conversion of certain convertible notes, to
acquire Shares of Common Stock (the "Convertible Securities"), assuming the
exercise of all such Convertible Securities, of which there can be no assurance.
All such proceeds will be used for working capital purposes. The Company issued
the Shares and the Convertible Securities in connection with the acquisitions of
SD&A and Metro, various financing efforts, employee compensation and in
settlement of liabilities to various creditors.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the Common
Stock beneficially owned by each Selling Stockholder as of June 30, 1997, and
also the amount offered hereunder. Because the Selling Stockholders may offer
some or all of the securities in an offering which is not underwritten on a firm
commitment basis, no estimate can be given as to the amount of securities that
will be held by the Selling Stockholders after completion of the sale of the
securities offered hereby. See "Plan of Distribution". To the extent required,
the specific securities to be sold, the names of Selling Stockholders effecting
such sale, the names of any agent, dealer or underwriter participating in such
sale, and any applicable commission or discount with respect to the sale will be
set forth in a supplement to this Prospectus. Except as otherwise indicated by
footnotes below, none of the Selling Stockholders has had any position, office
or other material relationship with the Company in the past three years, other
than as a result of the ownership of shares of Common Stock of the Company. The
securities offered by means of this Prospectus may be offered from time to time
by the Selling Stockholders named below:
<TABLE>
Common Stock
Beneficially Owned Shares
Prior to the Offering Being
Name of Selling Stockholder (1) Number Percent Offered
- ------------------------------------------------- --------------------------- -------
<S> <C> <C> <C>
Ace Foundation (2)................................ 100,000 * 100,000
John Adams........................................ 36,968 * 36,968
Lane Adams SEP/IRA Pension Plan................... 1,597 * 1,597
Lane Adams Money Purchase Pension Plan............ 1,261 * 1,261
Seth Antine....................................... 365,261 3.2 200,000
Bais Kaila Torah Preparatory H S for Girls........ 22,829 * 12,500
Kenneth Berg...................................... 36,968 * 36,968
Birdsall Corp. NV................................. 45,658 * 25,000
Ezra Birnbaum (3)................................. 14,566 * 14,566
Judith K. Bloome Family Trust..................... 4,621 * 4,621
BMG of Israel (2)................................. 20,000 * 20,000
Naomi Bodner (4).................................. 2,040,893 17.9 1,000,000
Robert M. Budlow (5).............................. 599,962 5.2 599,962
Irena Burenko..................................... 500 * 500
Cameron Capital (6)............................... 125,000 1.1 125,000
Camhy Karlinsky & Stein LLP (7)................... 6,250 * 6,250
Marguerite E. Cascio (8).......................... 10,492 * 9,242
William E. Chaikin................................ 2,084 * 2,084
William E. Chaikin & Anita Gene Chaikin -
Chaikin Family Trust.......................... 3,408 * 3,408
Coffin*KCSA (9)................................... 15,000 * 12,500
Robert Cohen (2).................................. 10,000 * 10,000
Congregation Ahavas Tzdokah Vechesed Inc.......... 68,487 * 37,500
H. William Coogan................................. 15,519 * 15,519
Stephen A. Cooper and Randy E. Cooper, Jt. Ten.... 9,242 * 9,242
Anne Corrigan (10)................................ 20,917 * 2,917
Cruttenden Roth Incorporated (11)................. 100,000 * 100,000
Dalton Trading S.A. (2)........................... 182,000 1.6 182,000
Robert Dessler (2)................................ 40,000 * 40,000
Stephen Dunn (12)................................. 271,394 2.4 269,894
Jeff Eisenberg (2)................................ 100,000 * 100,000
Abraham S. Elias (2).............................. 24,000 * 24,000
Israel A. Englander - IRA......................... 182,631 1.6 182,631
Bryan I. Finkel................................... 18,264 * 10,000
Sheldon Finkel.................................... 6,722 * 6,722
Seth Fireman...................................... 91,316 * 50,000
Lawrence Fish (13)................................ 12,500 * 12,500
Arnold Fishman.................................... 9,242 * 9,242
Arnold Fishman as Trustee for Jesse Fishman....... 4,621 * 4,621
Rita Folger....................................... 45,658 * 25,000
Friends of Kiryat Meor Chaim, Inc................. 45,658 * 25,000
Mr. Fructhandler (Chesed Avraham) (2)............. 40,000 * 40,000
Juliet Gal........................................ 9,242 * 9,242
Maxine Ganer...................................... 9,242 * 9,242
