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Filed Pursuant to Rule 424(b)(3)
PROSPECTUS
NATIONAL MEDIA CORPORATION
Eleven Penn Center, Suite 1100
1835 Market Street
Philadelphia, Pennsylvania 19103
(215) 988-4600
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15,000,000 Shares of Common Stock
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This prospectus concerns the offer and sale by the selling stockholders
named herein (the "Selling Stockholders"), from time to time, of up to
15,000,000 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 shares of Common Stock issuable by the
Company (i) upon conversion by the Selling Stockholders (as defined herein, the
"Series D Investors") of the Series D Convertible Preferred Stock, par value
$.01 per share, of the Company (the "Series D Preferred Stock") held by such
Selling Stockholders (the "Conversion Shares") and (ii) upon the exercise of
warrants (the "Series D Warrants") issued by the Company to the Series D
Investors (the "Series D Warrant Shares"). The Series D Preferred Stock was
issued by the Company to the Series D Investors in exchange for all shares of
the Company's Series C Convertible Preferred Stock, $.01 par value per share
(the "Series C Preferred Stock"), issued by the Company to such investors in
September 1997.
The Offered Shares include a good faith estimate of the number of shares of
Common Stock (including shares of Common Stock payable on account of the premium
payable) underlying the Series D Preferred Stock that may be issued in
connection with the conversion of the Series D Preferred Stock by reason of the
floating rate conversion mechanism included in the Series D Certificate of
Designations, Preferences and Rights. Pursuant to Rule 416(a) under the
Securities Act of 1933, as amended (the "Securities Act"), the number of Offered
Shares issuable in respect of (i) the Series D Preferred Stock and the Series D
Warrants are subject to adjustment by reason of stock splits, stock dividends
and other similar transactions in the Common Stock and (ii) the Series D
Preferred Stock is also subject to adjustment by reason of the floating rate
conversion mechanism included in the Series D Certificate of Designations,
Preferences and Rights.
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 Series D Warrants if the Series D 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. Any 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
April 15, 1998, the closing sale price for the Common Stock, as quoted on the
NYSE, was $1.875 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 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 April 16, 1998.
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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 Conversion Shares or the Series D
Warrant 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 January 9, 1998 (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, September 30, 1997 and December 31, 1997 and amendments
to the Company's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1997, dated, respectively, January 9, 1998 and
January 23, 1998;
(d) The Company's Current Reports on Form 8-K, dated April 28, 1997, June
30, 1997, September 18, 1997, January 5, 1998, March 30, 1998 and
April 8, 1998 and the Company's Current Report on Form 8-K/A,
dated January 5, 1998 and filed January 16, 1998; and
(e) The Company's Joint Proxy Statement/Prospectus dated March 16, 1998
related to the proposed merger of the Company with Value Vision
International, Inc.; and
(f) 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.
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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 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) the Merger; (as defined below);
(ii) competition for customers for its products and services; (iii) 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; (iv) the limited market life of the Company's products; and (v)
other statements about the Company or the direct response consumer marketing
industry. Such forward-looking statements include those preceded by, followed
by or that include the words "believes," "expects," "anticipates," "intends,"
"plans," "estimates" or similar expressions.
The Company's ability to predict the results or the effect of any pending
events (including the Merger) 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 for 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 Far
East Ltd., through which the Company operates in all Asian countries other than
Japan; 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 Holdings Pty Limited and its
operating subsidiaries (collectively, "Suzanne Paul"), which the Company
acquired in July 1996. The Company produces infomercials through DirectAmerica
Corporation ("DirectAmerica"), d/b/a Quantum Television, 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.
