<PAGE>
As filed with the Securities and Exchange Commission on October 31, 1995
Registration File No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NATIONAL MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-2658741
(I.R.S. Employer Identification Number)
1700 Walnut Street
Philadelphia, Pennsylvania 19103
(215) 772-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Mark P. Hershhorn, President and Chief Executive Officer
National Media Corporation
1700 Walnut Street
Philadelphia, Pennsylvania 19103
(215) 772-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
With a copy to:
Brian J. Sisko, Esquire
Gerald F. Stahlecker, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, Pennsylvania 19102
(215) 568-6060
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the 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 registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
Proposed Amount of
Title of Securities Amount to be Proposed Maximum Maximum Aggregate Registration
to be Registered Registered Price Per Share Offering Price Fee
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 8,498,232
value $.01 per share shares $15.125(1) $128,535,759 $44,322.68
===============================================================================================================================
</TABLE>
(1) Based on the average of the high and low sale prices of the
Registrant's Common Stock as reported on the New York Stock Exchange
("NYSE") on October 26, 1995, estimated solely for the purpose of
calculating the registration fee in accordance with Rule 457(c) under
the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
NATIONAL MEDIA CORPORATION
1700 Walnut Street
Philadelphia, Pennsylvania 19103
(215) 772-5000
------------------------------------
8,498,232 Shares of Common Stock
------------------------------------
This Prospectus concerns the offer and sale by certain Selling
Shareholders (as described herein), from time to time, of up to 554,456 shares
of the common stock, par value $.01 per share (the "Common Stock"), of National
Media Corporation, a Delaware corporation ("NMC" and, together with its
subsidiaries, the "Company"), issued by the Company to such Selling Shareholders
on October 25, 1995 in connection with the merger (the "Merger") of
DirectAmerica Corporation and California Production Group, Inc. (collectively,
"DirectAmerica") with and into a wholly-owned subsidiary of NMC. See "SELLING
SHAREHOLDERS AND RELATED INFORMATION." All shares of Common Stock issued by the
Company in connection with the Merger are hereinafter referred to as the "Merger
Shares."
This Prospectus also concerns the offer and sale by certain Selling
Shareholders, from time to time, of up to 2,557,960 shares of Common Stock
issuable upon the conversion of 255,796 shares of Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"). The Series B
Preferred Stock was issued by the Company to such Selling Shareholders during
the period of October 1994 through December 1994. See "SELLING SHAREHOLDERS AND
RELATED INFORMATION." The Series B Preferred Stock is convertible into an
aggregate of 2,557,960 shares of Common Stock. The shares of Common Stock
issuable upon conversion of the Series B Preferred Stock are hereinafter
referred to as the "Series B Shares."
This Prospectus also concerns the offer and sale by certain Selling
Shareholders, from time to time, of up to 5,385,816 shares of Common Stock
issuable upon the exercise of Warrants (as hereinafter defined) issued by the
Company. The Warrants consist of (i) 3,069,552 Common Stock purchase warrants
(3,027,000 of which have an exercise price of $4.80 per share of Common Stock
and 42,552 of which have an exercise price of $5.74 per share of Common Stock)
(the "Acquisition Warrants") issued by the Company to certain of the Selling
Shareholders in connection with their purchase of the Series B Preferred Stock
during the period of October 1994 through December 1994; (ii) 2,250,000 Common
Stock purchase warrants with an exercise price of $4.80 per share of Common
Stock (the "Loan Warrants") issued by the Company to certain of the Selling
Shareholders in connection with a $5.0 million term loan made by such Selling
Shareholders to the Company in October 1994 (the "Term Loan"); and (iii) 66,264
Common Stock purchase warrants with varying exercise prices (the "Settlement
Warrants") issued by the Company in February 1995 in connection with the
settlement of certain disputes between the Company and The Wall Street Group,
Inc. Each of the Acquisition Warrants and Loan Warrants may be exercised, from
time to time, at any time during the period beginning approximately one year
from the date of issuance by the Company and ending on the ten-year anniversary
thereof. The Settlement Warrants may be exercised, from time to time, at any
time during the period beginning on the date of issuance by the Company and
ending on the three-year anniversary thereof. The Acquisition Warrants, Loan
Warrants and Settlement Warrants are sometimes hereinafter collectively referred
to as the "Warrants." The 5,385,816 shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to as the "Warrant Shares."
See "SELLING SHAREHOLDERS AND RELATED INFORMATION." The Merger Shares, Series B
Shares and Warrant Shares are sometimes hereinafter collectively referred to as
the "Shares."
<PAGE>
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") and Philadelphia Stock Exchange ("PHLX") under the symbol "NM." On
October 26, 1995, the closing sale price for the Company's Common Stock, as
quoted on the NYSE, was $15.00 per share.
It is presently anticipated that sales of Shares by the Selling
Shareholders hereunder will be effected, from time to time, (i) in ordinary
transactions on the NYSE and PHLX; (ii) through dealers or in ordinary broker
transactions on the NYSE, PHLX or otherwise; (iii) "at the market" to or through
market makers or into an existing market for the Shares; (iv) in other ways not
involving market makers or established trading markets, including direct sales
to purchasers or sales effected through agents; (v) through transactions in
options (whether exchange-listed or otherwise); or (vi) in combinations of any
such methods of sale. The Shares held by the Selling Shareholders may also be
sold hereunder by brokers, dealers, banks or other persons or entities who
receive such Shares and as a pledgee of the Selling Shareholders. The Selling
Shareholders and brokers and dealers through whom sales of Shares may be
effected may be deemed to be "underwriters," as defined under the Securities Act
of 1933, as amended (the "Securities Act"), and any profits realized by them in
connection with the sale of the Shares may be considered to be underwriting
compensation.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 HEREOF.
-------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATIONS TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
Price Underwriting Discounts Proceeds to Proceeds to the
to Public and Commissions the Company Selling Shareholders
========================================================================================================================
<S> <C> <C> <C> <C>
Per Share..... $(1) $(2) $0(3) $(1)(4)
- ------------------------------------------------------------------------------------------------------------------------
Total......... $(1) $(2) $0(3) $(1)(4)
========================================================================================================================
</TABLE>
(1) It is anticipated that the Shares registered for resale hereunder will
be sold by the Selling Shareholders in market or private
transactions at prevailing prices, from time to time.
(2) No underwriting discounts or commissions were or are payable by the
Company in connection with the issuance of the Shares to the Selling
Shareholders. In connection with the sale of the Shares by the Selling
Shareholders pursuant to this Prospectus, the Selling Shareholders may
pay underwriting or broker-dealer discounts or commissions. The amount
of such discounts and commissions, if any, cannot be determined by the
Company at this time.
(3) The Company will not receive any proceeds from the resale of the
Shares by the Selling Shareholders.
(4) The Company will pay all expenses of the offering of the Shares to
which this Prospectus relates, other than, in connection with the
resales of the Shares by the Selling Shareholders, any underwriting or
broker-dealer discounts or commissions agreed to be paid by the Selling
Shareholders.
--------------------------------------
The Date of this Prospectus is October 31, 1995
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at prescribed rates at the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. The Common Stock of the Company is listed on both the NYSE
and PHLX, and such reports, proxy statements and other information concerning
the Company may be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005 and the Philadelphia Stock
Exchange, Inc., 1900 Market Street, Philadelphia, Pennsylvania 19103.