Marshall Geller (7)............................... 53,125 * 53,125
Martin Gilman..................................... 9,242 * 9,242
Glenn Golenberg (7)............................... 109,375 * 34,375
Roger Grant (14).................................. 38,878 * 8,878
Irwin L. Gross.................................... 273,946 2.4 273,946
Barbara M. Henagan................................ 9,242 * 9,242
Laura Huberfeld (4)............................... 2,040,893 17.9 1,000,000
Seymour Huberfeld................................. 45,658 * 25,000
Richard Humbert................................... 2,324 * 2,324
The Jerusalem Fund (2)............................ 20,000 * 20,000
Harold Jordan..................................... 18,484 * 18,484
Eliot R.J. Kalter (15)............................ 6,403 * 1,856
Harry Karten...................................... 18,484 * 18,484
Keren MYCB Elias Foundation....................... 45,658 * 25,000
Ruth Kerin........................................ 4,621 * 4,621
Joseph & Augustus LaRocca......................... 35,000 * 35,000
Laura Huberfeld & Naomi Bodner Jt. Ten. (4)....... 2,040,893 17.9 117,500
The Lederer Family Trust (8)...................... 10,492 * 9,242
Chanie Lerner..................................... 45,658 * 39,258
Thierry Liverman.................................. 4,621 * 4,621
Jonathan Mayer.................................... 13,698 * 7,500
Stacy and Andrew Messina.......................... 8,125 * 8,125
Millenco LP (2)................................... 100,000 * 100,000
Millennium Capital Corp. (16)..................... 19,000 * 9,625
Gloria Lee Morgan................................. 9,242 * 9,242
Moshe Mueller..................................... 54,790 * 30,000
Namax............................................. 45,658 * 45,658
The Nais Corp..................................... 45,658 * 25,000
Louis Napoliello (17)............................. 7,500 * 7,500
Charles Nebenzahl................................. 45,658 * 25,000
Jules Nordlicht (2)............................... 100,000 * 100,000
Ohr Somayach Tannbaum Educational Center.......... 45,658 * 25,000
Kimberly Peters................................... 13,250 * 13,250
Stacy Peters...................................... 5,125 * 5,125
Lee M. Polster (8)................................ 10,492 * 9,242
Prinn Family Trust, c/o Brian Prinn, Trustee...... 9,242 * 9,242
Philip Puschel.................................... 4,621 * 4,621
Release Me, Inc................................... 6,250 * 6,250
Ronald M. Resch (8)............................... 10,492 * 9,242
Stephanie Ruben (2)............................... 10,000 * 10,000
Fred Rudy......................................... 45,658 * 25,000
Malca Sand........................................ 45,658 * 25,000
Janet Sautkulis (18).............................. 199,988 1.7 199,988
Drew Savage....................................... 6,250 * 6,250
Richard Savage, Money Purchase Pension Plan....... 2,542 * 2,542
Richard Savage and Lane Adams, J.T................ 9,242 * 9,242
Richard Savage, SEP/IRA Pension Plan.............. 3,844 * 3,844
Thomas Scheir & Laurene S. Moise Jt. Ten. (19).... 60,875 * 8,000
Joshua Schwartz................................... 4,566 * 2,500
Shekel Hakodesh (20).............................. 58,790 * 34,000
Richard Stadtmauer................................ 45,658 * 25,000
The P.L. Thomas Group............................. 10,000 * 10,000
Value Investing Partners, Inc. (21)............... 32,750 * 10,250
Viva Corp. (2).................................... 100,000 * 100,000
Elizabeth Wainwright (22)......................... 5,000 * 1,000
Claudia Kaufmann Walters.......................... 9,242 * 9,242
Robert Weekley.................................... 9,242 * 9,242
Gregory Welter (23)............................... 10,634 * 1,392
Whale Securities Co., L.P. (24)................... 19,300 * 19,300
Nancy Whitten (25)................................ 291 * 291
Wolowitz Pension Fund (2)......................... 20,000 * 20,000
Gerald Yellin..................................... 17,500 * 17,500
Yeshiva of Telshe Alumni.......................... 45,658 * 25,000
Zapco Holdings, Inc............................... 9,242 * 9,242
Zapco Holdings, Inc. Deferred Compensation Plan Trust 9,242 * 9,242
Mark Zborowski (26)............................... 1,238 * 1,238
Seymour Zises (11)................................ 5,000 * 5,000
------------
6,146,824
============
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned
and all addresses are in care of the Company. All share amounts reflect
beneficial ownership determined pursuant to Rule 13d-3 under the Exchange
Act. All information with respect to beneficial ownership has been
furnished by the respective stockholder.