RECENT DEVELOPMENTS
General
On January 5, 1998, the Company announced that it had entered into an
Agreement and Plan of Reorganization and Merger (the "Merger Agreement"),
dated as of January 5, 1998, by and among the Company, ValueVision
International, Inc. ("ValueVision") and V-L Holdings Corp. (subsequently
renamed Quantum Direct Corporation) ("Quantum Direct"), a newly-formed
Delaware corporation. ValueVision is a Minneapolis, Minnesota-based
integrated electronic and print media direct marketing company which operates
the third largest home shopping network in the United States. Following
consummation of the transactions contemplated by the Merger Agreement, the
Company and ValueVision will be wholly-owned subsidiaries of Quantum Direct
(the "Merger"). Subject to the satisfaction of certain conditions set forth
below, the Merger is expected to be consummated in the second calendar
quarter of 1998. On March 16, 1998, each of the Company and ValueVision
mailed a joint proxy statement to its stockholders soliciting approval of the
Merger. Meetings of the Company's and ValueVision's stockholders were
scheduled for April 14, 1998 but postponed by each of the Company and
ValueVision pending renegotiation of certain terms of the Merger. The Merger
will be accounted for as a purchase for accounting and financial reporting
purposes with ValueVision as the acquiror. As a result, approximately $87
million in goodwill will have to be recognized by Quantum Direct and
amortized over a 25-year period. Quantum Direct is making application to
have its Common Stock listed on the New York Stock Exchange.
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As of October 31, 1997, ValueVision had approximately $45.7 million in cash
and cash equivalents and no outstanding indebtedness. The Company believes that
ValueVision's strong balance sheet will, upon consummation of the Merger,
improve the Company's liquidity. Such enhanced liquidity, management believes,
when combined with ValueVision's excess telemarketing, customer service and
order fulfillment capacity, will improve the Company's financial condition and
results of operations; provided, however, that until such time as the Merger is
completed and the businesses of the Company and ValueVision are integrated,
there can be no assurance as to the realization or magnitude of such operational
efficiencies.
The Company's relationship with ValueVision dates back to January 1994, at
which time ValueVision made an unsolicited tender offer to acquire the Company.
Although initially rejected by the Company, the companies eventually entered
into a merger agreement in March 1994, pursuant to which ValueVision amended its
tender offer. In April 1994, ValueVision terminated such merger agreement.
Such termination resulted in a year-long litigation between the companies.
Pursuant to a settlement of such litigation, ValueVision and the Company entered
into a Telemarketing, Production and Post-Production Agreement in April 1995
(the "Telemarketing Agreement") and the Company issued to ValueVision a warrant
to purchase 500,000 shares of Common Stock at an exercise price of $8.865 per
share. Since entering into the Telemarketing Agreement, ValueVision and
National Media have had an ongoing business relationship. The Telemarketing
Agreement and such warrant will be terminated as part of the Merger.
Transaction Terms
Pursuant to the terms of the Merger Agreement, each outstanding share of
Common Stock will be converted into the right to receive one share of common
stock in Quantum Direct and each outstanding share of common stock, $.01 par
value per share ("ValueVision Common Stock") of ValueVision, will be converted
into the right to receive 1.19 shares of common stock in Quantum Direct. Cash
will be paid in lieu of fractional shares of Quantum Direct common stock.
Following consummation of the Merger, Quantum Direct will have an aggregate of
approximately 57 million shares of common stock issued and outstanding (based
upon 25,325,487 shares of Common Stock and 26,755,778 shares of ValueVision
Common Stock issued and outstanding as of January 19, 1998). The Company's
stockholders will own approximately 45% of the common stock of Quantum Direct
after the Merger. ValueVision's shareholders will own approximately 55% of the
common stock of Quantum Direct after the Merger.
