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As filed with the Securities and Exchange Commission on November 28, 1997
Registration No. 333-36637
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Amendment No. 1
to
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)
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(Address of principal executive offices)
Brian J. Sisko, Senior Vice President and General Counsel
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(Name and address of agent for service)
(215) 988-4600
(Telephone number, including area code, of agent for service)
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, 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 investment 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>
<S> <C> <C> <C> <C>
Proposed Proposed Amount of
Title of Securities Amount to be Maximum Offering Maximum Aggregate Registration
to be Registered Registered Price Per Share Offering Price Fee
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.01 per share 8,241,000(1)(2)(3)(4)(5)(6) $4.375/share(7) $42,155,000 $12,784.00(8)
</TABLE>
(1) Includes 7,000,000 shares of Registrant's Common Stock issuable upon
conversion of the Registrant's Series C Convertible Preferred Stock.
For purposes of estimating the number of shares of Common Stock to be
included in this Registration Statement, the Company calculated
approximately 212% of the number of shares of Common Stock issuable in
connection with the conversion of the Series C Convertible Preferred
Stock (based on the currently applicable conversion price of $6.06 per
share as set forth in the Series C Certificate of Designations,
Preferences and Rights).
(2) Includes 989,413 shares of Registrant's Common Stock issuable upon
exercise of warrants (the "Series C Warrants") issued in connection
with the Series C Convertible Preferred Stock.
(3) Includes 125,000 shares of Registrant's Common Stock issuable upon
exercise of warrants (the "Bank Warrants") issued to CoreStates Bank,
N.A. in connection with the extension of the Company's principal credit
facility.
(4) Includes 26,587 shares of Registrant's Common Stock issued in connection
with Registrant's acquisition of Nancy Langston & Associates, Inc. in
August 1996.
(5) Includes 100,000 shares of Registrant's Common Stock issuable upon
exercise of options (the "NW Options") issued to Natwest Securities
Corp.
(6) In addition to the shares of Common Stock set forth in the Calculation
of Registration Fee Table, which includes a good faith estimate of the
number of shares of Common Stock underlying the Series C Convertible
Preferred Stock, the Series C Warrants, the Bank Warrants and the NW
Options, pursuant to Rule 416 of the Securities Act of 1933, as amended
(the "Securities Act"), this Registration Statement also registers such
additional number of shares of the Registrant's Common Stock as may
become issuable (i) upon conversion of the Series C Convertible
Preferred Stock, (ii) upon exercise of the Series C Warrants, Bank
Warrants or NW Options, or (iii) as a result of any premium paid on the
Series C Convertible Preferred Stock in Common Stock, stock splits,
stock dividends and anti-dilution provisions (including by reason of the
floating rate conversion price mechanism, as set forth in the Series C
Certificate of Designations, Preferences and Rights).
(7) Based on the closing sales price of the Registrant's Common Stock as
reported by the New York Stock Exchange on November 25, 1997, estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933.
(8) $12,642.00 of such fee was previously paid at the time of the original
filing of this Registration Statement.
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 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.
<PAGE>
"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."
<PAGE>
SUBJECT TO COMPLETION
PROSPECTUS
NATIONAL MEDIA CORPORATION
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(215) 988-4600
8,241,000 Shares of Common Stock
This prospectus concerns the offer and sale by the selling stockholders
named herein (the "Selling Stockholders"), from time to time, of up to 8,241,000
common shares (the "Offered Shares"), par value $.01 per share (the "Common
Stock") of National Media Corporation (together with its subsidiaries, the
"Company").
The Offered Shares consist of Common Stock which has been issued by the
Company to one of the Selling Stockholders, Nancy Langston (the "Langston
Shares"); or which is issuable by the Company (i) upon conversion by certain of
the Selling Stockholders (as defined herein, the "Series C Investors") of Series
C Convertible Preferred Stock, par value $.01 per share, of the Company (the
"Series C Preferred Stock") held by such Selling Stockholders (the "Conversion
Shares"), (ii) upon the exercise of warrants (the "Series C Warrants") issued by
the Company to the Series C Investors (the "Series C Warrant Shares"); (iii)
upon the exercise of warrants (the "Bank Warrants") issued by the Company to
another of the Selling Stockholders (the "Bank") (the "Bank Shares"); and (iv)
upon the exercise of warrants (the "NW Options") held by another of the Selling
Stockholders ("NW") (the "NW Shares"). The Series C Warrants and the Bank
Warrants are sometimes hereinafter collectively referred to as the "Warrants".
Nancy Langston, the Series C Investors, NW and the Bank are sometimes
collectively referred to herein as the "Selling Stockholders."
In addition to the Offered Shares, which include a good faith estimate of
the number of shares underlying the Series C Preferred Stock, the Series C
Warrants, the Bank Warrants and the NW Options, pursuant to Rule 416 of the
Securities Act of 1933, as amended (the "Securities Act"), this Prospectus also
covers such additional number of shares of Common Stock as may become issuable
upon conversion of the Series C Preferred Stock, exercise of the Warrants, as a
result of any premium paid on the Series C Preferred Stock in Common Stock,
stock splits, stock dividends and anti-dilution provisions (including, by reason
of any reduction in the floating rate conversion price mechanism of the
Preferred Stock).
None of the proceeds from the sale of the Offered Shares by the Selling
Stockholders will be received by the Company. However, the Company will receive
proceeds from the exercise of the Warrants if the Warrants are exercised. The
Company will pay substantially all of the expenses with respect to the offering
and sale of the Offered Shares to the public, including the costs associated
with registering the Offered Shares under the Securities Act and preparing and
printing this Prospectus. Normal underwriting commission and broker fees,
however, as well as any applicable transfer taxes, are payable individually by
the Selling Stockholders.
The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
and the Philadelphia Stock Exchange ("PHLX") under the symbol "NM." On November
25, 1997, the closing sale price for the Common Stock, as quoted on the NYSE,
was $4.375 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY OTHER AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November , 1997.
