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As filed with the Securities and Exchange Commission on November 16, 1999
Reg. No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
VIDEO CITY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
95-3897052
(I.R.S. Employer Identification No.)
Video City, Inc.
370 Amapola Avenue, Suite 208
Torrance, California 90501
(310) 533-3900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Young J. Kim, Esq.,
Senior Vice President and General Counsel
Video City, Inc.
370 Amapola Avenue, Suite 208
Torrance, California 90501
(310) 533-3900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
William J. Feis, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Offering Proposed Maximum
Title of Each Class of Amount to be Price Aggregate Amount of
Securities to be Registered Registered Per Share Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value............. 362,500 shares (1) $ 0.75 (2) $ 271,875 $ 76
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Common Stock, $.01 par value............. 35,000 shares (1) $ 0.75 (2) $ 26,250 $ 7
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Common Stock, $.01 par value............. 651,726 shares (3) $ 2.00 (4) $1,303,452 $362
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Common Stock, $.01 par value............. 100,000 shares (3) $ 2.437 (4) $ 243,700 $ 68
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Total Registration Fee.................................................................................................... $513
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</TABLE>
(1) Represents shares of Common Stock issuable upon conversion of the
convertible preferred stock described herein. In accordance with Rule 416,
there is also being registered hereunder such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of
the convertible preferred stock to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee.
Based, pursuant to Rule 457, on the average of the high and low sale prices
of Registrant's Common Stock as reported on the OTC Bulletin Board on
November 10, 1999.
(3) Represents shares issuable upon exercise of warrants. In accordance with
Rule 416, there is also being registered hereunder such indeterminate
number of additional shares of Common Stock as may become issuable upon
exercise of the warrants to prevent dilution resulting from stock splits,
stock dividends or similar transactions.
(4) Based, pursuant to Rule 457, on the exercise price of the warrants referred
to in note (3) above.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
1,149,226 Shares
VIDEO CITY, INC.
Common Stock
Video City, Inc. owns and operates video specialty stores that rent and sell a
variety of videocassettes, DVDs, game cartridges, accessories and concessions.
We currently have 78 retail stores.
The securityholders named herein or their assigns are offering for resale from
time to time up to 1,149,226 shares of our common stock which they have the
right to acquire. See "Selling Securityholders." All of the shares are being
offered by the selling securityholders. Of the shares offered, 751,726 are
issuable upon the exercise of outstanding warrants to purchase common stock and
397,500 are issuable upon conversion of our outstanding convertible preferred
stock held by certain of the selling securityholders. The number of shares
offered by these selling securityholders is subject to increase in certain
events by reason of so-called antidilution provisions of the warrants and
convertible preferred stock held by them.
We will receive the exercise price of the warrants described in this
prospectus to the extent they are exercised, but we will not otherwise receive
any proceeds in connection with the sale of the shares by the selling
securityholders. See "Use of Proceeds."
The common stock is traded on the OTC Bulletin Board under the symbol "VDCT."
On November 1, 1999, the last sale price for the common stock as reported on the
OTC Bulletin Board was $0.96.
The selling securityholders may offer the shares of common stock from time-to-
time to or through brokers, dealers or other agents, or directly to other
purchasers, in one or more market transactions or private transactions at
prevailing market or at negotiated prices. Brokers, dealers or other agents
engaged by the selling securityholders may arrange for other brokers, dealers or
agents to participate in sales of the shares and may receive commissions,
discounts or concessions from the selling securityholders in amounts to be
negotiated. These brokers, dealers or agents may be deemed to be "underwriters"
within the meaning of the federal securities laws, and any commissions,
discounts or concessions they receive may be deemed to be underwriting discounts
or commissions. See "Plan of Distribution."
We will bear the costs and expenses of registering the shares offered by the
selling securityholders. The selling securityholders will bear any commissions
and discounts attributable to sales of the shares.
An investment in the common stock involves a high degree of risk. Before
purchasing any shares, you should consider carefully the risks described under
"Risk Factors" beginning on page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the common stock or determined that this
prospectus is complete or accurate. Any representation to the contrary is a
criminal offense.
___________________
The date of this prospectus is __________, 1999
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THE COMPANY
General
We own and operate retail video specialty stores that rent and sell a variety
of videocassettes, DVDs, game cartridges, accessories and concessions. As part
of our strategic plan of acquisition, during the period from March 1998 through
March 1999 we grew through ten separate acquisitions from 18 stores in
California to more than 130 video stores located in 12 states. In July and
August 1999, we sold 49 stores in Oregon and Washington to Blockbuster, Inc.
("Blockbuster") for approximately $16 million in cash. We currently have 78
strategically located stores. Our revenues during the fiscal year ended January
31, 1999 and for the six months ended July 31, 1999 were $24,436,000 and
$27,518,000, respectively. Our principal executive offices are located at 370
Amapola Avenue, Suite 208, Torrance, California 90501 and our telephone number
is (310) 533-3900.