Concurrently with the execution of the Merger Agreement, the Company
entered into an agreement with the holders of the Series C Preferred Stock (the
"Redemption and Consent Agreement") in which the Company agreed to exchange the
Series C Preferred Stock for the Series D Preferred Stock and to redeem all of
the Series D Preferred Stock for approximately $23.5 million upon consummation
of the Merger. Pursuant to the terms of the Redemption and Consent Agreement,
the Series D Investors agreed, among other things, not to request the Company to
convert the Series C Preferred Stock or Series D Preferred Stock into Common
Stock at a per share price below $6.06 prior to the earliest of (i) June 1, 1998
(which date may be extended until August 31, 1998 in certain circumstances set
forth in the Redemption and Consent Agreement), (ii) the date upon which it is
publicly announced that ValueVision is unwilling to proceed with the Merger on
the terms set forth in the Merger Agreement, or (iii) the date upon which demand
is made to the Company to repay the Loan (as defined below) described below. In
order to make the required amendments to the terms of the Series C Preferred
Stock, the Company agreed to exchange the Series C Preferred Stock for a class
of newly designated preferred stock, Series D Preferred Stock, which contains
terms substantially similar to those set forth in the Series C Certificate of
Designations, Preferences and Rights. As further consideration for executing
the Redemption and Consent Agreement, the Company issued to the Series D
Investors the Series D Warrants which are exercisable at any time prior to
January 5, 2003.
Until a permanent Quantum Direct chief executive officer is appointed,
Robert Johander, current chief executive officer of ValueVision, will serve
as interim chief executive officer of Quantum Direct. On March 30, 1998, the
Company and ValueVision announced the hiring of Gene McCaffery as Quantum
Direct's President and Chief Executive Officer. Robert Verratti, current
chief executive officer of the Company, will reduce his operational
responsibilities upon completion of the Merger but will remain a member of
the Board of Directors and Executive Committee of Quantum Direct. Frederick
Hammer, Chairman of the Board of Directors of the Company, and Mr. Johander
will serve as co-chairmen of the Board of Directors of Quantum Direct.
Nicholas M. Jaksich, the current chief operating officer of ValueVision, will
serve as president and chief operating officer of Quantum Direct. Stuart R.
Romenesko, the current chief financial officer ValueVision, will serve as
chief financial officer of Quantum Direct. The Board of Directors of Quantum
Direct initially will consist of ten members, half chosen by the Company and
half chosen by ValueVision.
Pursuant to the terms of the Merger Agreement, ValueVision agreed to extend
to the Company a working capital loan (the "Loan") of up to $10 million, $7
million of which was advanced upon execution of Merger Agreement. The Loan
proceeds will be used by the Company for various purposes, including funding of
inventory and media purchases. The Loan bears interest at prime rate plus one
and one-half percent per annum and is due on the earlier of January 1, 1999 or
upon termination of the Merger Agreement in certain circumstances. In the event
the Company is
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unable to repay the Loan when due, ValueVision may elect to receive payment in
shares of Common Stock at the then present market value. In consideration for
providing the Loan, the Company issued to ValueVision a warrant to acquire
250,000 shares of Common Stock. Such warrant has an exercise price per share
equal to $2.73 per share. The warrant is exercisable until the earlier of (i)
January 5, 2003 and (ii) the occurrence of one of the following termination
events: (x) the consummation of the Merger or (y) the termination by the Company
of the Merger Agreement, if such termination results from a breach of a covenant
by ValueVision or in the event ValueVision's shareholders do not approve the
Merger Agreement; provided, however, that if, within 75 days after such
termination event, the Company has not repaid the Loan in full or if during such
75 days, the Company defaults under its obligations pursuant to the Loan, no
termination event will be deemed to have occurred and the warrant shall remain
exercisable. The Company also granted registration rights in connection with the
shares of Common Stock issuable in connection with the Loan and the warrants
issued to ValueVision.
Consummation of the Merger is subject to the satisfaction (or waiver) of a
number of conditions, including, but not limited to: (i) the approval and
adoption of the Merger Agreement and approval of the Merger by holders of a
majority of the issued and outstanding shares of Common Stock and ValueVision
Common Stock; (ii) redemption of the Company's Series D Stock for approximately
$23.5 million (which funds are to be advanced by ValueVision to the Company
immediately prior to the closing of the Merger); (iii) the effectiveness of a
Registration Statement in connection with the issuance of Quantum Direct common
stock in the Merger; (iv) the continuing accuracy in all material respects of
the representations and warranties made by each of the Company and ValueVision
in the Merger Agreement on and as of the Effective Time; (v) the compliance by
the parties with certain covenants contained in the Merger Agreement; (vi) the
receipt by each of the Company and ValueVision, as applicable, of certain
opinions regarding tax and certain other matters; and (vii) the receipt of
certain regulatory approvals.