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Pursuant to this Prospectus, the Offered Shares may be sold by the
Selling Stockholders, from time to time while the Registration Statement to
which this Prospectus relates is effective, on the NYSE, the PHLX or
otherwise at prices and terms prevailing at the time of sale, at prices and
terms related to such prevailing prices and terms, in negotiated transactions
or at fixed prices. The Selling Stockholders have advised the Company that
they currently intend to sell all or a portion of the Offered Shares pursuant
to this Registration Statement from time to time in any manner described
under "Plan of Distribution." See "Plan of Distribution." Notwithstanding the
registration of the offer and sale of Offered Shares hereunder to subsequent
purchasers, Selling Stockholders to whom the Offered Shares were initially
issued by the Company, whether or not affiliates of the Company, that acquire
the Langston Shares, the Conversion Shares, the Series C Warrant Shares, the
NW Shares or the Bank Shares will be required to deliver this Prospectus in
accordance with the Securities Act in connection with any transaction
involving the resale of such securities.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE AS
OF WHICH INFORMATION IS SET FORTH HEREIN.
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 and other information with the Commission. Such reports,
proxy and information statements and other information 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. Such reports and other information filed with the
Commission can be reviewed through the Commission's Electronic Data Gathering
Analysis and Retrieval System, which is publicly available through the
Commission's website (http:www.sec.gov). The Common Stock of the Company is
listed on the NYSE and the PHLX and reports, proxy and information material and
other information concerning the Company may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and the PHLX, 1900 Market
Street, Philadelphia, Pennsylvania 19103.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act with respect to the securities offered hereby. 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. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
the Company and the securities offered hereby. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained upon payment of the prescribed fee or may be examined
without charge at the Public Reference Section of the Commission described
above. Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS 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, 1997 (the "Form 10-K");
(b) Amendments to the Form 10-K filed on Form 10-K/A, dated,
respectively, July 28, 1997 and December , 1997
(together with the Form 10-K, the "1997 Annual
Reports");
(c) The Company's Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1997 and September 30, 1997;
(d) The Company's Current Reports on Form 8-K, dated April 28, 1997,
June 30, 1997 and September 18, 1997; and
(e) 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 documents filed 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
completion or termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be part hereof from the date of filing
of such documents. Any statement contained in a document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall
be deemed
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to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request, a copy of any or all of such documents which are incorporated herein
by reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this
Prospectus incorporates). Written or oral requests for copies should be
directed to National Media Corporation, Eleven Penn Center, Suite 1100, 1835
Market Street, Philadelphia, Pennsylvania 19103; Attention: Director of
Investor Relations, phone number 215-988-4600.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking" statements regarding potential
future events and developments affecting the business of the Company. Such
statements relate to, among other things, (i) competition for customers for its
products and services; (ii) the uncertainty of developing or obtaining rights to
new products that will be accepted by the market and the timing of the
introduction of new products into the market; (iii) the limited market life of
the Company's products; and (iv) other statements about the Company or the
direct response consumer marketing industry.
The Company's ability to predict the results or the effect of any pending
events on the Company's operating results is inherently subject to various risks
and uncertainties, including competition for products, customers and media
access; the risks of doing business abroad; the uncertainty of developing or
obtaining rights to new products that will be accepted by the market; the
limited market life of the Company's products; and the effects of government
regulations. Reference is made in particular to the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1997 Annual Report incorporated in this Prospectus
by reference.
THE COMPANY
The Company is principally engaged in the use of direct response
transactional television programming, known as infomercials, to sell consumer
products. The Company manages all phases of direct marketing the majority of its
products in both the United States and international markets, including product
selection and development, manufacturing by third parties, production and
broadcast of infomercials, order processing and fulfillment and customer
service.
The Company is engaged in direct marketing of consumer products in the
United States and Canada through its wholly-owned subsidiary, Quantum North
America, Inc. (formerly Media Arts International, Ltd.), which the Company
acquired in 1986, and internationally through its wholly-owned subsidiaries:
Quantum International Limited, which the Company acquired in 1991; Quantum
International Japan Company Limited, which the Company formed in June 1995;
and Prestige Marketing Limited and Prestige Marketing International Limited
(collectively, "Prestige") and Suzanne Paul Holding Pty Limited and its
operating subsidiaries (collectively, "Suzanne Paul"), which the Company
acquired in July 1996. The Company produces a substantial number of
infomercials through DirectAmerica Corporation ("DirectAmerica"), which the
Company acquired in October 1995 and Positive Response Television, Inc.
("Positive Response"), which the Company acquired in May 1996.
The Company is a Delaware corporation, with its principal executive offices
located at Eleven Penn Center, Suite 1100, 1835 Market Street, Philadelphia,
Pennsylvania 19103 and its telephone number is 215-988-4600.
RISK FACTORS
The purchase of the shares of Common Stock offered hereby involve certain
risks. In addition to the other information set forth and incorporated by
reference in this Prospectus, the following factors should be considered
carefully by prospective investors in evaluating an investment in the shares of
Common Stock offered hereby. The Company's fiscal year ends on March 31.
References to fiscal 1997, fiscal 1996 etc. refer to the fiscal period ending in
the indicated calendar year.
RECENT LOSSES; CASH FLOW
The Company has suffered net losses in three of its last four fiscal years,
including net losses of approximately $45.7 million in fiscal 1997,
approximately $670,000 in fiscal 1995 and approximately $8.7 million in fiscal
1994. The Company also reported a net loss of approximately $28.0 million for
the first six months of fiscal 1998. Based upon the deterioration which occurred
in the Company's financial condition during fiscal 1997 and the presence of
certain other conditions, as of July 14, 1997, the Company's independent
auditors opined that substantial doubt existed as to the Company's ability to
continue as a going concern. During calendar year 1997, the Company has also
experienced, as a result of such losses and other circumstances, significant
cash flow difficulties. While the Company has developed a business plan and
implemented a number of programs designed to reduce costs and return the Company
to profitability, there can be no assurance that the Company's business plan
adequately addresses the circumstances and situations which resulted in the
Company's performance in the periods referred to above. Unless the Company has
adequately addressed the reasons for its recent results of operations, there can
be no assurance as to the Company's future results of operations.