The Company has filed with the Commission a registration statement on
Form S-3 under the Securities Act with respect to the securities offered hereby
(such registration statement, together with all exhibits thereto, is hereinafter
referred to as the "Registration Statement"). This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is hereby made to the Registration
Statement. Statements contained in this Prospectus as to the contents of any
document filed with, or incorporated by reference in, the Registration Statement
are not necessarily complete, and in each instance are qualified in all respects
by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 (the "1995 Annual Report");
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 (the "June 30, 1995 10-Q");
(c) The Company's Current Reports on Form 8-K, dated April 13,
1995, September 11, 1995, September 21, 1995 and October 19,
1995; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, dated August 28,
1990, including all amendments and reports filed for the
purpose of updating such description.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the filing of a post-effective amendment to the
Registration Statement which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. Any statement contained in a
document incorporated by reference herein shall be modified or superseded for
all purposes to the extent that a statement contained herein or in any other
subsequently filed document which also is 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.
The Company hereby undertakes to provide, without charge, to each
person to whom a copy of this Prospectus has been delivered, upon the written or
oral request of such person, a copy of all documents incorporated by
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<PAGE>
reference in this Prospectus, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference herein. Written or oral
requests for copies should be directed to Marshall A. Fleisher, Vice
President/Legal and Corporate Secretary, National Media Corporation, 1700 Walnut
Street, Philadelphia, Pennsylvania 19103, (215) 772-5000.
The Company will furnish its shareholders with annual reports
containing audited financial statements and reports by independent accountants.
In addition, the Company will distribute unaudited quarterly reports to its
shareholders for the first three quarters of each fiscal year.
THE COMPANY
The Company's business involves the use of direct response
transactional television programming, known as infomercials, to sell consumer
products. The Company is engaged in this form of direct marketing of consumer
products in the United States and Canada through its wholly-owned subsidiary,
Media Arts International, Ltd. ("Media Arts"), which the Company acquired in
1986, and internationally through its wholly-owned subsidiaries, Quantum
International Limited ("Quantum"), which the Company acquired in 1991, and
Quantum International Japan Company Limited ("Quantum Japan"), which was formed
in June 1995. In addition, the Company markets products of independent third
parties who provide programs to the Company. To capitalize on the consumer
awareness and familiarity that the Company's infomercials create for its
products, the Company, along with its strategic partners, also markets and sells
its products through non-infomercial distribution channels, including retail
stores and television home shopping programs.
The Company is a Delaware corporation, with its principal executive
offices located at 1700 Walnut Street, Philadelphia, Pennsylvania 19103
(telephone number (215) 772-5000).
RISK FACTORS
The Shares offered hereby are speculative in nature and involve a high
degree of risk. In addition to the other information set forth in this
Prospectus (including the information set forth in the documents incorporated
herein by reference), the following factors should be considered carefully by
prospective investors in evaluating an investment in the Shares offered by this
Prospectus.
Recent Losses. The Company has suffered net losses in three of its last
four fiscal years, including a net loss of $8,699,000 incurred during the fiscal
year ended March 31, 1994 and a net loss of $672,000 incurred during the fiscal
year ended March 31, 1995. These losses resulted in a substantial decrease in
working capital from $7,995,000 at March 31, 1993 to $1,377,000 at March 31,
1994. Based upon this deterioration in the Company's financial condition and the
presence of certain other conditions, as of July 13, 1994, as noted in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994
(the "1994 Annual Report"), the Company's independent auditors opined that
substantial doubt existed as to the Company's ability to continue as a going
concern. However, as a result of a series of capital raising transactions in the
Company's 1995 fiscal year and the Company's recent profitability, at June 30,
1995, the Company's working capital had increased to approximately $25,000,000.
The Company's 1995 fiscal year end audited financial statements set forth in the
1995 Annual Report contain an unqualified opinion of its independent auditors.
No assurance can be given that the Company's operations will continue to be
profitable and/or that its financial position will continue to improve. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources," in each of the 1995 and 1994
Annual Reports.
Litigation and Regulatory Actions Involving the Company. The Company in
recent years has been and, to a much lesser extent, continues to be involved in
significant legal proceedings. In addition, the Company has been, and continues
to be, the subject of regulatory investigations by the Federal Trade Commission
(the "FTC") and the Consumer Product Safety Commission ("CPSC").
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<PAGE>
Material abbreviated information regarding the current status of
material pending litigation and regulatory actions involving the Company is set
forth below. However, as it pertains to previously reported matters, such
information does not purport to be complete and is qualified in its entirety by
the detailed description of the legal and regulatory proceedings set forth in
the Company's 1995 and 1994 Annual Reports under "Item 3, Legal Proceedings";
the Company's June 30, 1995 10-Q under "Item 1, Legal Proceedings"; and the
Company's Current Report on Form 8-K, dated April 13, 1995, under "Item 5, Other
Events." Such descriptions variously include information relating to the status
of the proceedings, the Company's evaluation of the claims made against it and
the like. Certain of such previously reported matters have been resolved
substantially in accordance with the terms set forth in such prior disclosure.
In addition, as set forth on the cover page hereof, the Company consummated the
Merger on October 25, 1995. As of such date, DirectAmerica was a party to
several litigation proceedings. As a result of the Merger, any liability which
DirectAmerica may have in connection with such litigation becomes the
responsibility of the subsidiary of the Company into which DirectAmerica was
merged. Although certain of the former shareholders of DirectAmerica have agreed
to indemnify the Company against certain of such liabilities, it is not possible
to predict with any accuracy what, if any, liability the Company may have in
connection with such matters.
1. Shareholders' Delaware Class Actions. In January 1994, four class
action complaints were filed against the Company and certain of its present and
former officers and directors in the Court of Chancery of the State of Delaware
in connection with a proposed merger transaction with ValueVision International,
Inc. ("ValueVision"). See the discussion of the litigation set forth under "Item
3. Legal Proceedings--Shareholders' Delaware Class Actions" in the Company's
1995 Annual Report. The Company and the other parties to the litigation have
reached agreement in principle to settle these actions as well as the Lachance
and Efron and Cohen class action litigation described below, providing for cash
payments by the Company's insurer of $1.125 million and cash payments by the
Company of $375,000, as to which the Company recorded a charge in the fourth
quarter of its 1995 fiscal year. Consummation of these settlements is subject,
among other things, to the approval of the Court.
2. Lachance and Efron and Cohen Class Actions. In July and December,
1994, stockholders filed purported class action lawsuits in federal court
against the Company and certain of its former officers and directors in
connection with the aborted ValueVision tender offer. The parties have reached
an agreement in principle to settle the matters as discussed under paragraph 1
above.
3. Consumer Product Safety Commission Investigation. On February 24,
1994, the staff of the CPSC notified the Company that it had made a preliminary
determination that a particular model of the Company's Juice Tiger(R) product
presents a "substantial product hazard" under the Consumer Product Safety Act.
The CPSC staff requested the Company to take voluntary corrective action to
ameliorate such alleged product hazard. While the Company has disputed that the
model in question presents a substantial product hazard, the Company and the
CPSC staff are presently discussing the form and nature of voluntary action
proposed by the Company to assuage the CPSC staff's concerns. The CPSC staff has
also indicated that, upon agreement on and implementation of a corrective action
plan, it may investigate and assess whether the Company failed to comply with
reporting requirements under the Consumer Product Safety Act such as to warrant
imposition of a civil penalty. Management believes that it is not yet possible
to determine whether the cost of implementing any such corrective action plan
and the amount of any such civil penalty, alone or together, will have a
material adverse effect on the Company, its results of operations or financial
condition.