(2) All of the common stock beneficially owned by this selling stockholder is
issuable upon the conversion of a convertible promissory note.
(3) Includes 10,000 beneficially owned shares of Common Stock issuable upon the
conversion of a convertible promissory note.
(4) 214,591 of this stockholder's total number of beneficially owned shares of
Common Stock are beneficially owned by the Laura Huberfeld/Naomi Bodner
Partnership (the "Bodner/Huberfeld Partnership"). Each of Naomi Bodner and
Laura Huberfeld disclaims beneficial ownership of the shares of Common
Stock beneficially owned by the other and the shares of Common Stock
beneficially owned by the Bodner/Huberfeld Partnership. The address for
this 5% Stockholder is c/o Broad Capital Associates, Inc., 152 West 57th
Street, 54th Floor, New York, New York 10019.
(5) Includes 55,762 beneficially owned shares of Common Stock issuable upon the
conversion of a convertible promissory note of the Company in the aggregate
face amount of $300,000 issued to Mr. Budlow in connection with the
Company's acquisition of Metro. Mr. Budlow's address is c/o Metro Services
Group, Inc., 333 Seventh Avenue, New York, New York 10001.
(6) Includes 125,000 beneficially owned shares of Common Stock issuable upon
the exercise of currently exercisable warrants.
(7) Includes 6,250 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(8) Includes 1,250 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(9) Includes 12,500 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants and the right to acquire 2,500
shares in settlement of a liability.
(10) Includes 18,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options.
(11) Includes 100,000 beneficially owned shares of Common Stock issuable upon
the exercise of currently exercisable warrants.
(12) Includes 5,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(13) Includes 12,500 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(14) Includes 30,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options.
(15) Includes 1,856 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(16) Includes 9,625 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(17) Includes 2,500 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(18) Includes 18,588 beneficially owned shares of Common Stock issuable upon the
conversion of a convertible promissory note of the Company in the aggregate
face amount of $100,000 issued to Ms. Sautkulis in connection with the
Company's acquisition of Metro.
(19) Includes 52,500 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options.
(20) Includes 4,000 beneficially owned shares of Common Stock issuable upon
conversion of a convertible promissory note.
(21) Includes 15,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants and the right to acquire 7,500
shares in settlement of a liability.
(22) Includes 4,000 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable options.
(23) Includes 1,392 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(24) Includes 9,925 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(25) Includes 291 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
(26) Includes 1,238 beneficially owned shares of Common Stock issuable upon the
exercise of currently exercisable warrants.
THE RECAPITALIZATION
On December 23, 1996, the Company and certain of its securityholders effected
changes in the Company's outstanding capital stock and related securities
whereby: (i) all 6,200 outstanding shares of the Series B Preferred Stock were
converted in accordance with their terms and without the payment of additional
consideration into 2,480,000 shares of Common Stock; (ii) all 2,000 outstanding
shares of the Series C Preferred Stock were repurchased by the Company for $1.0
million aggregate principal amount of promissory notes; (iii) warrants issued to
the holders of the Series C Preferred Stock, which were exercisable for
3,000,000 shares of Common Stock, were exchanged for an aggregate of 600,000
shares of Common Stock; (iv) all accrued interest on the Series B Preferred
Stock and the Series C Preferred Stock ($145,753 in the aggregate at December
23, 1996) was converted into 88,857 shares of Common Stock; and (v) agreements
to issue warrants exercisable for an aggregate of up to 1,038,503 shares of
Common Stock, which the Company entered into with certain of its securityholders
in consideration for such securityholders' agreement to certain lockup
arrangements, were rescinded. See "Certain Transactions." Upon conversion of the
Series B Preferred Stock and accumulated interest thereon into Common Stock on
December 23, 1996, the Company incurred a non-cash, non-recurring dividend for
the difference between the conversion price and the market price of the Common
Stock totaling $8.5 million. Upon repurchase of the Series C Preferred Stock,
the Company recognized a non-recurring dividend of $573,000 for the difference
between the purchase price and the recorded carrying value of the stock. The
dividends did not impact net income (loss), but impacted net income (loss)
attributable to common stockholders in the calculation of earnings per share in
the quarter ended December 31, 1996.
