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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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8,293,000 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 8,293,000
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"); (iv) upon the exercise of options (the "NW Options") held by
another of the Selling Stockholders ("NW") (the "NW Shares"), and (v) upon the
exercise of warrants (the "Settlement Warrants") issued by the Company to
Bodylines, Inc. ("Bodylines") in settlement of litigation (the "Settlement
Shares"). The Series C Warrants, the Bank Warrants and the Settlement Warrants
are sometimes hereinafter collectively referred to as the "Warrants". Nancy
Langston, the Series C Investors, NW, the Bank and Bodylines are sometimes
collectively referred to herein as the "Selling Stockholders."
The Offered Shares include a good faith estimate of the number of shares
of Common Stock (including shares of Common Stock payable in connection with
conversion defaults or on account of the premium payable) underlying the
Series C Preferred Stock that may be issued in connection with conversion of
Series C Preferred Stock by reason of the floating conversion mechanism
included in the Series C Certificate of Designations, Preferences and Rights.
Prusuant 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 C Preferred Stock, the Series C Warrants, the Bank Warrants, the NW
Options and the Settlement Warrants are subject to adjustment by reason of
stock splits, stock dividends and other similar transactions in the Common
Stock and (ii) the Series C Preferred Stock is subject also to adjustment by
reason of the floating rate conversion mechanism included in the Series C
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 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
January 16, 1998, the closing sale price for the Common Stock, as quoted on the
NYSE, was $2.6875 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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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 January 27, 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 Langston Shares, the Conversion Shares, the Series C Warrant
Shares, the NW Shares, the Bank Shares or the Settlement 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 and September 30, 1997 and amendments to the
Company's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1997, dated 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 and January 5, 1998 and the Company's
Current Report on Form 8-K/A, dated January 5, 1998 and filed
January 16, 1998; 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
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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) 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 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
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.
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. ("Newco"), a newly-formed Delaware
corporation to be renamed upon consummation of the Merger Agreement.
ValueVision is a Minneapolis, Minnesota-based integrated electronic and print
media direct marketing company and 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 Newco (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. The Merger will be accounted for as a
purchase for accounting and financial reporting purposes with ValueVision as the
acquiror. As a result, approximately $80 million in goodwill will have to be
recognized by Newco and amortized over a 25-year period. It is presently
anticipated that Newco will apply to have its Common Stock listed for trading on
a national exchange or market.
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 for the Company. In April 1994, ValueVision terminated the Merger
Agreement with the Company. Termination of the Merger Agreement 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.
Transactions 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 Newco 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 Newco. Cash will be paid in
lieu of fractional shares of Newco common stock. Following consummation of
the Merger, Newco will have an aggregate of approximately 57 million shares
of common stock issued and outstanding (based upon 25,507,436 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 Newco after the Merger.
ValueVision's shareholders will own approximately 55% of the common stock of
Newco after the Merger.
Concurrently with the execution of the Merger Agreement, the Company
entered into an agreement (the "Redemption and Consent Agreement") in which the
Company agreed to redeem all of the Series C Preferred Stock for approximately
$23.5 million upon consummation of the Merger. Pursuant to the terms of the
Redemption and Consent Agreement, the Series C Investors agreed, among other
things, not to request the
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Company to convert the Series C Preferred Stock to 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 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 below.
In order to make the required amendments to the terms of the Series C Preferred
Stock, the Company has agreed to exchange the Series C Preferred Stock for a
class of newly designated preferred stock, Series D Convertible Preferred Stock,
which shall contain 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 C Investors warrants to acquire 500,000 shares of Common Stock at an
exercise price of $6.82 per share. Such warrants are exercisable at any time
prior to January 5, 2003.
Until a new chief executive officer is appointed, Robert Johander, current
chief executive officer of ValueVision, will serve as interim chief executive
officer of Newco. The Board of Directors has commenced a search for a permanent
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 Newco. 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
Newco. Nicholas M. Jaksich, the current chief operating officer of ValueVision,
will serve as president and chief operating officer of Newco. Stuart R.
Romenesko, the current chief financial officer ValueVision, will serve as chief
financial officer of Newco. The Board of Directors of Newco 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 has agreed to
extend to the Company a working capital loan (the "Loan") of up to $10 million.
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 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 addition, in consideration for providing the Loan, the
Company has issued to ValueVision a warrant to acquire 250,000 shares of Common
Stock. Such warrants will have an exercise price per share equal to the average
of the quoted prices of the Common Stock reported on the New York Stock Exchange
Composite Tape for the 20 consecutive trading days immediately succeeding
January 5, 1998, the date of the first advance by ValueVision to the Company
under the Loan. The Warrants are 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 of 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 C 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) consummation of the
repurchase by ValueVision from Montgomery Ward of 1,280,000 shares of
ValueVision Common Stock and cancellation of warrants previously issued to
Montgomery Ward to acquire approximately 3.8 million shares of ValueVision
Common Stock; (iv) the effectiveness of a Registration Statement in connection
with the issuance of Newco common stock in the Merger; (v) 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; (vi) the compliance by the parties with certain covenants
contained in the Merger Agreement; (vii) the receipt by each of the Company and
ValueVision, as applicable, of certain opinions regarding tax and
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certain other matters; and (viii) 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 average closing sales price for ValueVision
Common Stock of $3.875 per share on January 2, 1998 (the date immediately
prior to the date the Merger was publicly announced) in determining the
aggregate value of the shares of Newco common stock upon consummation of the
Merger, the value of the shares of Newco common stock would be
approximately $193 million. Based upon the average closing sales price for
ValueVision Common Stock of $3.625 per share on January 15, 1998, the
aggregate value of the shares of Newco common stock upon consummation of the
Merger would be approximately $180 million. There can be no assurance as to
the price at which Newco'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 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 nine
months ended October 31, 1997 gives effect to the Merger as if it had
occurred on February 1, 1997 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 September 30, 1997 for the Company.