4. William H. Campbell. In July 1994, William H. Campbell, a former
officer of the Company, filed a complaint in federal court against the Company
and the Company's former Chairman and Chief Executive Officer alleging that the
defendants fraudulently induced him to purchase the Company's Common Stock
through the exercise of stock options and to forebear from selling his shares of
Common Stock. Mr. Campbell seeks to recover compensatory damages in excess of
$1.3 million as well as punitive damages and to rescind all alleged debts owed
to the Company by Mr. Campbell (approximately $238,000). The parties have
informally reached a confidential settlement of the action, and on December 9,
1994, the court dismissed the case with prejudice. The court has retained
jurisdiction of the case in the event that any party seeks to have the dismissal
vacated, modified or stricken should the parties fail to execute and deliver a
definitive settlement agreement. Although the Company has no reason to expect
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<PAGE>
that such a definitive settlement agreement will not be executed by all parties,
there can be no assurance that the settlement will be so finalized. Management
of the Company believes that the definitive settlement, if implemented on
substantially the terms of the informal settlement, would not be likely to have
a material adverse effect on the financial position or results of operations of
the Company.
Regulatory Matters. The infomercial industry is regulated by the FTC,
the United States Post Office, the CPSC, the Federal Communications Commission,
the Food and Drug Administration, various States' Attorneys General, and other
state and local consumer protection and health agencies. The FTC directly
regulates marketers of products, such as the Company, credit card companies
which process customer orders and others involved in the infomercial and direct
marketing industries.
The Company's marketing activities and/or products have been
and will continue to be subject to the scrutiny of each of the aforementioned
regulatory agencies. An adverse determination or extended investigation by any
of these agencies could have a material adverse effect on the Company. Moreover,
the domestic and international regulatory environments in which the Company
operates are subject to change from time to time. It is possible that changes in
the regulations to which the Company is subject might have a material adverse
effect on the Company's business, operation and financial condition. As a result
of prior settlements with the FTC, the Company has agreed to two consent orders
which among other things require the Company to submit compliance reports to the
FTC staff. The Company has submitted the compliance reports as well as
additional information requested by the FTC staff. In connection with one of
these orders, the Company recently received a request from the FTC for certain
information regarding the Company's infomercials in order to determine whether
the Company is in compliance with such order. The Company is cooperating with
such request and as of the current date believes itself to be in compliance with
the consent orders and other FTC requirements.
The Company's international business is subject to the laws
and regulations of England, the European Union, Japan and other countries in
which the Company sells its products, including, but not limited to, the various
consumer and health protection laws and regulations in the countries in which
the programming is broadcast, where applicable. If any significant actions were
brought against the Company or any of its subsidiaries in connection with a
breach of such laws or regulations, including the imposition of fines or other
penalties, or against one of the entities through which the Company obtains a
significant portion of its media access, the Company's results of operations
could be materially adversely affected. There can be no assurance that changes
in the laws and regulations of any territory which forms a significant portion
of the Company's market will not adversely affect the Company's business.
Dependence on Key Personnel. The Company is dependent upon its ability
to attract, and retain recognizable and effective spokespersons for its
infomercial programming. The Company currently utilizes a limited number of
spokespersons. The inability of the Company to attract, retain or replace
effective spokespersons in the future could have a material adverse effect on
the Company.
Product Liability Claims. Products sold by the Company may expose it to
potential liability from claims by users of such products. The Company generally
requires the manufacturers of its products to carry product liability insurance,
although in certain instances where a limited amount of products are purchased
from non-U.S. vendors, the Company may not formally require the vendor to carry
product liability insurance. (Certain of such vendors, however, may in fact
maintain such insurance.) There can be no assurance that such parties will
maintain this insurance or that this coverage will be adequate to cover all
potential claims. The Company currently maintains product liability insurance
coverage in amounts deemed prudent. There can be no assurance that the Company
will be able to maintain such coverage or obtain additional coverage on
acceptable terms, or that such insurance will provide adequate coverage against
all potential claims.
Media Access; Related Matters. The Company is dependent on having
access to media time to televise its infomercials on cable networks, network
affiliates and local stations. There can be no assurance that the Company will
be able to purchase or renew media time on a long-term basis or at favorable
price levels. The Company purchases a significant amount of its media time from
cable television and satellite networks. These cable television and satellite
networks assemble programming for transmission to multiple and local cable
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<PAGE>
system operators. These operators may not be required to carry all of the
network's programming. The Company currently does not pay and is not paid for
the "privilege" of being broadcast by these operators. It is possible that, if
demand for air time grows, and because of recently enacted cable legislation,
these operators will begin to charge the Company to continue broadcasting the
Company's infomercials or limit the amount of time available to the Company.
Recently, larger multiple system operators have elected to change their
operations by selling dark time (i.e. the hours during which a station does not
broadcast its own programming). Significant increases in the cost of media time
or significant decreases in the Company's access to media time could have a
material adverse effect on its results of operations.
Approximately one-third of the Company's media time is
purchased under long-term contracts, which are generally from one to five years
in length. Long-term contracts require the Company to make advance purchases and
commitments to purchase media time which, to the extent the Company does not use
it effectively, will have a material adverse effect on the Company's results of
operations. However, in the past the Company has generally been able to maintain
a flow of infomercials to fill the media time on channels where it has advance
commitments. In addition, as part of its media strategy, the Company arranges to
sell a portion of its media time to others, if necessary. There can be no
assurance, however, that the Company will be able to use all of its media time
or sell it to others or that, upon expiration of such long-term contracts, the
Company will be able to successfully negotiate extensions of such contracts. The
inability of the Company to extend one or more of such contracts as they expire
could have a material adverse effect on the Company's business and results of
operations.
Strategic Partnerships. The Company has entered into relationships with
manufacturers of consumer products in several product categories, including
Regal Ware, Inc., CSA, Inc. and Blue Coral, Inc. These manufacturers have come
to realize that the showcasing of a product through an infomercial on television
is a powerful means to create and build brand awareness and generate follow-up
product sales. A clear advantage of these relationships to the Company is that
the manufacturing partner provides research and development support and assumes
the inventory risk, thereby reducing the Company's financial risk as well as its
working capital requirements. Additionally, in January 1995, the Company entered
into a two year agreement with Mitsui & Co., Ltd. to provide media time and
fulfillment service in support of the Company's Japanese operations. A loss of
any of these relationships could have a material adverse effect on the Company's
business and results of operations.
Competition. The Company competes directly with several companies which
generate sales from infomercials. The Company also competes with a large number
of consumer product companies and retailers which have substantially greater
financial, marketing and other resources than the Company, some of which have
recently commenced, or indicated their intent to conduct, direct response
marketing. The Company also competes with companies that make imitations of the
Company's products at substantially lower prices. Products similar to the
Company's products may be sold in department stores, pharmacies, general
merchandise stores and through magazines, newspapers, direct mail advertising
and catalogs.
Dependence on Key Products by the Company and Unpredictable Market
Life. The Company has been dependent on its ability to develop a relatively
small number of successful new products in each year. The Company's five most
successful products in each of the fiscal years ended March 31, 1995, 1994,
1993, and 1992, accounted for 54%, 67%, 47%, and 59% respectively, of the
Company's net revenues for such periods. Product sales for a given period
reflect, among other things, customer response to the infomercials on the air
during the period. Customer response to infomercials depends on many variables,
including the appeal of the products being marketed, the effectiveness of the
infomercials and the availability of competing products, and the timing and
frequency of air-time. There can be no assurance that the Company's new products
will receive market acceptance. In addition, in the event the Company does not
have an adequate supply of inventory, as a result of production delays or
shortages or inadequate inventory management, it may lose potential product
sales. The ability of the Company to manage its inventory is of critical
importance due to the Company's practice of minimizing its inventory of a given
product. This issue is made even more difficult by the international nature of
the Company's business.