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NATURE OF THE INFOMERCIAL INDUSTRY
The worldwide infomercial industry is now characterized by extreme
competition for products, customers and media access. The Company's future in
this industry will depend in part on its access to, and efficient management
of, media time; the introduction of successful products and the full
exploitation of such products through not only direct marketing but also
traditional retail marketing; its ability to enhance its product lines and
support product marketing and sales with efficient order fulfillment and
customer services; and its ability to successfully integrate the entities or
businesses the Company has or may acquire into an efficient global company.
The future revenues of the business will depend substantially on the
Company's ability to create and maintain an effective, integrated
organization to develop, introduce and market products that (i) address
changing consumer needs on a timely basis; (ii) establish and maintain
effective distribution channels (infomercial and non-infomercial) for its
products; and (iii) develop new geographic markets while expanding
established geographic markets. There can be no assurance that the Company
will be able to achieve these goals. While the Company maintains an internal
product development group responsible for seeking out new products from third
parties, there can be no assurance that present and potential third party
product providers will choose to market products through the Company in the
future. Delays in product introductions and short falls in successful product
introductions played a significant part in the Company's fiscal 1997 results
of operations. Any significant delays or reductions in product introductions
in the future periods could have a material adverse effect on the Company's
future results of operations.
DEPENDENCE ON FOREIGN SALES
The Company had no sales outside the United States and Canada prior to June
1991. The Company now markets products to consumers in over 70 countries. In
fiscal 1997, 1996 and 1995, approximately 47.4%, 51.6% and 45.7%, respectively,
of the Company's net revenues were derived from sales to customers outside the
United States and Canada. Such sales represented a 12.4% increase in fiscal 1997
from fiscal 1996, a 87.6% increase in fiscal 1996 from fiscal 1995 and a 74.8%
increase in fiscal 1995 from fiscal 1994. In fiscal 1997, 1996 and 1995, sales
in Germany accounted for approximately 5.7%, 7.0% and 13.0%, respectively, of
the Company's net revenues. In early 1994, the Company began airing its
infomercials in Asia. Sales of the Company's products in Asia accounted for
approximately 19.8% of' the Company's net revenues for fiscal 1997. Sales of the
Company's products in Asia, a significant portion of which were made in Japan,
accounted for approximately 17.7% of the Company's net revenues for fiscal 1997.
The Company experienced a decline of approximately 30.3% in its Japanese net
revenues in fiscal 1997 compared to fiscal 1996. During the early part of fiscal
1998 this trend has continued. In the first six months of fiscal 1998, as
compared to the first six months of fiscal 1997, the Company's revenues in its
Asian marketplace had declined by 42.2%, 4.8% of which is attributable to
currency devaluation. Geographical expansion of sales activity results in
increased working capital requirements as a result of additional lead time for
delivery of and payment for product prior to receipt of sale proceeds. While the
Company's foreign operations have the advantage of airing infomercials that have
already proven successful in the United States market, as well as successful
infomercials produced by other international companies with limited media access
and distribution capabilities, there can be no assurance that the Company's
foreign operations will continue to generate increases in net revenues.
Competition in the Company's international marketplace is increasing rapidly. In
addition, the Company is subject to many risks associated with 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 have
a material adverse effect on the Company's results of operations.
ENTERING INTO NEW MARKETS
As the Company enters into new markets, including countries in Asia and
South America, it is faced with the uncertainty of never having done business in
those commercial, political and social settings. 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, some unforeseen circumstance could arise which would limit the Company's
ability to continue to do business or to expand in that new market.
DEPENDENCE ON NEW PRODUCTS; UNPREDICTABLE MARKET LIFE; INVENTORY MANAGEMENT
AND PRODUCT RETURNS
The Company is dependent on its continuing ability to develop or obtain
rights to new products to supplement or replace existing products as they
mature through their product life cycles. The Company's future results of
operations will also be dependent upon its ability to proactively manage its
products through their life cycles. The Company's five most successful
products in each of fiscal 1997, 1996 and 1995 accounted for approximately
41.2%, 46.0% and 54.0%, respectively, of the Company's net revenues for such
periods. For the most part, the Company's five most successful products
change from year to year. Revenues are dependent from year to year on the
introduction of new products. Even if the Company is able to introduce new
products, there can be no assurance that such new products will
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be successful. The Company's future results of operations depend on its
ability to spread its revenue (sales) stream over a larger number of products
in a given period and to more effectively exploit the full revenue potential
of each product it introduces through all levels of consumer marketing,
whether directly or through third parties.
Product sales and results of operations for a given period will depend upon,
among other things, a positive customer response to the Company's infomercials,
the Company's effective management of product inventory and the stage in their
life cycles of products sold during such period. Customer response to
infomercials depends on many variables, including, the appeal of the products
being marketed, the effectiveness of the infomercials, 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 the event the Company does not have an adequate supply of inventory, as a
result of production delays or shortages or inadequate inventory management or
cash flow difficulties, it may lose potential product sales. The ability of the
Company to maintain systems and procedures to more effectively manage its
inventory (and its infomercial airings), in the domestic as well as
international markets, is of critical importance to the Company's continuing
cash flow and results of operations. It is possible that, during a product's
life, unanticipated obsolescence of such product may occur or problems may arise
regarding regulatory, intellectual property, product liability or other issues
which may affect the continued viability of the product for sale despite the
fact that the Company may still hold a sizable inventory position in such
product. Most of the Company's products have a limited market life. It is
therefore, extremely important that the Company fully realize the potential of
each successful product.