PLAN OF DISTRIBUTION
The securities offered hereby may, upon compliance with applicable "Blue Sky"
law, be sold from time to time to purchasers directly by the Selling Stockholder
or by pledgees, donees, transferees or other successors in interest, or in
negotiated transactions and in the over-the-counter market on NASDAQ. The Shares
may be sold by one or more of the following: (a) a block trade in which the
broker or dealer so engaged with attempt to sell the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions in which the broker solicits purchasers. In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this Prospectus.
Alternatively, the Selling Stockholder may from time to time offer the
securities offered hereby through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholder and/or the purchasers of securities for
whom they may act as agents. To the extent that any of the Shares are sold by a
pledgee, donee, transferee or other successor in interest, such person may use
this Prospectus to sell such shares.
The Selling Stockholder and any underwriters, dealers or agents that participate
in the distribution of securities offered hereby may be deemed to be
underwriters, and any profit on the sale of such securities by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. At the time a particular underwritten offer of securities is
made, to the extent required, a supplement to this Prospectus will be
distributed which will set forth the aggregate amount of securities being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, and discounts, commissions and other items
constituting compensation from the Selling Stockholder and any discounts,
commissions or concessions allowed or re-allowed or paid to dealers.
Each Selling Shareholder may be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Rules 10b-2, 10b-6 and 10b-7, which provisions may limit the timing of purchases
and sales of any of the securities by the Selling Shareholders.
There is no assurance that any of the Selling Shareholders will sell any of the
Shares.
The securities offered hereby may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed or at varying
prices determined at the time of sale or at negotiated prices.
The Selling Stockholder will pay the commissions and discounts of underwriters,
dealers or agents, if any, incurred in connection with the sale of the Shares.
The Company will pay all expenses incident to the offering and sale of the
Shares by the Selling Stockholder.
DESCRIPTION OF CAPITAL STOCK
The following is a summary of the material terms of the Company's capital stock
which are contained in the Restated Articles and the By-Laws, which are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
Reference is made to such exhibits for a more complete description of the
Company's capital stock.
Common Stock
General
The Company is authorized to issue 36,250,000 shares of Common Stock in
accordance with an amendment to its Restated Articles approved by the Company's
Board of Directors and stockholders effective August 1996. The shares of Common
Stock being sold by the Selling Stockholders are, and the shares issuable upon
conversion of convertible debt and exercise of warrants, upon full payment will
be, legally issued, fully paid and nonassessable.
Quorum and Voting Rights
Each share of Common Stock is entitled to one vote on all matters as to
which the holders of Common Stock are entitled to vote. The affirmative vote of
a majority of the stock having voting power present or represented by a proxy at
a meeting at which a quorum is present is required as to any matter which
requires the approval of the holders of Common Stock, other than (i) the
approval of certain business combinations and reclassifications. (ii) the
amendment of certain provisions of the Restated Articles, and (iii) the
amendment of certain provisions of the By-Laws, which require the approval of
75% of the outstanding shares of stock entitled to vote for the election of
Directors. In the case of certain Business Combinations and Reclassifications,
the approval of a majority of the outstanding shares of stock entitled to vote
for the election of Directors other than those beneficially owned by the other
party to the Business Combination is required.
At any meeting of the stockholders of the Company at which the holders
of Common Stock are entitled to vote, the presence, in person or by proxy, of a
majority of the stock issued and outstanding, and entitled to vote thereat,
constitutes a quorum. No action may be taken at any meeting, other than to
adjourn such meeting, unless a quorum of each class entitled to vote is present.