Even when market acceptance for the Company's new products
occurs, the Company's results of operations may be adversely impacted by returns
of such products. The Company establishes reserves against such returns.
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Although the Company believes that such reserves are adequate based upon
historic levels and product mix, there can be no assurance that the Company
will not experience unexpectedly high levels of returns (in excess of its
reserves) for certain products. In the event that returns exceed reserves, the
Company's results of operations could be adversely affected.
Most of the Company's products have a limited market life for
sales through infomercials. Historically, the majority of products generate
their most significant domestic revenue in their introductory year, while
foreign revenues have tended to have been generated more evenly over a longer
period. In the event the Company increases the number of times an infomercial is
broadcast within a market, the market life of such product in such market may
decrease. There can be no assurances that a product which has produced
significant sales will continue to produce significant or any sales in the
future. As a result, the Company is dependent on its ability to continue to
identify and successfully market new products. The failure of newly introduced
products or significant delays in the introduction of, or failure to introduce,
new products would adversely impact the Company's results of operations in terms
of both lost opportunity cost and actual loss of dollars invested.
Dependence on Foreign Sales by the Company. The Company had no sales
outside the United States and Canada prior to June 1991. In the fiscal years
ended March 31, 1995, 1994, 1993 and 1992, approximately 45.7%, 26.7%, 26.4% and
13.8%, respectively, of the Company's net revenues were derived from sales to
customers outside the United States and Canada, and such sales represented a
74.8% increase in the fiscal year ended March 31, 1995 from the fiscal year
ended March 31, 1994, a 22.6% increase in the fiscal year ended March 31, 1994
from the fiscal year ended March 31, 1993 and a 165.5% increase in the fiscal
year ended March 31, 1993 from the fiscal year ended March 31, 1992. In the
fiscal years ended March 31, 1994 and 1995, sales in Germany accounted for
approximately 12-13% of the Company's net revenues, respectively. In late July
1994, the Company began airing its infomercials in Japan. Sales of the Company's
products in Japan accounted for approximately 30.0% of the Company's net
revenues in the quarter ended June 30, 1995. The Company anticipates that sales
in Japan and elsewhere in the Pacific Rim will continue to increase as a
proportion of the Company's overall sales. This increase in international sales
activity has resulted in increased working capital requirements as a result of
additional lead time for delivery and payment of product prior to receipt of
sale proceeds. However, while the Company's foreign operations have the
advantage of airing its infomercials that have been successful in the United
States, as well as successful infomercials produced by companies with limited
media access and distribution capabilities, there can be no assurance that the
Company's foreign operations will continue to generate significant increases in
net revenues. In addition, the Company is subject to the risks of doing business
abroad, including adverse fluctuations in currency exchange rates,
transportation delays and interruptions, political and economic disruptions, the
imposition of tariffs and import and export controls, and increased customs or
local regulations. The occurrence of any one or more of the foregoing could
adversely affect the Company's results of operations.
Risks Associated with Entering into New Markets. The Company's
dependence on revenues from sales of products outside the United States and
Canada is described above, under "- Dependence on Foreign Sales by the Company."
In particular, the Company's entrance into the Japanese market should be noted.
As the Company enters into markets such as Japan it is faced with the
uncertainty of never having done business in that commercial, political and
social setting. Accordingly, despite the Company's best efforts, its likelihood
of success in each new market which it enters is unpredictable for reasons
particular to each such market. It is also possible that, despite the Company's
apparently successful entrance into a new market, that some unforeseen
circumstance will arise which limits the Company's ability to continue to do
business or to expand in that new market.
Dependence on Third Party Manufacturers. The Company is dependent on
its strategic partners and other third party sources, both foreign and domestic,
to manufacture all of its products, but does not depend on any one particular
supplier for a majority of its products. It is inherent in the nature of the
Company's business for a strategic partner or a limited number of manufacturers
to manufacture certain of its products at any given time. The inability of the
Company, either temporarily or permanently, to obtain a timely supply of product
to fulfill sales orders for a specific product could have a material adverse
impact on the Company. Moreover, because the time from the initial approval of a
product by the product development department to the first sale of such product
is relatively short, the Company's ability to identify sources that can meet its
production deadlines at a reasonable cost and produce a high quality product is
important to its business, and there can be no assurance that the Company will
successfully locate such sources. Because the Company often relies on foreign
-8-
<PAGE>
manufacturers, it must allow longer lead times to order products to fulfill
customer orders and utilizing such foreign manufacturers exposes the Company to
the general risks of doing business abroad.
Shares Eligible for Sale under Registration Rights. In February 1995,
the Company completed a registration process with respect to 500,000 shares of
Common Stock which were issued in connection with the settlement of certain
litigation which allows the holder of such shares to sell them publicly. In
addition, in October 1995, the Company completed a registration process with
respect to 200,000 shares of Common Stock issuable pursuant to certain employee
benefit plans of the Company. In connection with the settlement of certain
disputes between the Company and ValueVision described more fully in the
Company's Current Report on Form 8-K, dated April 13, 1995, under "Item 5 -
Other Events," the Company entered into a Telemarketing, Production and
Post-Production Agreement and a Joint Venture Agreement with ValueVision (the
"ValueVision Agreements") in April 1995. In connection with the ValueVision
Agreements, the Company has agreed to issue, subject to the satisfaction of
certain conditions, warrants to purchase 500,000 shares of common stock to each
of (i) ValueVision (the "ValueVision Warrants") and (ii) the holders of notes
issued in connection with the Term Loan (the "Holders' Warrants") whose consent
was required for the Company to issue the ValueVision Warrants. The ValueVision
Warrants, when issued, will become exercisable with respect to 166,667 shares of
Common Stock on each of the thirteen month and two year anniversaries of the
effective date of the ValueVision Agreements and 166,666 shares of Common Stock
on the three year anniversary of the effective date, provided ValueVision has
satisfied certain conditions set forth in the ValueVision Warrants. The Holders'
Warrants, when issued, will be immediately exercisable. All of the Common Stock
issuable upon exercise of the ValueVision Warrants and the Holders' Warrants
(herein referred to as "Restricted Shares") may not be sold unless registered
under the Securities Act or sold pursuant to an applicable exemption from
registration, including, but not limited to, the limitations established by Rule
144 promulgated under the Securities Act. Restricted Shares may not be sold
under Rule 144 unless they have been held for at least two years. After such
two-year holding period, such Restricted Shares may be sold in brokers'
transactions or to market makers in aggregate amounts that in any three-month
period do not exceed the greater of 1% of the total number of shares of Common
Stock then outstanding or the average weekly trading volume for the four week
period prior to such sale. After they have been held for more than three years,
Restricted Shares held by persons who are not "affiliates" (as defined in Rule
405 promulgated under the Act) of the Company may be sold without regard to such
volume limitations if the other requirements of Rule 144 are met. Even after the
three-year holding period, any Common Stock held by affiliates of the Company
may only be sold under Rule 144 in accordance with the limitations described
above. The foregoing is a summary of Rule 144 and is not intended to be a
complete description thereof.