Historically, the majority of products generate their most significant
domestic revenue in their introductory year. Foreign revenues have tended to
have been generated more evenly over a somewhat longer period. In the event the
number of times an infomercial is broadcast within a market is increased, the
market life of such product in such market may decrease. There can be no
assurance 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 adapt to market conditions and competition as well
as other factors which affect the life cycles of its products and 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.
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, either pursuant to the Company's warranties or otherwise. While the
Company establishes reserves against such returns which it believes 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 would be adversely affected.
DEPENDENCE ON THIRD PARTY MANUFACTURERS AND SERVICE PROVIDERS
The Company is dependent on third party sources, both foreign and domestic,
to manufacture all of its products, although it does not depend on any
particular supplier for a majority of its products. The Company is also
dependent to an extent upon a number of companies which serve to fulfill orders
placed for the Company's products and/or provide telemarketing services. The
inability of the Company, either temporarily or permanently, to obtain a timely
supply of product to fulfill sales orders for a specific product or to satisfy
orders for such product could have a material adverse effect on the Company's
results of operations. Moreover, because the time from this initial approval of
a product by the Company's product development personnel to the first sale of
such product is relatively short, the Company's ability to cause its
manufacturing sources to meet its production and order fulfillment deadlines at
reasonable costs and produce a high-quality product or render quality service is
important to its business. There can be no assurance that the Company will
successfully manage this process in such a way to maximize its sales of its
products. Since the Company often relies on foreign manufacturers, it must allow
longer lead times for products to fulfill customer orders. Utilizing such
foreign manufacturers exposes the Company to the general risks of doing business
abroad.
DEPENDENCE ON MEDIA ACCESS; EFFECTIVE MANAGEMENT OF MEDIA TIME
The Company is dependent on having access to media time to televise its
infomercials on cable networks, network affiliates and local stations. The
Company's future results of operation will also depend upon the Company's
ability to manage its media time, taking advantage of long-term purchases where
prudent and spot purchases where necessary. This media management function must
also include a meaningful coordination between available infomercials and
available media time. In the normal course of business, the Company's media
contracts expire pursuant to their terms from time to time. There can be no
assurance that, as existing contracts expire, 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
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assemble programming for transmission to multiple and local cable system
operators. These cable system 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, these operators will begin to charge the Company to
continue broadcasting the Company's infomercials or limit the amount of time
available for broadcast. 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, domestically or internationally, including, but not limited to, any
failure to renew or extend existing agreements, could have a material adverse
effect on its results of operations. There can also be no assurances that, even
if the Company secures media access, its programming will attract viewers or
that its products will enjoy consumer acceptance. In addition, periodically, due
to world events, media access and the number of persons viewing the Company's
infomercials in one or more markets may be substantially diminished. In such
circumstances, the Company's results of operations for such periods may be
adversely affected. In recent periods the Company has experienced an increase in
the demand by international media suppliers for fixed rates and/or for minimum
revenue guarantees, both of which increase the Company's risk.
A significant portion of the Company's media time has historically been
purchased under contracts which are one year or greater in length. Whenever the
Company makes advance purchases and commitments to purchase media time, if the
Company does not manage such media time effectively, such failure could have a
material adverse effect on the Company's results of operations. In the event the
Company is unable to utilize all of the media time it has acquired, it attempts
to arrange to sell a portion of its media time to others. 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 on
terms favorable to the Company. The inability of the Company to extend one or
more of such contracts on reasonable terms as they expire could have a material
adverse effect on the Company's results of operations.
LITIGATION INVOLVING THE COMPANY
The infomercial industry has historically been very litigious and the
Company in recent years has been involved in significant legal proceedings
and has incurred significant charges in prior periods related to such
litigation. Abbreviated information regarding the status of current material
pending litigation 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 reports filed by the
Company pursuant to the Exchange Act and incorporated by reference herein.
Such descriptions variously include information relating to the status of the
proceedings and the Company's evaluation of the claims made against it.
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 above, the Company consummated the acquisition of DirectAmerica
in October 1995. Further, as discussed above, the Company consummated the
acquisition of Positive Response in May 1996. As a result of these
acquisitions, all liabilities of DirectAmerica and Positive Response became
liabilities of the respective wholly-owned subsidiary of the Company into
which each of DirectAmerica and Positive Response was merged. The Company
also acquired Prestige and Suzanne Paul in July 1996, including all of their
respective liabilities.
NATIONAL MEDIA LITIGATION
WWOR LITIGATION
In March 1997, WWOR-TV filed a breach of contract action in the United
States District Court for New Jersey against one of the Company's operating
subsidiaries alleging that the subsidiary wrongfully terminated a contract for
the purchase of media time, seeking in excess of $1,000,000 in compensatory
damages. The Company is contesting the action. At this stage it is not possible
to predict the outcome of this matter; however, even if plaintiffs were to
succeed on all of their claims, it is not believed that such result would have a
material adverse impact on the Company's financial condition or results of
operations.
PRTV LITIGATION
PRTV SHAREHOLDERS' CALIFORNIA CLASS ACTION
On May 1, 1995, prior to the acquisition of PRTV by the Company, a
purported class action suit was filed in the United States District Court for
the Central District of California against PRTV and its principal executive
officers alleging that PRTV made false and misleading statements in its
public filings, press releases and other public statements with respect to
its business and financial prospects. The suit was filed on behalf of all
persons who purchased PRTV common stock during the period from January 4,
1995 to April 28, 1995. The suit sought unspecified compensatory damages and
other equitable relief. On or about September 25, 1995, the plaintiffs filed
a second amended complaint which added additional officers as defendants and
attempted to set forth new facts to support plaintiff's entitlement to
8
<PAGE>
legal relief. The Company reached an agreement in principle to settle this
action in fiscal year 1997 which provides for the payment of $550,000 to the
class, 66% of which is to be paid by PRTV's insurance carrier. The Company
recorded a charge of $187,000 during fiscal 1997 in connection with this
matter, reflecting its portion of such settlement. Such settlement is
contingent upon final court approval.