Dividends
The Board of Directors may cause dividends to be paid to the holders of
Common Stock from time to time out of funds legally available therefor. When and
as dividends are declared, they may be payable in cash, in property or in shares
of Common Stock. See "Risk Factors -- No Intention to Pay Dividends."
Registration Rights
The Company has granted to certain of its securityholders rights to
have certain shares of Common Stock held by or issuable to such persons
registered for resale under the Securities Act.
Preferred Stock
General
The Company has authorized 50,000 shares of Convertible Preferred
Stock, which the Company has issued from time to time in the form of designated
series as set forth below.
Series A Preferred Stock
In May 1996, the Company issued 10,000 shares of Series A Convertible
Preferred Stock. Subsequently, in June 1996 these shares were repurchased and
canceled as a condition precedent to the purchase of the Series B Preferred
Stock and the Series C Preferred Stock by the holders thereof, and are currently
held by the Company as authorized but unissued shares.
Series B Preferred Stock
In June 1996, the Company issued 6,200 shares of Series B Preferred
Stock. The Company also issued warrants (the "Series B Warrants") to the holders
of Series B Preferred Stock exercisable for 3,100,000 shares of Common Stock at
an exercise price of $2.50 per share for three years. In December 1996, all of
the outstanding shares of Series B Preferred Stock were converted into 2,480,000
shares of Common Stock, in accordance with the terms thereof, as part of the
Recapitalization. See "The Recapitalization." In March, 1997, in an induced
conversion to raise capital, the Series B Warrants were exercised in full and
the Company recognized an expense of $5 million to reflect the market value of
the discounts. In addition, pursuant to an agreement dated June 7, 1996 with the
holders of the Series B Preferred Stock and the Series B Warrants, the Company
agreed to file, on or before October 5, 1996 (120 days after the date of such
agreement), a registration statement on Form S-3 or Form S-1 for the public
resale by the holders of the shares of Common Stock issuable upon conversion of
the Series B Preferred Stock or upon exercise of the Series B Warrants. The
holders of the shares of Common Stock into which the Series B Preferred Stock
was converted and Series B Warrants were exercised continue to have these
registration rights with respect to the shares of Common Stock issued upon
conversion of the Series B Stock and the shares issued upon the exercise of the
Series B Warrants; however, the requirement to have the registration statement
relating thereto filed by October 5, 1996 has been waived by the holders of the
Series B Warrants.
Series C Preferred Stock
In September 1996, the Company issued, retroactive to June 1996, 2,000
shares of Series C Preferred Stock. The Company also issued warrants (the
"Series C Warrants") to the holders of the Series C Preferred Stock exercisable
for 3,000,000 shares of Common Stock at an exercise price of $3.00 per share for
three years. In December 1996, all of the outstanding shares of Series C
Preferred Stock were repurchased for promissory notes in an aggregate principal
amount of $1.0 million, and the Series C Warrants were exchanged for 600,000
shares of Common Stock, in each case as part of the Recapitalization. See "The
Recapitalization." In addition, pursuant to an agreement dated September 10,
1996, but effective as of June 7, 1996, with the holders of the Series C
Preferred Stock and the Series C Warrants, the Company agreed to file, on or
before October 7, 1996, a registration statement on Form S-3 or Form S-1 for the
public resale by the holders of the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock or upon exercise of the Series C
Warrants. The holders of the shares of Common Stock into which the Series C
Warrants were exchanged continue to have these registration rights with respect
to the shares of Common Stock issued upon exchange of the Series C Warrants;
however, the requirement to have the registration statement relating thereto
filed by October 7, 1996 has been waived by the holders of the Series C
Warrants.
Other Options and Warrants
In addition to the Series B Warrants and the Series C Warrants
described above, the Company, on various dates ranging from April 21, 1995 to
June 5, 1997, issued to several persons 430,577 warrants (the "Warrants") that
are outstanding and fully vested as of the date of this Prospectus. Each Warrant
entitles the holder to one share of Common Stock at exercise prices ranging from
$2.50 to $8.00 per share. The Warrants expire on dates ranging from April 21,
1998 to February 26, 2001. The Company granted to the holders of 305,577 of the
Warrants piggyback registration rights.