The Company has contractually obligated itself, subject to
certain limitations, to register all of the Restricted Shares under the
Securities Act upon the demand of the holders thereof and/or upon the
registration of other shares by the Company. If such registration occurs, all of
such Restricted Shares will be subject to sale in the open market in the
discretion of the holders thereof.
Dividends on Common Stock Not Likely. The Company has not declared or
paid a cash dividend on the Common Stock since the quarter ended December 31,
1991 and the Board of Directors does not anticipate that dividends will be paid
in the near future. In addition, that certain Note and Warrant Purchase
Agreement, dated as of October 19, 1994, by and among the Company, certain of
its subsidiaries and Safeguard Scientifics (Delaware), Inc. provides that, so
long as any notes remain outstanding and unpaid, the Company may not declare or
pay any dividends or make any other distribution (whether in cash or property)
on any shares of its capital stock without the prior written consent of the
holder(s) of the notes issued thereunder.
-9-
<PAGE>
SELLING SHAREHOLDERS
AND RELATED INFORMATION
The Selling Shareholders are listed below. Included below concerning
each Selling Shareholder is a table showing the total amount and percentage of
the Common Stock beneficially owned by such person, the amount subject to sale
hereunder and the resulting amount and percentage if all Shares offered hereby
which are owned by such person are sold. Except as otherwise provided in the
notes to the table, none of the Selling Shareholders has held any position or
office, or had any other material relationship with the Company during the past
three years.
<TABLE>
<CAPTION>
Pre-Offering(1) Post-Offering(2)
--------------- ----------------
Total Total
Number Number
of Shares of Shares
Beneficially Percentage Shares Beneficially Percentage
Selling Shareholders Owned of Class(3) Offered Owned of Class(3)
- -------------------- ----- ----------- ------- ----- -----------
<S> <C> <C> <C> <C> <C>
Anapol, Schwartz, Weiss
and Cohen, P.C.(4) 16,566 * 16,566 0 0
Gary J. Anderson(5)(6) 27,500 * 27,500 0 0
Charles L. Andes(5)(6)(7) 32,500 * 27,500 5,000 *
Jeanne Apostol(8) 7,917 * 7,917 0 0
David Bacharach(9)(10) 129,800 * 55,000 74,800 *
David E. Baxter and
Nancy L. Baxter(5)(11) 68,335 * 27,500 40,835 *
Vincent G. Bell, Jr.(12) 44,000 * 44,000 0 0
Michael Boyd(5) 27,500 * 27,500 0 0
Paul R. Brazina(13) 22,145 * 22,145 0 0
Peter Brice(9) 55,000 * 55,000 0 0
CIP Capital L.P.(14) 550,000 3.50% 550,000 0 0
David John Carman and
Eline Emilie Carman(9)(15) 268,200 1.74% 55,000 213,200 1.38%
Jeff Clifford(16) 1,000 * 1,000 0 0
Craig Drake(9)(17) 146,200 * 55,000 91,200 *
Gary Erlbaum(18) 101,250 * 101,250 0 0
Michael Erlbaum(18) 22,500 * 22,500 0 0
Steven Erlbaum(18) 56,250 * 56,250 0 0
Anthony J. Filiti(19) 82,500 * 82,500 0 0
Nedra Fischer(20) 330,000 2.13% 330,000 0 0
Robert A. Fox(9)(21) 55,000 * 55,000 0 0
Morris R. Garfinkle(22)(23) 220,000 1.43% 220,000 0 0
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Pre-Offering(1) Post-Offering(2)
--------------- ----------------
Total Total
Number Number
of Shares of Shares
Beneficially Percentage Shares Beneficially Percentage
Selling Shareholders Owned of Class(3) Offered Owned of Class(3)
- -------------------- ----- ----------- ------- ----- -----------
<S> <C> <C> <C> <C> <C>
Marc R. Ginsberg(24) 8,250 * 8,250 0 0
William M. Goldstein(5) 27,500 * 27,500 0 0
Bruce D. Goodman(25) 147,630 * 147,630 0 0
Micaela Hallman(26) 11,000 * 11,000 0 0
Frederick S. Hammer(9)(27) 85,000 * 55,000 30,000 *
Robert Henry(16) 792 * 792 0 0
Patrick R. Himmler(16) 500 * 500 0 0
Martin Jacobs(19) 82,500 * 82,500 0 0
Robert E. Keith, Jr.(6)(9) 55,000 * 55,000 0 0
Tan Ching Khoon(28) 110,000 * 110,000 0 0
Sharon King(16) 792 * 792 0 0
John W. Kirby(29) 372,180 2.46% 372,180 0 0
Legg Mason Wood Walker
Custodian FBO Steven
Rosner IRA Rollover(22)(30) 328,600 2.14% 220,000 108,600 *
Yolande Levene(9) 55,000 * 55,000 0 0
Howard E. Lubert, as
Trustee for the Jonathan
Lubert Trust(31) 153,750 1.00% 153,750 0 0
Howard E. Lubert, as
Trustee for the Kristine
Lubert Trust(31) 153,750 1.00% 153,750 0 0
Ira Lubert(5)(6)(32) 32,500 * 27,500 5,000 *
MLPF as Custodian FBO
The Mark P. Hershhorn
IRA FBO Mark P.
Hershhorn(28)(33) 560,000 3.56% 110,000 450,000 2.86%
Richard C. Maida(9) 55,000 * 55,000 0 0
Jack L. Messman(34) 33,000 * 33,000 0 0
Morris Saffer Holdings(18) 45,000 * 45,000 0 0
Robert M. Morse(19) 82,500 * 82,500 0 0
Warren V. Musser(6)(28) 110,000 * 110,000 0 0
David Naftaly(5) 27,500 * 27,500 0 0
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Pre-Offering(1) Post-Offering(2)
--------------- ----------------
Total Total
Number Number
of Shares of Shares
Beneficially Percentage Shares Beneficially Percentage
Selling Shareholders Owned of Class(3) Offered Owned of Class(3)
- -------------------- ----- ----------- ------- ----- -----------
<S> <C> <C> <C> <C> <C>
Steven H. Oram, Chartered
Cash or Deferred
Arrangement Profit
Sharing Trust(5) 27,500 * 27,500 0 0
PNC Bank, Custodian
UGMA PA for Kyle
Messman(26) 11,000 * 11,000 0 0
PNC Bank, Custodian UGMA PA for
Valerie L. Messman(26) 11,000 * 11,000 0 0
James W. Poduska,Sr.(28)(35) 110,000 * 110,000 0 0
Gary Quint(36) 1,000 * 1,000 0 0
Peter Richner(9) 55,000 * 55,000 0 0
Theodore D. Rosner(9)(37) 81,600 * 55,000 26,600 *
Safeguard Scientifics
(Delaware), Inc.(6)(38) 2,450,000 13.92% 2,450,000 0 0
Stanley Schneider(9)(39) 142,300 * 55,000 87,300 *
Wolfgang Simon(40) 137,500 * 137,500 0 0
Arthur R. Spector(19) 82,500 * 82,500 0 0
Sylvester Stallone(41) 751,600 4.87% 275,000 476,600 3.09%
Joan Stefanik(9) 55,000 * 55,000 0 0
David Stein and
Barbara Stein(9)(42) 75,000 * 55,000 20,000 *
Craig A. Streem(43) 42,983 * 13,750 29,233 *
John J. Sullivan(44) 149,849 * 41,250 108,599 *
Patrick Sullivan(45) 41,250 * 41,250 0 0
Technology Leaders II
L.P.(6)(46) 557,300 3.55% 557,300 0 0
Technology Leaders II
Offshore C.V.(6)(47) 442,700 2.84% 442,700 0 0
Jean C. Tempel(6)(9) 55,000 * 55,000 0 0
Robert Thatcher(16) 500 * 500 0 0
The Wall Street Group,
Inc.(48) 44,728 * 44,728 0 0
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Pre-Offering(1) Post-Offering(2)
--------------- ----------------
Total Total
Number Number
of Shares of Shares
Beneficially Percentage Shares Beneficially Percentage
Selling Shareholders Owned of Class(3) Offered Owned of Class(3)
- -------------------- ----- ----------- ------- ----- -----------
<S> <C> <C> <C> <C> <C>
Carl Wayneburn(4) 4,970 * 4,970 0 0
H. Dewey Yesner(9) 55,000 * 55,000 0 0
Jon W. Yoskin, II(49) 114,012 * 78,012 36,000 *
</TABLE>
- --------------
* Less than 1%.