SUNTIGER
In late March 1997, Suntiger, Inc. ("Suntiger"), a distributor of
sunglasses, filed suit against PRTV and certain other parties alleging patent
infringement. The Company has reached a settlement with the plaintiffs involving
a going forward business relationship which will have no material adverse effect
on the Company's financial condition or results of operations.
PARKIN
In early October 1997, John Parkin, an on air personality appearing in
certain of the Company's infomercials, brought an action for injunctive relief
and unspecified damages in the United States District Court for the Eastern
District of Pennsylvania, alleging principally breach of contract and
intellectual property based claims. Following court hearings, plaintiff's claims
for injunctive relief were dismissed. While at this stage it is not possible to
predict the outcome of this matter, the Company believes that any resolution of
this matter will not have a material adverse effect on the Company's results of
operations or financial condition.
REGULATORY MATTERS
The infomercial industry is regulated by the Federal Trade Commission (the
"FTC"), the United States Post Office, the Consumer Product Safety Commission,
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 or results of operations. As a result of prior
settlements with the FTC, the Company has agreed to two consent orders. Prior to
the Company's acquisition of Positive Response, Positive Response and its Chief
Executive Officer, Michael S. Levey, also agreed to a consent order with the
FTC. Among other things, such consent orders require the Company, Positive
Response and Mr. Levey to submit compliance reports to the FTC staff. The
Company, Positive Response and Mr. Levey have submitted compliance reports as
well as additional information requested by the FTC staff. In June 1996, the
Company received a request from the FTC for additional information regarding two
of the Company's infomercials in order to determine whether the Company was
operating in compliance with the consent orders referred to above. The Company
responded to such request. The FTC later advised the Company that it believed
the Company had violated one of the consent orders by allegedly failing to
substantiate certain claims made in one of its infomercials aired by the Company
between 1993 and 1995. Such infomercials are no longer being aired. The Company
provided information to the FTC to demonstrate substantiation. If the Company's
substantiation is deemed to be insufficient by the FTC, the FTC has a variety of
enforcement mechanisms available to it, including, but not limited to, monetary
penalties. The Company is indemnified by a third party in connection with any
continuing costs or damages related to this matter. While no assurances can be
given, especially given the applicable indemnification, the Company does not
believe that any remedies to which it may become subject will have a material
adverse effect on the Company's results of operations or financial condition.
In addition, in accordance with applicable regulations, the Company notified
the CPSC of breakages which were occurring in its Fitness Strider product. The
Company also notified the CPSC of its replacement of certain parts of the
product with upgraded components. The CPSC reviewed the Company's testing
results in order to assess the adequacy of the Company's upgraded components and
conducted testing of its own. On November 7, 1997, the CPSC informed the
Company that the compliance staff had made a preliminary determination that the
Fitness Strider product and the upgraded component present a substantial product
hazard, as defined under applicable law. The Company and the CPSC Staff are
discussing voluntary action to address the CPSC's concerns, including
replacement of the affected components. At present it is not anticipated that
any action agreed upon, or action required by the CPSC, will have any material
adverse impact on the Company's financial condition or results of operations.
9
<PAGE>
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 territories 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 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 financial condition or results of
operations.
PRODUCT LIABILITY CLAIMS
Products sold by the Company may expose it to potential liability from
claims by users of such products, subject to the Company's rights, in certain
instances, to indemnification against such liability from the manufacturers
of such products. The Company generally requires the manufacturers of its
products to carry product liability insurance, although in certain instances
where a limited quantity of products are purchased from non-U.S. vendors, the
vendor may not be formally required 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, including
coverage in amounts which it believes to be adequate. 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.
COMPETITION
The Company competes directly with many 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 PERSONNEL
The Company's executive officers have substantial experience and expertise
and make significant contributions to the Company's growth and success. The
unexpected loss of the services of one or more of such individuals could have a
material adverse effect on the Company.
CONVERTIBLE SECURITIES; SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the shares of Common Stock currently issued,
issuable upon conversion or exercise of securities convertible into or
exercisable for Common Stock or of the shares of Common Stock offered hereby
could adversely affect the market value of the Common Stock, depending upon the
timing of such sales, and, in the case of convertible and exercisable
securities, may effect a dilution of the book value per share of Common Stock.
As of September 26, 1997, 20,000 shares of the Company's Series C
Preferred Stock were issued and outstanding. Each share of the Series C
Preferred stock is convertible into such number of shares of Common Stock as
is determined by dividing the stated value ($1,000) of the shares of Series C
Preferred Stock (as such value is increased by a premium of six percent (6%)
per annum based on the number of days the Series C Preferred Stock is held)
by the then current conversion price (which is determined by reference to the
Certificate of Designations, Preferences and Rights of the Series C Preferred
Stock and the then current market price). The terms of the Series C Preferred
Stock did not provide for a beneficial conversion price upon issuance. If
converted on September 26, 1997, the Series C Preferred Stock would have been
convertible into approximately 3,300,330 shares of Common Stock. Depending on
market conditions at the time of conversion, the number of shares issuable
could prove to be significantly greater in the event of a decrease in the
trading price of the Common Stock. Purchasers of Common Stock could therefore
experience substantial dilution upon conversion of the Series C Preferred
Stock. The shares of Series C Preferred Stock are not registered and may be
sold only if registered under the Securities Act or sold in accordance with
an applicable exemption from registration, such as Rule 144. The shares of
Common Stock into which the Series C Preferred Stock may be converted are
being registered pursuant to this Registration Statement.