The Company has also granted to Mr. C. Anthony Wainwright, a Director
of the Company, by the terms of his consulting agreement with the Company, the
right to purchase from the Company, for $2,500, warrants exercisable for 50,000
shares of Common Stock at an exercise price of $4.00 per share for the first
25,000 shares, $4.50 per share for the next 15,000 shares and $5.00 per share
for the remaining 10,000 shares. These warrants, if purchased, will be
exercisable at the time of purchase and will expire on June 3, 2000.
In connection with the Company's acquisition of HSGR, in June 1993, the
Company issued options to the former owners of HSGR. These options are currently
exercisable for 2,250 shares of Common Stock in the aggregate at an exercise
price of $16.00 per share. The options expire in June 1998.
Limitation of Directors Liability; Indemnification
The Restated Articles provide that Directors and officers of the
Company shall not be personally liable to the Company or its stockholders for
damages for breach of fiduciary duty as a Director or officer, except for (i)
acts or omissions which involve intentional misconduct, fraud, or a knowing
violation of law or (ii) the payment of dividends in violation of the provisions
of Chapter 78 of the NRS. The Restated Articles further provide that, if the NRS
is amended to authorize corporate action further eliminating or limiting the
personal liability of Directors and officers, then the liability of a Director
or officer of the Company shall be eliminated or limited to the full extent
permitted by the NRS. Any repeal or modification of all or any portion of the
limitation on liability contained in the Restated Articles by the stockholders
of the Company shall not adversely affect any right or protection of a Director
or officer of the Company with respect to any acts or omissions occurring prior
to the time of such repeal or modification.
The By-Laws provide for indemnification of the officers and Directors
of the Company, as the case may be, against any liability, cost or expense
incurred by such Director or officer by reason of the fact that such person is
or was a Director, officer, employee or agent of the Company, except to the
extent that such indemnification is prohibited by Chapter 78 of the NRS.
Section 78.751 of the NRS provides that a corporation may, and in
certain cases, must, indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding (other than certain actions by, or in right of, the
Corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, and, in the case of a non-derivative
action, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such person, in connection with the action, suit or proceeding, if,
in either type of action, such person acted in good faith and in a manner which
such person reasonably believed to be in, or not opposed to, the best interests
of the corporation. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent does not, of itself, create a presumption that the person did not act
in good faith and in a manner which such person reasonably believed to be in, or
not opposed to, the best interests of the corporation and that, with respect to
any criminal action or proceeding, such person had reasonable cause to believe
that such person's conduct was unlawful.
Indemnification may not be made, in a derivative action, for any claim,
issue or matter as to which such a person had been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the corporation, or for amounts paid in settlement to the corporation,
unless, and only to the extent that, the court in which the action or suit was
brought or other court of competent jurisdiction determines upon application
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
The Company's By-Laws provide that the expenses of officers and
Directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred, and in advance of the
final disposition of the action, upon receipt of an undertaking by, or on behalf
of, the Director or officer to repay the amount if it is ultimately determined
by a court of competent jurisdiction that such person is not entitled to be
indemnified by the corporation, unless ordered by a court or advanced (as
described above), any indemnification must be made by the corporation, only as
authorized in the specific case, upon a determination that the indemnification
of the Director, officer, employee or agent is proper in the circumstances. The
determination must be made either by the stockholders, or by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to the act, suit or proceeding. If a majority vote of a quorum
consisting of Directors who were not parties to the act, suit or proceeding so
orders, or if a quorum consisting of Directors who were not parties to the act,
suit or proceeding cannot be obtained, the determination must be made by
independent legal counsel in a written opinion.
Insofar as indemnification for Directors, officers and controlling
persons of the Company with respect to liabilities arising under the Securities
Act may be granted pursuant to the provisions described above, 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.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is Continental
Stock Transfer & Trust Company and its address is 2 Broadway, New York, New York
10004.
LEGAL MATTERS
Certain legal matters regarding the securities offered hereby are being
passed upon for the Company by Lionel Sawyer & Collins, Las Vegas, NV.