(1) Beneficial ownership figures include all Common Stock represented by
(i) shares of issued and outstanding Common Stock; (ii) shares of
Common Stock issuable upon exercise or conversion of the Series B
Preferred Stock and the Warrants; and (iii) shares of Common Stock
issuable upon exercise or conversion of other outstanding warrants,
options or convertible securities which are exercisable or
convertible, as applicable, within sixty days of the date hereof. Based
on information available to the Company, except as otherwise indicated
herein, to the Company's knowledge, none of the Selling Shareholders
beneficially owns any Common Stock other than the Merger Shares, the
Series B Shares and the Warrant Shares.
(2) Assumes the sale of all Shares offered by this Prospectus by each
Selling Shareholder to third parties unaffiliated with the Selling
Shareholders.
(3) These percentages are calculated in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder.
(4) Represents Warrant Shares issuable upon the exercise of Settlement
Warrants.
(5) Includes 12,500 Series B Shares and 15,000 Warrant Shares issuable
upon the exercise of Acquisition Warrants.
(6) Statements on Schedule 13D, dated December 19, 1994, were filed by the
following persons affirming their membership in a group with respect
to their respective holdings of Common Stock: Safeguard Scientifics,
Inc. ("SSI") and its wholly-owned subsidiary, Safeguard Scientifics
(Delaware), Inc. ("SSD"), Technology Leaders II Management L.P.
("TLM"), a limited partnership organized for the sole purpose of acting
as a general partner of Technology Leaders II L.P. ("TL") and
Technology Leaders II Offshore C.V. ("TLO"), Gary J. Anderson, Charles
L. Andes, Robert E. Keith, Jr., Ira Lubert, Warren V. Musser and
Jean C. Tempel (collectively, the "Group"). Mr. Anderson is Executive
Vice President - Fund Management of SSI and is a Managing Director of
Technology Leaders Management, Inc. ("TLM Inc."), a general partner of
TLM. Mr. Andes controls Technology Leaders Advisers III, Inc., a
general partner of TLM. Mr. Keith is President - Fund Management of
SSI and is a Managing Director of TLM Inc. Mr. Lubert is a Managing
Director of TLM Inc. Mr. Musser is Chairman of the Board, Chief
Executive Officer, President and Chief Operating Officer of SSI. Ms.
Tempel is Executive Vice President of SSI and a Managing Director of
TLM Inc.
(7) Includes 5,000 shares of Common Stock issued as compensation for
serving as a director of the Company. Mr. Andes has served as a
director of the Company since October 1994.
(8) Represents Merger Shares issued by the Company in connection with the
Merger. Ms. Apostol serves as Vice President - Production and
Development of DirectAmerica.
-13-
<PAGE>
(9) Includes 25,000 Series B Shares and 30,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(10) Mr. Bacharach is also the beneficial owner of 74,800 shares of Common
Stock.
(11) Includes 40,835 shares of Common Stock held by Mr. Baxter,
individually. Mr. Baxter served as a consultant to the Company from
October 1992 through February 1993. Mr. Baxter also served as acting
President of Media Arts from October 1992 through January 1993.
(12) Includes 20,000 Series B Shares and 24,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants. Mr. Bell is a director of SSI
and, as such, may be deemed to beneficially own those shares of Common
Stock controlled by SSI and its affiliates. Mr. Bell expressly
disclaims beneficial ownership of any shares of Common Stock controlled
by SSI and its affiliates.
(13) Represents Merger Shares issued by the Company in connection with the
Merger. Mr. Brazina serves as Vice-President, Chief Financial Officer
and Treasurer of DirectAmerica.
(14) Includes 250,000 Series B Shares and 300,000 Warrant Shares issuable
upon the exercise of Acquisition Warrants.
(15) Includes 13,200 shares of Common Stock and options to purchase an
additional 200,000 shares of Common Stock held by Mr. Carman,
individually. Mr. Carman is Executive Vice President of the Company and
President and Chief Executive Officer of Quantum. He has served as a
director of the Company since April 1993.
(16) Represents Merger Shares issued by the Company in connection with the
Merger.
(17) Mr. Drake is also the beneficial owner of 91,200 shares of Common
Stock.
(18) Represents Warrant Shares issuable upon the exercise of Loan Warrants.
(19) Includes 37,500 Series B Shares and 45,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(20) Includes 150,000 Series B Shares and 180,000 Warrant Shares issuable
upon the exercise of Acquisition Warrants.
(21) Mr. Fox is a director of SSI and, as such, may be deemed to
beneficially own those shares of Common Stock controlled by SSI and its
affiliates. Mr. Fox expressly disclaims beneficial ownership of any
shares of Common Stock controlled by SSI and its affiliates.
(22) Includes 100,000 Series B Shares and 120,000 Warrant Shares issuable
upon the exercise of Acquisition Warrants.
(23) Mr. Garfinkle is Vice President - Global Strategy of the Company.
(24) Includes 3,750 Series B Shares and 4,500 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(25) Represents Merger Shares issued by the Company in connection with the
Merger. Mr. Goodman serves as President and Chief Operating Officer of
DirectAmerica.
(26) Includes 5,000 Series B Shares and 6,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
-14-
<PAGE>
(27) Includes 5,000 shares of Common Stock issued as compensation for
serving as a director of the Company and options to purchase an
additional 25,000 shares of Common Stock. Mr. Hammer has served as a
director of the Company since October 1994.
(28) Includes 50,000 Series B Shares and 60,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(29) Represents Merger Shares issued by the Company in connection with the
Merger. Mr. Kirby serves as Chairman of the Board and Chief Executive
Officer of DirectAmerica and Executive Vice President of the Company.
(30) Mr. Rosner is also the beneficial owner of 108,600 shares of Common
Stock.
(31) Includes 18,750 Series B Shares, 22,500 Warrant Shares issuable upon
the exercise of Acquisition Warrants and 112,500 Warrant Shares
issuable upon the exercise of Loan Warrants.
(32) Includes 5,000 shares of Common Stock issued as compensation for
serving as a director of the Company. Mr. Lubert has served as a
director of the Company since December 1994.
(33) Includes options to purchase 450,000 shares of Common Stock. Mr.
Hershhorn is President and Chief Executive Officer of the Company and
Chairman of the Board of Quantum. He has served as a director of the
Company since September 1994.
(34) Includes 15,000 Series B Shares and 18,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants. Mr. Messman is a director of SSI
and, as such, may be deemed to beneficially own those shares of Common
Stock controlled by SSI and its affiliates. Mr. Messman expressly
disclaims beneficial ownership of any shares of Common Stock controlled
by SSI and its affiliates.