In the event of the termination of the Merger Agreement under certain
circumstances, such as the proposal of an Alternative Transaction (as defined in
the Merger Agreement), the Company is obligated to pay to ValueVision, or
ValueVision is obligated to pay to the Company, a termination fee equal to $5.0
million. In addition, the Company has granted to ValueVision an option to
purchase up to 19.9% (5,075,979 shares of Common Stock based upon the number of
shares of Common Stock issued and outstanding on the date of execution of the
Merger Agreement) of the Company's Common Stock at a per share cash purchase
price of $3.4375. Similarly, ValueVision has granted to the Company an option
to purchase up to 19.9% (5,579,119 shares of ValueVision Common Stock based upon
the number of shares of ValueVision Common Stock issued and outstanding as of
the date of execution of the Merger Agreement) of ValueVision's Common Stock at
a per share cash purchase price of $3.875. Such options (each, a "Termination
Option") are exercisable by the respective party, in whole or in part, at any
time after the occurrence of an event which would entitle such party to the
termination fee described above; provided, however, that neither party may
exercise the Termination Option if such party is in material breach of any of
its material representations, warranties, covenants or agreements contained in
the Merger Agreement or in the Termination Option. Neither party may receive in
excess of $7.5 million in connection with the receipt of the termination fee and
the exercise of such party's Termination Option. The Termination Option could
have the effect of making a third party acquisition of the Company more costly
because of the need to acquire in any such transaction the shares of Common
Stock subject to such Termination Option, and could also jeopardize the ability
of a third party to acquire the Company in a transaction accounted for as a
pooling of interests.
Possible Transaction Value
If one were to use the closing sales price for ValueVision Common Stock of
$3.875 per share on January 2, 1998 (the last trading date immediately prior to
the date the Merger was publicly announced) in determining the aggregate value
of the shares of Quantum Direct common stock expected to be issued upon
consummation of the Merger, the value of the shares of Quantum Direct common
stock would be approximately $189 million. Based upon the average closing sales
price for ValueVision Common Stock of $3.25 per share on April 15, 1998, the
aggregate value of the shares of Quantum Direct common stock expected to be
issued upon consummation of the Merger would be approximately $156 million.
There can be no assurance as to the price at which Quantum Direct's common stock
will trade following consummation of the Merger.
Comparative Per Share Data
The following table summarizes certain unaudited historical and pro forma
per share data, giving effect to the Merger as a purchase with ValueVision
deemed the acquiror for accounting and financial reporting purposes. The
unaudited selected pro forma per share data for the year ended January 31, 1997
(ValueVision's fiscal year ends on January 31) gives effect to the Merger as if
it had occurred on February 1, 1996 and has been prepared on the basis of the
results of operations for the year ended January 31, 1997 for ValueVision and
for the year ended March 31, 1997 for the Company. The unaudited selected per
share data for the
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nine months ended October 31, 1997 gives effect to the Merger as if it had
occurred on February 1, 1996 and has been prepared on the basis of the results
of operation for the nine months ended October 31, 1997 for ValueVision and for
the nine months ended December 31, 1997 for the Company. The unaudited selected
pro forma condensed consolidated per share data set forth in the following table
is derived from, and should be read in conjunction with, the publicly-filed
historical consolidated financial statements of ValueVision and the Company,
including the respective notes thereto. The following unaudited per share data
is presented for informational purposes only and is not necessarily indicative
of the results that would have been achieved had the Merger been consummated on
the dates or prior to the periods presented.