EXPERTS
The consolidated balance sheets as of June 30, 1996 and 1995 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 1996, and the financial
statement schedule listed in Items 8 and 14(a) of the Company's Annual Report on
Form 10-K/A-2 for the year ended June 30, 1996, have been incorporated herein by
reference in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
<PAGE>
No underwriter, dealer, salesperson
or other person has been authorized to
give any information or to make any
representations in connection with MARKETING
the offering made by this Prospectus SERVICES GROUP, INC.
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, any
securities offered hereby by anyone
in any jurisdiction in which such offer
or solicitation is not authorized or in
which the person making such offer or
solicitation is not qualified to do so
or to any person to whom it is unlawful 6,146,824 Shares of
to make such offer or solicitation in Common Stock
such jurisdiction. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, under any circumstances,
create any implication that the
information herein is correct as of
any time subsequent to the date of
this Prospectus.
-------------------
_____________________________ PROSPECTUS
-------------------
Table of Contents
Page
Available Information.......................3
Incorporation of Certain Information
by Reference.............................3
Prospectus Summary..........................4
The Offering................................6 July __, 1997
Risk Factors................................7
Use of Proceeds............................13
Selling Stockholders.......................14
The Recapitalization.......................18
Plan of Distribution.......................18
Description of Capital Stock...............19
Legal Matters..............................22
Experts....................................22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14 - Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities being registered hereby.
The Selling Stockholders will pay the commissions and discounts of underwriters,
dealers of agents, if any, incurred in connection with the sale of the Shares.
The Company will pay all other expenses incident to the offering and sale of the
Shares
Total*
SEC Registration Fee $ 5,836
Accountants' Fees and Expenses 10,000
Legal Fees and Expenses 5,000
Printing and Filing Expenses 1,000
Miscellaneous 100
---------
TOTAL $21,936
=========
* All amounts, except the SEC Registration Fee, are estimates.
Item 15 - Indemnification of Directors and Officers
See "DESCRIPTION OF CAPITAL STOCK -- Limitations of Directors' Liability;
Indemnification".
Item 16 - Exhibits
Exhibit
Number Item Exhibit
(See Notes)(*)
4.1 Amended and Restated Articles of Incorporation C (3(a)(1))
4.2 Certificate of Amendment to the Amended and Restated
Articles of Incorporation B (3.2)
4.3 Certificate of Amendment to the Amended and Restated
Articles of Incorporation D (3(iii))
4.4 Certificate of Amendment to the Amended and Restated
Articles of Incorporation E (3(v))
4.5 By-Laws C (3(c)(2))
5.1 Opinion of Lionel Sawyer & Collins, including consent A
23.1 Consent of Lionel Sawyer & Collins
(included in Exhibit 5.1) A
23.2 Consent of Coopers & Lybrand L.L.P. A
Notes relating to Exhibits
A Filed herewith.
B Incorporated by reference to the Company's Registration Statement
on Form SB-2 No. 333-14339.
C Incorporated by reference to the Company's Registration
Statement on Form S-4 No. 33-45192, declared effective
on February 12, 1992.
D Incorporated by reference to the Company's Report on Form 10-K for
the fiscal year ended June 30, 1995.
E Incorporated by reference to the Company's Report on Form 10-K for
the fiscal year ended June 30, 1996.
* Numbers in parentheses next to any of the above letters B through
E refer to the exhibit numbers within each document from which the
Exhibit is incorporated by reference herein.
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 foregoing provisions, 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 in connection with the securities 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 Company hereby undertakes that:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, it will treat each post-effective amendment as
a new registration statement of the securities offered, and the
offering of the securities at that time be the initial bona fide
offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
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.
<PAGE>
SIGNATURES
In accordance with 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 be signed on its behalf by the undersigned thereunto duly authorized,
in the City of Culver City, State of California, on July 2, 1997.
MARKETING SERVICES GROUP, INC.
By: /s/ J. Jeremy Barbera
J. Jeremy Barbera
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on July 2, 1997.