(35) Mr. Poduska is a director of SSI and, as such, may be deemed to
beneficially own those shares of Common Stock controlled by SSI and its
affiliates. Mr. Poduska expressly disclaims beneficial ownership of any
shares of Common Stock controlled by SSI and its affiliates.
(36) Represents Merger Shares issued by the Company in connection with the
Merger. Mr. Quint serves as Vice President - Finance of DirectAmerica.
(37) Mr. Rosner is also the beneficial owner of 26,600 shares of Common
Stock.
(38) Includes 500,000 Series B Shares, 600,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants and 1,350,000 Warrant Shares
issuable upon the exercise of Loan Warrants.
(39) Mr. Schneider is also the beneficial owner of 87,300 shares of Common
Stock.
(40) Includes 62,500 Series B Shares and 75,000 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(41) Includes 125,000 Series B Shares and 150,000 Warrant Shares issuable
upon the exercise of Acquisition Warrants. Also includes an additional
476,600 shares of Common Stock. Mr. Stallone filed a Statement on
Schedule 13D, dated September 7, 1995, with respect to his holdings of
Common Stock.
(42) Mr. Stein is also the beneficial owner of 20,000 shares of Common
Stock.
(43) Includes 6,250 Series B Shares and 7,500 Warrant Shares issuable upon
the exercise of Acquisition Warrants. Also includes 5,900 shares of
Common Stock and options to purchase an additional 23,333 shares of
Common Stock. Mr. Streem served as Vice President and Secretary of the
Company from May 1992 until March 1994 and from April 1994 until
December 1994.
-15-
<PAGE>
(44) Includes 18,750 Series B Shares and 22,500 Warrant Shares issuable upon
the exercise of Acquisition Warrants. Also includes 75,265 shares of
Common Stock and options to purchase an additional 33,334 shares of
Common Stock. Mr. Sullivan is Senior Vice President - Administration,
Planning and Investor Relations of the Company.
(45) Includes 18,750 Series B Shares and 22,500 Warrant Shares issuable upon
the exercise of Acquisition Warrants.
(46) Includes 139,325 Series B Shares, 167,190 Warrant Shares issuable upon
the exercise of Acquisition Warrants and 250,785 Warrant Shares
issuable upon the exercise of Loan Warrants.
(47) Includes 110,675 Series B Shares, 132,810 Warrant Shares issuable upon
the exercise of Acquisition Warrants and 199,215 Warrant Shares
issuable upon the exercise of Loan Warrants.
(48) Represents Warrant Shares issuable upon the exercise of Settlement
Warrants. The Wall Street Group, Inc. provided investor relations
services to the Company from March 1990 until August 1992. In
connection with the termination of The Wall Street Group, Inc.'s
services by the Company, certain disputes arose between the parties,
which disputes were settled by the Company in February 1995 through the
issuance of the Settlement Warrants.
(49) Includes 35,460 Series B Shares and 42,552 Warrant Shares issuable upon
the exercise of Acquisition Warrants. Also includes 11,000 shares of
Common Stock and options to purchase an additional 25,000 shares of
Common Stock. Mr. Yoskin has served as a director of the Company since
June 1994.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby has been
passed upon for the Company by Marshall A. Fleisher, Esquire, Vice President
(Legal) and Corporate Secretary of the Company. Mr. Fleisher is the beneficial
owner of 36,000 shares of Common Stock.
EXPERTS
The consolidated financial statements of National Media Corporation
appearing in the Company's Annual Report on Form 10-K for the year ended
March 31, 1995 have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
-16-
<PAGE>
===================================== ===================================
No person is authorized to give
any information or to make any
representation not contained or NATIONAL MEDIA CORPORATION
incorporated by reference in this
Prospectus, and if given or made,
such information or representation
must not be relied upon as having 8,498,232 SHARES OF COMMON STOCK
been authorized by the Company.
Neither the delivery of this
Prospectus nor any sale made
hereunder shall, under any
circumstances, create any ---------------------
implication that there has been no
change in the facts set forth in
this Prospectus or in the affairs PROSPECTUS
of the Company since the date hereof.
This Prospectus does not constitute
an offer to sell or a solicitation
of an offer to buy any securities October 31, 1995
other than those to which it relates
or an offer to sell or a solicitation
of an offer to buy any securities 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 to make such an offer or
solicitation in such jurisdiction.
TABLE OF CONTENTS
Page
----
Available Information.......... 3
Incorporation of Certain
Information by Reference..... 3
The Company.................... 4
Risk Factors................... 4
Selling Shareholders and
Related Information.......... 10
Legal Matters.................. 16
Experts........................ 16
===================================== ===================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an itemized statement of all expenses incurred or to be
incurred in connection with the issuance and distribution of the securities to
be registered:
Registration fee*....................................... $44,322.68
Blue sky filing fees and expenses....................... 5,000.00
Transfer agent and registration fee..................... 1,000.00
Printing and mailing expenses........................... 5,000.00
Legal fees and expenses................................. 10,000.00
Accounting fees and expenses............................ 7,500.00
Miscellaneous........................................... 5,000.00
Total................................................ $77,822.68
-------------------
*Exact; all other fees and expenses are estimates.
Item 15. Indemnification of Directors and Officers.
The Company has adopted in its Certificate of Incorporation and Bylaws
the provisions of Section 102(b)(7) of the Delaware General Corporation Law
which eliminate or limit the personal liability of a director to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except that this provision shall not eliminate or limit the liability
of a director for any breach of the director's duty of loyalty to the Company or
its stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, under Section 174 of the
Delaware General Corporation Law, or for any transaction from which the director
derived an improper personal benefit.
Further, the Company's Certificate of Incorporation and Bylaws provide
that the Company shall indemnify all persons whom it may indemnify pursuant to
Section 145 of the Delaware Corporation Law to the full extent permitted
therein. Section 145 provides, subject to various exceptions and limitations,
that the Company may indemnify its directors or officers if such director or
officer is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The determination of whether indemnification is proper
under the circumstances, unless made by a court, shall be made by a majority of
a quorum of disinterested members of the Board of Directors, independent legal
counsel or the stockholders of the Company. In addition, the Company shall
indemnify its directors or officers to the extent that they have been successful
on the merits or otherwise in defense of any such action, suit or proceeding, or
in the defense of any claim, issue or matter therein, against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection therewith.
II-1
<PAGE>
Item 16. Exhibits
The following documents are filed as a part of this Registration
Statement. (Exhibit numbers correspond to the exhibits required by Item 601 of
Regulation S-K for a Registration Statement on Form S-3.)
(a) Exhibits
Exhibit No.
*5 Opinion of Marshall A. Fleisher, Esquire, Vice President (Legal) and
Corporate Secretary of the Registrant.
*23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Marshall A. Fleisher, Esquire, Vice President (Legal) and
Corporate Secretary of the Registrant (included in the opinion filed
as Exhibit 5 hereto).
24 Power of Attorney regarding amendment of this Registration Statement
appears on the signature page of this Registration Statement.
- -------------------
* Filed herewith.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling-person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
of the registrant in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement 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, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d)
II-2
<PAGE>
of the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on this
30th day of October, 1995.