<TABLE>
<CAPTION>
Pro Forma(1)
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Year Ended Nine Months Ended
January 31, October 31,
1997 1997
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<S> <C> <C>
Per share data:
ValueVision Common Stock
Net income (loss):
Historical.............. $0.57 $0.58
Pro forma consolidated.. (0.30) (0.11)
Book value(2):
Historical.............. 4.41 4.73
Pro forma consolidated.. 3.62
</TABLE>
<TABLE>
<CAPTION>
Pro Forma(1)
--------------------------------
Year Ended Nine Months Ended
March 31, December 31,
1997 1997
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<S> <C> <C>
National Media Common Stock
Net loss:
Historical.............. ($2.09) ($1.45)
Pro forma equivalent.... (0.30) (0.11)
Book value(2):
Historical.............. 3.68 2.95
Pro forma equivalent.... 3.62
</TABLE>
(1) Pro Forma adjustments reflect $86.7 million of excess cost over net
tangible assets acquired (i.e., goodwill) arising from the Merger in
accordance with the purchase method of accounting. This adjustment
reflects the replacement of the Company's historical recurring amortization
of goodwill with the amortization of Parent goodwill recorded through
purchase accounting. Goodwill is assumed to be amortized on a
straight-line basis over a period of 25 years. For accounting and
financial reporting purposes, ValueVision will be deemed the acquiror.
Also included in the purchase price is the estimated fair value of stock
options "in-the-money" as of the assumed closing date of the Merger. This
adjustment reflects the effect of the redemption of the Series D Preferred
Stock on December 31, 1997 for approximately $21.4 million. The final
allocation of the purchase price will be determined upon the consummation
of the Merger or shortly thereafter.
(2) In making such calculations, historical book value per share is calculated
by dividing total common shareholders' equity by total common shares
outstanding. Pro forma consolidated book value per share is calculated by
dividing total pro forma common shareholders' equity by the sum of total
outstanding shares of National Media's Common Stock (assuming the
conversion of 5.0 shares of the Series B Stock) adjusted for the 1.0 to 1.0
exchange ratio plus the total outstanding shares of ValueVision Common
Stock adjusted for the 1.19 to 1.0 exchange ratio. Pro forma equivalent
book value per share represents the pro forma consolidated book value per
share multiplied by the 1.0 to 1.0 National Media exchange ratio.
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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. The following does not discuss matters which
relate specifically to ValueVision or its business, financial condition or
results of operations. There can be no assurance that the Merger will be
consummated or that, if consummated, the Merger will result in any of the
synergies or other benefits expected to result from the Merger.
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 $35.5 million for
the first nine 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
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 such business plan
adequately addresses the circumstances and situations which resulted in the
Company's performance in the periods referred to above. Unless the Company
adequately addresses the reasons for its recent results of operations, there can
be no assurance as to the Company's future results of operations.
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 and other channels of distribution; 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 and subsequent 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 Japan, which represented a significant portion of
Asian revenues, 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 fiscal
1998 this trend has continued. In the first nine months of fiscal 1998, as
compared to the first nine months of fiscal 1997, the Company's revenues in its
Asian marketplace had declined by 49.4%, approximately 10% of which is
attributable to currency devaluation. The Company expects such revenues to
continue to decline in light of the economic downtown, including a significant
devaluation in currencies, and increased competition experienced in certain
Asian countries in the fourth calendar quarter of 1997 and in the beginning of
the
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first calendar quarter of 1998. 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 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.
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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 has historically been dependent on third party sources, both
foreign and domestic, to manufacture all of its products. From time to time,
the Company has also been 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 has historically been 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 operations 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 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
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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 and 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 and believes it has meritorious
defenses to the plaintiff's claims for damages. At this stage, the Company
cannot predict the outcome of this matter; however, even if plaintiffs were to
prevail on all of their claims, the Company does not believe that such result
would have a material adverse impact 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.
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 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., 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 not have a material adverse effect on the
Company's financial condition or results of operations.
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.
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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 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 certain 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 which it no longer
airs in the United States. The Company, which is now indemnified against
damages sustained as a result of any action taken by the FTC in connection with
such infomercial, has 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. While no assurances can be
given, especially given the indemnification protection available to it, 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 Spring 1997, 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. The CPSC also undertook its own testing of the product
and, in November 1997, the CPSC informed the Company that the CPSC 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, management of the Company does not anticipate 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.