As of November 15, 1997, approximately 10,376,921 shares of Common Stock
were reserved for issuance upon exercise of outstanding warrants (including the
Warrants), options and the Company's Series B Convertible Preferred Stock and an
additional 10,000,000 shares of Common Stock were reserved for issuance upon
conversion of the Series C Preferred Stock and exercise of the Series C
Warrants. At November 15, 1997, there were
10
<PAGE>
26,212,716 shares of Common Stock outstanding, nearly all of which were
freely tradeable without restriction under the Securities Act unless held by
affiliates.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Offered
Shares of Common Stock offered hereby. The Selling Stockholders will receive all
of the net proceeds from the sale of the Offered Shares of Common Stock offered
hereby. Upon the exercise of the Warrants by the holders thereof, the Company
will receive the exercise price of the Warrants. To the extent the Warrants are
exercised, the Company will apply the proceeds thereof to its general corporate
purposes and working capital.
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of Common Shares beneficially owned by such Selling Stockholders as of
November 15, 1997 and the number of Offered Shares which may be offered for sale
pursuant to this Prospectus by each such Selling Stockholder. Other than for
CoreStates Bank, N.A. (or its predecessor in interest), which has been the
Company's principal lender since April 1995, and Nancy Langston, from whom the
Company purchased, and who is President of, the Company's Nancy Langston &
Associates, Inc. subsidiary, none of the Selling Stockholders has held any
position, office or other material relationship with the Company or any of its
affiliates within the past three years other than as a result of his or its
ownership of Common Shares. The Offered Shares may be offered from time to time
by the Selling Stockholders named below. See "Plan of Distribution." However,
such Selling Stockholders are under no obligation to sell all or any portion of
such Offered Shares, nor are the Selling Stockholders obligated to sell any such
Offered Shares immediately under this Prospectus. Because the Selling
Stockholders may sell all or part of their Offered Shares, no estimate can be
given as to the number of Common Shares that will be held by any Selling
Stockholder upon termination of any offering made hereby.
Pursuant to Rule 416 of the Securities Act, Selling Stockholders may also
offer and sell additional Common Shares issued with respect to the Series C
Preferred Stock and the Warrants as a result of any premiums paid on the Series
C Preferred Stock in Common Stock, stock splits, stock dividends and anti-
dilution provisions (including by reason of the floating rate conversion price
mechanism of the Series C Preferred Stock in accordance with the terms thereof).
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
OWNED AFTER
OFFERING (1)
-------------------------
NUMBER OF COMMON
SHARES BENEFICIALLY COMMON SHARES PERCENT OF
NAME OF SELLING STOCKHOLDER OWNED PRIOR TO OFFERING OFFERED HEREBY NUMBER OUTSTANDING
- ----------------------------- -------------------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Capital Ventures International(2)............. 5,992,060(3) 5,992,060 0 0
RGC International Investors,.................. 1,997,353(3) 1,997,353 0 0
LDC(2)
CoreStates Bank, N.A.......................... 125,000(4) 125,000 0 0
Nancy Langston................................ 26,587(5) 26,587 0 0
Natwest Securities Corp....................... 100,000(6) 100,000 0 0
------------ ---------- --- ---
------------ ---------- --- ---
</TABLE>
- ------------------------
(1) Assumes the sale of all Offered Shares.
(2) Pursuant to that certain Securities Purchase Agreement, dated September 4,
1997, among the Company, Capital Ventures International and RGC
International Investors, LDC (collectively, the "Series C Investors"), the
Series C Investors purchased an aggregate of 20,000 shares of Series C
Preferred Stock which are convertible into Common Shares and Series C
Warrants to acquire 989,413 Common Shares.
(3) Represents the pro rata allocation among the Series C Investors of
7,000,000 Common Shares which may become issuable upon conversion of the
Series C Preferred Stock and 989,413 Common Shares issuable upon exercise
of the Series C Warrants which the Company is registering hereunder
pursuant to the registration rights agreement between the Company and the
Series C Investors. As of the date of this Prospectus, the actual number
of shares of Common Stock issuable upon conversion of Series C Preferred
Stock and exercise of the Series C Warrants is indeterminate, is subject
to adjustment and could be materially less or more than such estimated
number depending on factors which cannot be predicted by the Company at
this time, including, among other factors, the future market price of the
Common Stock. The actual number of shares of Common Stock offered hereby,
and included in the Registration Statement of which this Prospectus is a
part, includes such additional number of shares of Common Stock as my be
issued or issuable upon conversion of the Series C Preferred Stock and
exercise of the Series C Warrants by reason of the floating rate
conversion price mechanism or other adjustment mechanisms described
therein, or by reason of any stock split, stock dividend or similar
transaction involving the Common Stock, in order to prevent dilution, in
accordance with Rule 416 under the Securities Act. Pursuant to the terms
of the Certificate of Designations, Preferences and Rights of the Series
C Preferred Stock, the actual number of Common Shares issuable upon
conversion of the Series C Preferred Stock will equal (in addition to the
Common Shares issuable upon exercise of the Series C Warrants) (i) the
aggregate stated value of the shares of Series C Preferred Stock then
being converted (i.e., $1,000 per
12
<PAGE>
share), plus a premium in the amount of 6% per annum accruing from
September 18, 1997, through the date of conversion (unless the Company
chooses to pay such premium in cash) plus any conversion default amount
(as defined in the Certificate of Designations, Preferences and Rights of
the Series C Preferred Stock), divided by (ii) (x) if the conversion
occurs on or before March 17, 1998, a conversion price equal to $6.06 per
share, or (y) in the case of conversions after March 18, 1998, a
conversion price equal to the lower of $6.06 per share and the lowest
volume weighted average sale (as determined in accordance with the
Certificate of Designations, Preferences and Rights of the Series C
Preferred Stock) price of the Common Stock during a specified trading
period immediately prior to such conversion (subject to adjustment in
accordance with the Certificate of Designations, Preferences and Rights
of the Series C Preferred Stock).
Except under certain limited circumstances, no holder of the Series C
Preferred Stock and Series C Warrants is entitled to convert or exercise
such securities to the extent that the shares to be received by such
holder upon such conversion or exercise would cause such holder to
beneficially own more than 4.9% of the Common Shares. Therefore, the
number of shares set forth herein and which a Series C Investor may sell
pursuant to this Prospectus may exceed the number of Common Shares such
Series C Investor would otherwise beneficially own as determined pursuant
to Section 13(d) of the Exchange Act.