NATIONAL MEDIA CORPORATION
BY: /s/ Mark P. Hershhorn
-----------------------------
Mark P. Hershhorn, President
and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of National Media
Corporation whose signature appears below hereby appoints Mark P. Hershhorn and
John J. Sullivan, jointly and each individually, as true and lawful
attorneys-in-fact for the undersigned with full power of substitution, to
execute in his name and on his behalf in each capacity stated below, any and all
amendments (including post-effective amendments) to this Registration Statement
as the attorney-in-fact shall deem appropriate, and to cause to be filed any
such amendment (including exhibits thereto and other documents in connection
therewith) to this Registration Statement with the Securities and Exchange
Commission, as fully and to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or either of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
/s/ Brian McAdams Chairman of the Board, Chairman of October 30, 1995
- ---------------------------- the Executive Committee and
Brian McAdams Director
/s/ Mark P. Hershhorn President, Chief Executive Officer October 30, 1995
- ---------------------------- and Director
Mark P. Hershhorn
/s/ John J. Sullivan
- ---------------------------- Senior Vice President, October 30, 1995
John J. Sullivan Administration, Planning and
Investor Relations (Principal
Accounting Officer)
/s/ David J. Carman
- ---------------------------- Executive Vice President October 30, 1995
David J. Carman and Director
/s/ Charles L. Andes
- ---------------------------- Director October 30, 1995
Charles L. Andes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
/s/ Constantinos I. Costalas Vice Chairman of the Board October 30, 1995
- ---------------------------- (Principal Financial Officer) and
Constantinos I. Costalas Director
/s/ Albert R. Dowden
- ----------------------------
Albert R. Dowden Director October 30, 1995
/s/ Michael J. Emmi
- ----------------------------
Michael J. Emmi Director October 30, 1995
/s/ Frederick S. Hammer
- ---------------------------- Director October 30, 1995
Frederick S. Hammer
/s/ Ira M. Lubert
- ---------------------------- Director October 30, 1995
Ira M. Lubert
/s/ Jon W. Yoskin II
- ---------------------------- Director October 30, 1995
Jon W. Yoskin II
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
5 Opinion of Marshall A. Fleisher, Esquire, Vice
President (Legal) and Corporate Secretary of the
Registrant.
23.1 Consent of Ernst & Young LLP.
<PAGE>
Marshall A. Fleisher, Esq.
Vice President (Legal), Corporate Secretary
Direct Dial: 215/772-5153
Fax: 215/772-5173
October 30, 1995
Board of Directors
National Media Corporation
1700 Walnut Street
Philadelphia, PA 19103
Re: Registration Statement on Form S-3
Gentlemen:
I am Vice President (Legal) and Corporate Secretary of National Media
Corporation (the "Company") and have acted in such capacity in connection with
the proposed registration of an aggregate of 8,498,232 shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), on a registration
statement on Form S-3 being filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"). Such registration statement, as it may be amended or supplemented from
time to time, including all exhibits thereto, is referred to hereinafter as the
"Registration Statement."
The Registration Statement relates to the offer and sale by certain of
the Company's shareholders (the "Selling Shareholders"), from time to time, of
up to 554,456 shares of Common Stock issued by the Company to such Selling
Shareholders on October 25, 1995, in connection with the merger of DirectAmerica
Corporation and California Production Group, Inc. with and into a wholly-owned
subsidiary of the Company (the "Merger"). All shares of Common Stock issued by
the Company in connection with the Merger are hereinafter referred to as the
"Merger Shares."
The Registration Statement also relates to the offer and sale by
certain Selling Shareholders, from time to time, of up to 2,557,960 shares of
Common Stock issuable by the Company upon the conversion of 255,796 shares of
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock"). All shares of Common Stock issuable upon conversion of the
Series B Preferred Stock are hereinafter referred to as the "Series B Shares."
The Registration Statement also relates to the offer and sale by
certain Selling Shareholders, from time to time, of up to an aggregate of
5,385,816 shares of Common Stock issuable by the Company upon the exercise of
Warrants (as hereinafter defined) issued by the Company. The Warrants consist of
(i) 3,069,552 Common Stock purchase warrants (the "Acquisition Warrants") issued
by the Company to certain of the Selling Shareholders in connection with their
purchase of the Series B Preferred Stock during the period of October, 1994
through December, 1994; (ii) 2,250,000 Common Stock purchase warrants (the "Loan
Warrants") issued by the Company to certain of the Selling Shareholders in
connection with a $5.0 million term loan made by such Selling Shareholders to
the Company in October, 1994; and (iii) 66,264 Common Stock purchase warrants
(the "Settlement Warrants") issued by the Company in February 1995 in connection
with
<PAGE>
Board of Directors
October 30, 1995
Page 2
the settlement of certain disputes between the Company and The Wall Street
Group, Inc. The Acquisition Warrants, Loan Warrants and Settlement Warrants are
hereinafter collectively referred to as the "Warrants." The 5,385,816 shares of
Common Stock issuable upon exercise of the Warrants are hereinafter referred to
as the "Warrant Shares."
In rendering the opinions set forth herein, I have examined: (i) the
Company's Certificate of Incorporation and Bylaws, each as amended and as
presently in effect; (ii) the Registration Statement; (iii) those documents and
instruments pursuant to which the Merger Shares, Series B Preferred Stock and
Warrants described above were issued; (iv) minutes of the corporate proceedings
with respect to the issuance of the Merger Shares, Series B Preferred Stock and
Warrants described above; and (v) such officers' certificates, corporate records
and other documents as I have deemed necessary or appropriate for purposes of
rendering the opinions expressed herein.
In rendering such opinions, I have assumed (other than with respect to
the records of the Company or documents to which the Company or any of its
officers or directors are signatories) the authenticity of all documents and
records examined, the conformity with the original documents of all documents
submitted to me as copies and the genuineness of all signatures.
The opinions expressed herein are based solely upon my review of the
documents and other materials expressly referred to above. Other than such
documents and other materials, I have not reviewed any other documents in
rendering such opinions. Such opinions are therefore qualified by the scope of
that document examination.
Based upon and subject to the foregoing, and on such other examination
of law and fact as I have deemed necessary or appropriate in connection
herewith, I am of the opinion that:
1. The Merger Shares are duly authorized, validly issued, fully paid
and nonassessable.
2. The 255,796 outstanding shares of Series B Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable and, upon conversion of
the Series B Preferred Stock in accordance with the terms thereof, the Series B
Shares will be duly authorized, validly issued, fully paid and nonassessable.
3. The Warrants have been duly authorized, executed and delivered by
the Company and, when exercised in accordance with the terms thereof, the
Warrant Shares will be duly authorized, validly issued, fully paid and
nonassessable.
I have made such investigation of the General Corporation Law of the
State of Delaware as I have considered appropriate for the purposes of rendering
the opinions expressed herein. I am qualified to practice law in the
Commonwealth of Pennsylvania only. This opinion is, accordingly, limited to the
law of the Commonwealth of Pennsylvania, the Federal law of the United States
<PAGE>
Board of Directors
October 30, 1995
Page 3
and the General Corporation Law of the State of Delaware. Except as expressly
otherwise noted herein, this opinion is given as of the date hereof.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to me under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement. In
giving such consent, I do not thereby admit that I come within the category of
persons whose consent is required under Section 7 of the Act, or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
Sincerely,
/s/ Marshall A. Fleisher
-------------------------------------
Marshall A. Fleisher
for NATIONAL MEDIA CORPORATION
MAF:aty
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of National Media
Corporation for the registration of 8,498,232 shares of its common stock and to
the incorporation by reference therein of our report dated May 12, 1995, with
respect to the consolidated financial statements and schedule of National Media
Corporation included in its Annual Report (Form 10-K) for the year ended March
31, 1995, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Philadelphia, Pennsylvania
October 27, 1995