The Company has also been contacted by Australian consumer protection regulatory
authorities regarding the safety and fitness of the Fitness Strider product and
an exercise rider product marketed only in Australia and New Zealand. At this
point, the Company cannot predict whether the outcome of these matters regarding
the Fitness Strider will have a material adverse impact upon the Company's
financial condition or results of operations.
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
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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. In
particular, the Company is highly dependent on certain of its employees
responsible for product development and production of infomercials. The
unexpected loss of the services of one or more of such individuals could have a
material adverse effect on the Company.
Year 2000 Issues
The efficient operation of the Company's business is dependent in part on
its computer hardware, software programs and operating systems (collectively,
"Programs and Systems"). These Programs and Systems are used in several key
areas of the Company's business, including merchandise purchasing, inventory
management, pricing, sales, shopping and financial reporting, as well as in
various administrative functions. The Company has been evaluating its Programs
and Systems to identify potential Year 2000 compliance issues. These actions
are necessary to ensure that the Programs and Systems will recognize and process
the Year 2000 and beyond. It is anticipated that modification or replacement of
some of the Company's Programs and Systems will be necessary to make such
Programs and Systems Year 2000 compliant. The Company is also communicating
with suppliers, financial institutions and others to coordinate Year 2000
conversion.
Based on present information, the Company believes that it will be able to
achieve such Year 2000 compliance through a combination of modification of some
existing Programs and Systems, and the replacement of other Programs and Systems
with new Programs and Systems that are already Year 2000 compliant. However, no
assurance can be given that these efforts will be successful. The Company does
not expect that the expenses and capital expenditures associated with achieving
Year 2000 compliance will have a material effect on its financial condition or
results of operations.
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.
Immediately prior to the effectiveness of the Registration Statement to
which this Prospectus relates, the Series D Investors exchanged all of the
issued and outstanding shares of Series C Preferred Stock for 20,000 shares of
the Company's Series D Preferred Stock. Each share of the Series D 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 D Preferred Stock
(as such value is increased by a premium of six percent (6%) per annum based on
the number of days the Series D 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 D Preferred Stock and the
then current market price). The terms of the Series D Preferred Stock did not
provide for a beneficial conversion price upon issuance. If converted on
April 15, 1998, the Series D Preferred Stock would have been convertible into
approximately 3,300,330 plus shares of Common Stock, excluding the premium
payable thereon. Depending on market conditions at the time of conversion, the
number of shares issuable could prove to be significantly greater based upon the
prevailing trading price of the Common Stock. For example, in the event that
the volume weighted average sale of the Common Stock was equal to $2.50 per
share on the date of conversion, the Series D Preferred Stock would be
convertible into 8,000,000 shares of Common Stock, excluding any premium accrued
on account of the Series D Preferred Stock. Purchasers of Common Stock could
therefore experience substantial dilution upon conversion of the Series D
Preferred Stock. The shares of Series D 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 D Preferred Stock may be converted are being
registered pursuant to this Registration Statement.
As of April 15, 1998, approximately 12,100,000 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. At
April 15, 1998, there were 25,375,487 shares of Common Stock outstanding, nearly
all of which were freely tradeable without restriction under the Securities Act
unless held by affiliates.
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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 Series D Warrants by the holders
thereof, the Company will receive the exercise price of the Series D Warrants.
To the extent the Series D Warrants are exercised, the Company will apply the
proceeds thereof to its general corporate purposes and working capital.
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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
March 12, 1998 and the number of Offered Shares which may be offered for sale
pursuant to this Prospectus by each such Selling Stockholder. Neither 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 its ownership of the Company's Securities. 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(a) under the Securities Act, the shares of Common
Stock issuable in respect of (i) the Series D Preferred Stock and Series D
Warrants are subject to adjustment by reason of stock splits, stock dividends,
and other similar transactions in the Common Stock and (ii) the Series D
Preferred Stock is also subject to adjustment by reason of the floating rate
conversion price mechanism included in the Series D Certificate of Designations,
Preferences and Rights.