Signature Title
/s/ J. Jeremy Barbera Chairman of the Board and Chief Executive
J. Jeremy Barbera Officer (Principal Executive Officer)
/s/ Scott Anderson Chief Financial Officer (Principal
Scott Anderson Financial and Accounting Officer)
/s/ Alan I. Annex Director and Secretary
Alan I. Annex
/s/ S. James Coppersmith Director
S. James Coppersmith
/s/ Seymour Jones Director
Seymour Jones
/s/ C. Anthony Wainwright Director
C. Anthony Wainwright
EXHIBITS 5 AND 23.1
July 2, 1997
Marketing Services Group, Inc.
400 Corporate Pointe, Suite 780
Culver City, CA 90230
Re: Registration Statement on Form S-3
Marketing Services Group, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Marketing Services Group, Inc., a
Nevada corporation (the "Company"), in connection with the preparation of a
registration statement on Form S-3 (the "Registration Statement"), being filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act") with respect to the
registration by the Company of 6,146,824 shares (the "Shares"), of common stock,
par value $.01 per share (the "Common Stock), of the Company, representing
4,886,897 shares owned by the Selling Stockholders (the "Selling Stockholder
Shares"), 954,350 shares (the "Convertible Note Shares"), issuable upon
conversion of certain convertible promissory notes (the "Convertible Notes"),
and 305,577 shares (the "Warrant Shares"), issuable upon exercise of warrants
(the "Warrants") held by the Selling Stockholders. The Convertible Note Shares
and the Warrant Shares are collectively referred to as the "Conversion Shares".
Capitalized terms not defined in this opinion letter have the meanings given to
them in the Registration Statement.
This opinion is being furnished to you in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with the opinions hereinafter given, we have examined
copies of the following documents: (i) the Registration Statement, (ii) the
Warrants, (iii) the Convertible Notes, (iv) the Articles of Incorporation of the
Company, as currently in effect, (v) the Bylaws of the Company, as currently in
effect, (vi) a specimen certificate representing Shares and (vii) copies of
certain resolutions adopted by the Board of Directors of the Company relating
to, among other things, the Selling Stockholder Shares, the Convertible Notes,
the Warrants and related matters.
We have also examined originals or copies certified or otherwise
identified to our satisfaction of such other corporate records and certificates
of public officials as we have deemed necessary or advisable for the purposes of
this opinion. We have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to originals of all copies of all documents submitted
to us.
We have relied upon the certificates of all public officials and
corporate officers with respect to the accuracy of all matters contained
therein, including, but not limited to, the officer's certificate attached
hereto as Exhibit A.
Based upon and subject to the foregoing, and assuming (i) the
conformity of the certificates representing the Shares to the form of specimen
thereof examined by us, (ii) the due execution and delivery of such certificates
, and (iii) the receipt of the consideration for the Selling Stockholder Shares
and the Conversion Shares, designated in the resolutions approving the issuance
of the Selling Stockholder Shares, the Convertible Notes and/or the Warrants, as
the case may be, we are of the opinion that the Shares have been duly authorized
by requisite corporate action by the Company, and, when the Conversion Shares
have been issued, delivered and paid for in accordance with the terms and
conditions of the Convertible Notes and the Warrants, respectively, will be
validly issued, fully paid and non-assessable.
Nothing herein shall be deemed an opinion as to the laws of any
jurisdiction other than the State of Nevada.
This opinion is intended solely for the use of the Company in
connection with the registration of the Shares. It may not be relied upon by any
other person or for any other purpose, or reproduced without the written consent
of this firm; provided, however, we hereby consent to the filing of this opinion
as an exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we are in the category of person whose consent is required
under Section 7 of the 1933 Act or the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
/s/ Lionel Sawyer & Collins
LIONEL SAWYER & COLLINS
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated September 19, 1996, except for Note 19 as to which
the date is December 17, 1996, on our audits of the consolidated financial
statements and financial statement schedule of All-Comm Media Corporation and
subsidiaries as of June 30, 1996 and 1995 and for each of the three years in the
period ended June 30, 1996, which reports are included in All-Comm Media
Corporation's Annual Report on Form 10-K/A-2, and of our report dated June 2,
1995, of our audits of the financial statements of Stephen Dunn & Associates,
Inc. for the three years ended December 31, 1994, included in Form 8-K/A-2,
dated July 24, 1996. We also consent to the reference to our Firm under the
heading "Experts" in this Registration Statement.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
July 2, 1997