In making such determination, the historical operating results of the
Company's fourth fiscal quarter ended March 31, 1997 are included both as a
part of the operating results of the Company's fiscal year ended March 31,
1997 and the nine-month period ended September 30, 1997. 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 Consolidated (1)
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Year Ended Nine Months Ended
January 31, October 31,
1997 1997
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Per share data:
ValueVision Common Stock
Net income (loss):
Historical .......................... $0.57 $0.58
Pro forma consolidated .............. (0.32) (0.82)
Book value(2):
Historical .......................... 4.41 4.73
Pro forma consolidated .............. 3.66
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Consolidated (1)
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Year Ended Nine Months Ended
March 31, September 30,
1997 1997
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<S> <C> <C>
Per share data:
National Media Common Stock
Net loss:
Historical .......................... ($2.07) ($3.15)
Pro forma consolidated .............. (0.32) (0.82)
Book value(2):
Historical .......................... 3.68 3.43
Pro forma consolidated .............. 3.66
</TABLE>
(1) Pro forma adjustments reflect $25.9 million of incremental excess cost
over net assets acquired (i.e., goodwill) arising from the Merger in
accordance with the purchase method of accounting. The aggregate excess
cost over net tangible assets acquired is approximately $80.1 million.
This adjustment reflects the additional amortization of incremental excess
cost over net assets acquired (i.e., goodwill) arising from the Merger in
accordance with the purchase method of accounting. Goodwill is assumed to
be amortized on a straight-line basis over a period of 25 years. For
accounting and financial reporting purpose, 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 closing date of the Merger.
This adjustment relects the effect of the redemption of the Series C Stock
for approximately $23.5 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 book value per share is calculated by dividing total
pro forma common shareholders' equity by the sum of total outstanding
shares of the Company's common stock (assuming the conversion of 86,250
shares of the Company's Series B Convertible Preferred Stock) plus the
outstanding shares of ValueVision common stock adjusted for the 1.19 to 1.0
exchange ratio.
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
$27.3 million for the first six months of fiscal 1998. The Company expects
to report a loss for the quarter ended December 31, 1997. 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.
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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 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 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. The Company expects such revenues to continue to decline in
light of the economic downturn, 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 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
8
<PAGE>
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 has historically been 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 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
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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 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 or financial condition.
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
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<PAGE>
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 have no 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.
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 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. 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 5, 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, 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. At this point, the Company cannot predict
whether the outcome of these matters regarding the
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<PAGE>
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 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 January 19, 1998, 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
January 19, 1998, 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. For example, in the event that the volume weighted average sale
of the Common Stock was equal to $3.00 per share on the date of conversion, the
Series C Preferred Stock would be convertible into 6,666,667 shares of 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
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<PAGE>
Stock into which the Series C Preferred Stock may be converted are being
registered pursuant to this Registration Statement.
As of January 19, 1998, 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 January 19, 1998, there were 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 or the NW Options by the
holders thereof, the Company will receive the exercise price of the Warrants or
the NW Options, as the case may be. To the extent the Warrants or the NW
Options 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 shares of Common Stock beneficially owned by such Selling
Stockholders as of January 5, 1998 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(a) under the Securities Act, the shares of Common
Stock issuable in respect of (i) the Series C Preferred Stock, the Series C
Warrants, the Bank Warrants, the NW Options and the Settlement Warrants are
subject to adjustment by reason of stock splits, stock dividends, and other
similar transactions in the Common Stock and (ii)the Series C Preferred Stock
is subject also to adjustment by reason of the floating rate conversion price
mechanism included in the Series C 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) 5,992,060 (3) 5,992,060 0 0
RGC International Investors, LDC(2) 1,997,353 (3) 1,997,353 0 0
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
Bodylines, Inc. 52,000 (7) 52,000 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 shares of Common Stock which may be issued upon conversion of the
Series C Preferred Stock, on account of conversion defaults, if any, and
payment of the premium payable thereon in shares of Common Stock and
989,413 shares of Common Stock 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. These 7,000,000 shares of Common Stock represent a good
faith estimate of the number of shares underlying the Series C Preferred
Stock and the premium payable thereon.
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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 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 3, 1998, a conversion price equal to $6.06 per share, or (y)
in the case of conversions after March 4, 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) Consists of 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.
(7) Consists of 52,000 Common Shares issuable to such Selling Stockholder in
connection with the settlement of litigation between the Company and such
Selling Stockholder in November 1997.
15
<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.
16
<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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<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information..................... 3
Incorporation of Certain
Documents by Reference.................... 3
Forward-Looking Statements................ 5
The Company............................... 5
Recent Developments....................... 5
Risk Factors.............................. 8
Use of Proceeds........................... 14
Selling Stockholders...................... 15
Plan of Distribution...................... 17
Legal Matters............................. 17
Experts................................... 17
</TABLE>
8,293,000 Shares of Common Stock
NATIONAL MEDIA CORPORATION
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PROSPECTUS
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January 27, 1998