<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) 11,992,060(3) 11,250,000 742,060 2.8%
RGC International Investors, 3,997,353(3) 3,750,000 247,353 *
LDC(2)
______________________________
* Less than one percent.
</TABLE>
(1) Assumes the sale of all Offered Shares.
(2) Pursuant to a Redemption and Consent Agreement, dated as of January 5,
1998, among the Company, Capital Ventures International and RGC
International Investors, LDC (collectively, the "Series D Investors"), the
Series D Investors agreed to exchange an aggregate of 20,000 shares of
Series C Preferred Stock purchased by the Series D Investors pursuant to
that certain Securities Purchase Agreement, dated September 4, 1997, among
the Series D Investors and the Company for an aggregate of 20,000 shares of
Series D Preferred Stock and warrants to purchase 500,000 Common Shares.
(3) Represents the pro rata allocation among the Series D Investors of
14,500,000 shares of Common Stock which may be issued upon conversion of
the Series D Preferred Stock, on account of conversion defaults, if any,
and payment of the premium payable thereon in shares of Common Stock and
500,000 Common Shares issuable upon exercise of the Series D Warrants which
the Company is registering hereunder pursuant to the registration rights
agreement between the Company and the Series D Investors. As of the date
of this Prospectus, the actual number of shares of Common Stock issuable
upon conversion of Series D Preferred Stock and exercise of the Series D
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. These 14,500,000 shares of
Common Stock represents a good faith estimate of the number of shares
underlying the Series D Preferred Stock and the premium payable thereon.
Pursuant to the terms of the Certificate of Designations, Preferences and
Rights of the Series D Preferred Stock, the actual number of Common Shares
issuable upon conversion of the Series D Preferred Stock will equal (in
addition to the Common Shares issuable upon exercise of the Series D
Warrants) (i) the aggregate stated value of the shares of Series D
Preferred Stock then being converted (i.e., $1,000 per share), plus a
premium in the amount of 6% per annum accruing from the date of issuance,
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 D
Preferred Stock), divided by (ii) (x) if the conversion occurs on or before
the Adjustment Date (as defined herein), a conversion price equal to $6.06
per share, or (y) in the case of conversions after the Adjustment Date, a
conversion price per share equal to the lower of 101% of the closing bid
price of the Common Stock on June 1, 1998, 101% of the
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closing bid price of the Common Stock on the first trading day after the
Merger Termination Date (as defined in the Merger Agreement) or $6.06. For
purposes of conversions of the Series D Preferred Stock, the Adjustment
Date means the earlier to occur of (i) June 1, 1998 (which date may be
extended until August 31, 1998 by the Company and ValueVision in certain
circumstances set forth in the Redemption and Consent Agreement), (ii) the
date upon which it is publicly announced that ValueVision is unwilling to
proceed with the Merger on the terms set forth in the Merger Agreement, or
(iii) the date upon which demand is made to the Company to repay the Loan
described under "Recent Developments."
Except under certain limited circumstances, no holder of the Series D
Preferred Stock and Series D 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 D Investor may sell pursuant to this
Prospectus may exceed the number of Common Shares such Series D Investor
would otherwise beneficially own as determined pursuant to Section 13(d) of
the Exchange Act.
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.
17
<PAGE>
EXPERTS
The consolidated financial statements and schedule of National Media
Corporation appearing in National Media Corporation'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 as described in
Note 1 to the consolidated financial statements) included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
18
<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.
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TABLE OF CONTENTS
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Page
Available Information...................... 3
Incorporation of Certain
Documents by Reference..................... 3
Forward-Looking Statements................. 5
The Company................................ 5
Recent Developments........................ 5
Risk Factors............................... 9
Use of Proceeds............................ 15
Selling Stockholders....................... 16
Plan of Distribution....................... 17
Legal Matters.............................. 17
Experts.................................... 18
15,000,000 Shares of Common Stock
NATIONAL MEDIA CORPORATION
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PROSPECTUS
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April 16, 1998