(4) Represents 125,000 Common Shares issuable to such Selling Stockholder upon
the exercise of warrants received by such Selling Stockholder in connection
with the extension of the Company's principal credit facility in September
1997.
(5) Consists of 26,587 Common Shares issued to such Selling Stockholder in
connection with the Company's acquisition of Nancy Langston & Associates,
Inc. in August 1996.
(6) Consists of 100,000 Common Shares issuable to such Selling Stockholder upon
the exercise of options transferred to such Selling Stockholder in 1996.
13
<PAGE>
PLAN OF DISTRIBUTION
The Offered Shares are being offered on behalf of the Selling
Stockholders, and, except for the exercise price of the Warrants, the Company
will not receive any proceeds from the Offering. The Offered Shares may be
sold or distributed from time to time by the Selling Stockholders, or by
pledgees, donees or transferees of, or other successors in interest to, the
Selling Stockholders, directly to one or more purchasers (including pledgees)
or through brokers, dealers or underwriters who may act solely as agent or
may acquire Offered Shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at
negotiated prices, or at fixed prices, which may be changed. The sale of the
Offered Shares may be effected in one or more of the following methods: (i)
ordinary brokers' transactions, which may include long or short sales; (ii)
transactions involving cross or block trades or otherwise on the NYSE and
PHLX; (iii) purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this Prospectus;
(iv) "at the market" to or through market makers or into established trading
markets, including direct sales to purchasers or sales effected through
agents; (vi) any combination of the foregoing, or by any other legally
available means. In addition, the Selling Stockholders or their successors in
interest may enter into hedging transactions with broker-dealers who may
engage in short sales of Offered Shares in the course of hedging the position
they assume with the Selling Stockholders. The Selling Stockholders or their
successors in interest may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the
Offered Shares, which Offered Shares may be resold thereafter pursuant to
this Prospectus. There can be no assurance that all or any of the Offered
Shares will be issued to, or sold by, the Selling Stockholders.
Brokers, dealers, underwriters or agents participating in the sale of the
Offered Shares as agents may receive compensation in the form of commissions,
discounts or concessions from the Selling Stockholders and/or purchasers of the
Offered Shares for whom such broker-dealers may act as agent, or to whom they
may sell as principal, or both (which compensation to a particular broker-dealer
may be less than or in excess of customary commissions). The Selling
Stockholders and any broker-dealers or other persons who act in connection with
the sale of Offered Shares hereunder may be deemed to be "Underwriters" within
the meaning of the Securities Act, and any commission they receive and proceeds
of any sale of Offered Shares may be deemed to be underwriting discounts and
commission under the Securities Act. Neither the Company nor any Selling
Stockholder can presently estimate the amount of such compensation. The Company
knows of no existing arrangements between any Selling Stockholder any other
shareholders, broker, dealer, underwriter or agent relating to the sale or
distribution of the Offered Shares.
The Selling Stockholders and any other persons participating in the sale or
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Shares by the
Selling Stockholders or any other such persons. The foregoing may affect the
marketability of the Offered Shares.
The Company will pay substantially all of the expenses incident to the
registration, offering and sale of the Offered Shares to the public other than
commission or discounts of underwriter, broker-dealers or agents. The Company
has also agreed to indemnify certain of the Selling Stockholders and certain
related persons against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Offered Shares has been passed upon for the Company by
Brian J. Sisko, Esq., Senior Vice President and General Counsel of the Company.
EXPERTS
The consolidated financial statements and schedule of National Media
Corporation appearing in the Company's Annual Report (Form 10-K) for the year
ended March 31, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an explanatory
paragraph indicating that matters exist that raise substantial doubt as to the
Company's ability to continue as a going concern) included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule have been incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
14
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus
in connection with the offering described herein and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy a
security other than the shares of Common Stock offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein
is correct as of any date subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
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Page
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Available Information................................................. 3
Incorporation of Certain Documents by Reference....................... 3
Forward-Looking Statements............................................ 5
The Company........................................................... 5
Risk Factors.......................................................... 5
Use of Proceeds....................................................... 11
Selling Stockholders.................................................. 12
Plan of Distribution.................................................. 14
Legal Matters......................................................... 14
Experts............................................................... 14
8,241,000 Shares of Common Stock
NATIONAL MEDIA CORPORATION
--------------
PROSPECTUS
--------------
NOVEMBER __, 1997
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all
expenses payable by the registrant in connection with the registration of the
Offered Shares, other than underwriting discounts and commissions:
Registration Fee--Securities and Exchange
Commission........................................ $12,784.00
*Blue Sky fees and expenses.......................... $ 1,000.00
*Accountants' fees and expenses...................... $ 5,000.00
*Legal fees and expenses............................. $10,000.00
*Printing and EDGAR expenses......................... $ 5,000.00
*Miscellaneous....................................... $ 2,500.00
----------
Total...................................... $36,284.00
----------
----------
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* Estimate
Item 15. Indemnification of Directors and Officers.
(A) The Delaware General Corporation Law provides that, to the
extent that any director, officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company) to which such person
was a party by reason of the fact that such person is or was a director,
officer, employee or agent of the Company or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, the
Company shall indemnify any such person against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith.
(B) In addition, the Company has the power to indemnify any of the
persons referred to above against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any such action, suit or proceeding, if such
person acted in good faith and in a manner such person 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 such
person's conduct was unlawful.
Notwithstanding the foregoing, in connection with any action or suit
by or in the right of the Company to procure a judgment in its favor, the
Company shall not make any indemnification as described above in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Company unless, and only to the extent that, the Court of
Chancery (in the State of Delaware) or the court in which such action or suit
was brought shall determine, upon application, that despite adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(C) The Company also has the power, under the Delaware General
Corporation Law, to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any other liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Company would have the power to indemnify
such person against such liability under the foregoing provisions.
(D) The indemnification provided by or allowable pursuant to the
Delaware General Corporation Law shall or may, as applicable, continue as to
a person who has ceased to be a director, officer, employee or agent of the
Company and shall inure to the benefit of the heirs, executors and
administrators of such person.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Schedule of Exhibits.
Exhibit
Number Exhibit
------- -------
* 4.1 Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock.
* 4.2 Form of Warrant issued in connection with Series C
Convertible Preferred Stock.
* 4.3 Form of Registration Rights Agreement by and among the
Company and the Series C Investors.
* 4.4 Securities Purchase Agreement, dated September 4, 1997,
among the Company and the Series C Investors.
** 4.5 Form of Warrant issued to CoreStates Bank, N.A.
** 4.6 Option issued to Natwest Securities Corp.
5 Opinion and Consent of Brian J. Sisko, Esquire.
***10.1 Agreement and Plan of Merger and Reorganization dated as
of August 7, 1996, by and among the Company, NLA
Acquisition Corp., Nancy Langston & Associates, Inc. and
Nancy Langston.
23.1 Consent of Ernst & Young LLP, independent auditors, with
respect to the consolidated financial statements of
National Media Corporation for the year ended March 31,
1997.
24 The Powers of Attorney contained on the signature pages
of this Registration Statement are hereby incorporated by
reference.
- --------------
* Incorporated by reference to the Company's Current Report on Form 8-K
dated September 18, 1997.
** To be filed by amendment.
*** Incorporated by reference to the Company's Current Report on Form 8-K
dated August13, 1997.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Amendment No. 1 to Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Philadelphia, Commonwealth of Pennsylvania, on this 28th day of
November, 1997.
NATIONAL MEDIA CORPORATION
BY: /s/ Robert N. Verratti
----------------------
Robert N. Verratti, President
and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities indicated on this 28th day of November, 1997.
Signature Title(s)
- --------- -----------------------------------------------
/s/ Robert N. Verratti President, Chief Executive Officer and Director
- ------------------------
Robert N. Verratti
/s/ Paul R. Brazina* Vice President and Chief Financial Officer
- ------------------------
Paul R. Brazina
* Vice Chairman of the Board, Director
- ------------------------
Constantinos I. Costalas
* Director
- ------------------------
Albert R. Dowden
* Director
- ------------------------
Michael J. Emmi
* Director
- ------------------------
William M. Goldstein
* Chairman of the Board, Director
- ------------------------
Frederick S. Hammer
* Director
- ------------------------
Robert E. Keith, Jr.
Director
- ------------------------
Ira M. Lubert
* Director
- ------------------------
Brian McAdams
* Director
- ------------------------
Warren V. Musser
* Director
- ------------------------
Jon W. Yoskin II
*Attorney-in-fact pursuant to power of attorney filed as part of the original
filing of this Registration Statement.
/s/ Paul R. Brazina
- ------------------------
Paul R. Brazina
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
5 Opinion of Brian J. Sisko, Esq. with respect to the legality
of the shares of Common Stock being registered hereunder.
<PAGE>
EXHIBIT 5
<PAGE>
NATIONAL MEDIA CORPORATION
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, PA 19103
November 28, 1997
Board of Directors
National Media Corporation
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
Re: Registration Statement on Form S-3; File No. 333-36637
Gentlemen:
I am general counsel to National Media Corporation (the "Company") and
have caused to be prepared a registration statement on Form S-3 (File No.
333-36637) in connection with the proposed registration of shares of the
Company's common stock, par value $.01 per share (the "Common Stock")
pursuant to the Securities Act of 1933, as amended (the "Securities 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 shares to be registered (the "Offered Shares") consist of
(i) 7,000,000 shares of Common Stock (the "Series C Conversion Shares")
issuable upon conversion of the Company's Series C Convertible Preferred
Stock, par value $.01 per share (the "Series C Preferred Stock"),
(ii) 989,413 shares of Common Stock (the "Series C Warrant Shares") issuable
upon exercise of warrants issued in connection with the Series C Preferred
Stock, (iii) 125,000 shares of Common Stock (the "Credit Facility Warrant
Shares") issuable upon conversion of warrants issued in connection with the
extension of the Company's principal credit facility, (iv) 100,000 shares of
Common Stock (the "Natwest Option Shares") issuable upon conversion of
options held by Natwest Securities Corp., and (v) 26,587 shares of Common
Stock (the "Langston Shares") issued by the Company in connection with its
acquisition of Nancy Langston & Associates, Inc. The Shares may be offered
and sold from time to time for the account of the persons referred to in the
Registration Statement as "Selling Stockholders."
In this regard, I have examined: (i) the agreements (the "Agreements")
pursuant to which the Selling Stockholders have received or may acquire the
Offered Shares from the Company; (ii) the Company's Certificate of
Incorporation and Bylaws, each as amended and as presently in effect;
(iii) the Registration Statement; and (iv) such officers' certificates,
resolutions, minutes, 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 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.
<PAGE>
Board of Directors
September 29, 1997
Page 2
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 related 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 examinations
of law and fact as I have deemed necessary or appropriate in connection
herewith, I am of the opinion that, (i) the Langston Shares are duly
authorized, validly issued, fully paid and non-assessable shares of Common
Stock and (ii) upon issuance in accordance with the provisions of the
appropriate Agreements, the Series C Conversion Shares, the Series C Warrant
Shares, the Credit Facility Warrant Shares and the Natwest Option Shares will
be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock.
This opinion is limited to the laws of the Commonwealth of Pennsylvania
and the General Corporation Law of the State of Delaware; provided, however,
that no opinion is hereby rendered as to the state securities laws of either
the Commonwealth of Pennsylvania or 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. By giving such consent, I do not hereby admit that I fall within
the category of persons whose consent is required pursuant to Section 7 of
the Securities Act.
Very truly yours,
/s/ Brian J. Sisko, Esq.
Brian J. Sisko, Esq.