Recent Developments
On August 1, 1999, we entered into a merger agreement to acquire West Coast
Entertainment Corporation ("West Coast"), which owns and operates 237 video
stores and franchises, an additional 107 stores, primarily in the Atlantic
corridor between Philadelphia and Boston (the "West Coast Acquisition"). The
consummation of this merger is subject to various conditions including our
obtaining of financing, the approval by our stockholders and the stockholders of
West Coast, certain regulatory approvals, fairness opinions, and approval by
creditors and other third parties. Subject to satisfying these conditions, our
current objective is to complete the West Coast Acquisition on or about January
14, 2000. However, no assurance can be given that all of the requisite
conditions will be satisfied. West Coast's revenues during the fiscal year
ended January 31, 1999 and the two quarters ended August 1, 1999 were
$120,174,000 and $52,429,000, respectively.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 (the "Exchange Act"). We file reports and other information with
the Securities and Exchange Commission in accordance with the Exchange Act. You
can inspect and copy these reports, proxy statements and other information at
the public reference facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices: Seven World Trade Center, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661. You can obtain
copies of such material from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. You can also obtain such materials electronically at the SEC's site on
the World Wide Web at http:/www.sec.gov.
Additional information regarding us and the shares of common stock offered by
the selling securityholders is contained in the registration statement of which
this prospectus forms a part, and the exhibits thereto, filed with the SEC under
the Securities Act of 1933. For further information pertaining to us and the
offered shares, reference is made to the registration statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the SEC at Judiciary Plaza, 450
Fifth Street, Washington, D.C. 20549 or obtained electronically at the SEC's
World Wide Web site referred to above. Statements contained herein concerning
the provisions of any document are not necessarily complete and in each instance
reference is made to the copy of the document filed as an exhibit or schedule to
the registration statement. Each such statement is qualified by reference to
the copies of the applicable documents filed with the SEC.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which we have filed with the SEC, are incorporated by
reference into this prospectus: (1) our annual report on Form 10-K for the year
ended January 31, 1999, Amendment No. 1 thereto filed with the SEC on June 1,
1999; (2) our Current Report on Form 8-K filed with the SEC on April 15, 1999,
and an Amendment thereto filed with the SEC on June 14, 1999; and our Current
Reports on Form 8-K filed with the SEC on August 10, 1999 and August 11, 1999;
and (3) our quarterly reports on Form 10-Q for the quarters ended April 30, 1999
and July 31, 1999.
All documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and before the
termination of the offering of the common stock offered in this prospectus shall
be deemed incorporated by reference into this prospectus and to be a part of
this prospectus from the respective dates of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed modified, superseded or replaced for purposes
of this prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies, supersedes or replaces such statement. Any statement
so modified, superseded or replaced shall not be deemed, except as so modified,
superseded or replaced, to constitute a part of this prospectus.
Upon request, we will provide without charge, to each person to whom this
prospectus is delivered, a copy of any or all of the information incorporated by
reference (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Video City, Inc., 370 Amapola Avenue, Suite 208, Torrance,
California 90501, Attention: Young J. Kim, Esq., telephone number (310) 533-
3900.
FORWARD LOOKING STATEMENTS
This prospectus contains so-called forward-looking statements within the
meaning of the federal securities laws. These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
"will," "we believe," "management believes" and similar language. All forward-
looking statements are based on our current expectations and are subject to
certain risks, uncertainties and assumptions. Our actual results may differ
materially from results anticipated in these forward-looking statements. We
base our forward-looking statements on information currently available to us,
and we assume no obligation to update them.
RISK FACTORS
An investment in these securities involves a high degree of risk. Before
deciding to invest, you should read and carefully consider the following risk
factors.
We have incurred operating losses since our merger in 1997 and may never
generate substantial operating profits, if any at all
We have incurred operating losses since the merger between Prism Entertainment
Corporation and our predecessor company in 1997. We may never generate
substantial operating income, if any at all. We incurred an operating loss of
$5,003,000 on revenues of $27,518,000 for the six months ended July 31, 1999, an
operating loss of $1,263,000 on revenues of $24,436,000 for the fiscal year
ended January 31, 1999, and an operating loss of $2,423,000 on revenues of
$10,212,000 for the fiscal year ended January 31, 1998. As of July 31, 1999, we
had an accumulated deficit of $11,746,000. Our ability to operate profitably is
dependent upon the successful execution of our business plan.
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If we are unable to compete effectively with our competitors, some of which have
significantly greater resources than us, we will not be able to increase
revenues or generate profits
Our ability to increase revenues and generate profits is directly related to
our ability to compete effectively with local, regional and national chains,
including Blockbuster and Hollywood Entertainment Corporation ("Hollywood
Entertainment"), and with supermarkets, mass merchants, Internet and mail order
companies and other retailers. According to published reports, as of March 31,
1999, Blockbuster had more than 3,600 stores in the United States and as of
December 31, 1998, Hollywood Entertainment had approximately 1,260 stores in the
United States, making these chains much larger than Video City and West Coast.
They and some of our other competitors have significantly greater financial and
marketing resources and name recognition.
We believe the principal competitive factors in the video retail industry are
store location and visibility, title selection, the number of copies of popular
titles available, customer service, and pricing. As a result of direct
competition with Blockbuster and others, the availability of sufficient copies
of popular releases and the rental pricing of videocassettes are significant
competitive factors in our business.
Because some of our competitors have greater revenue sharing arrangements with
motion picture studios than we do, our business could be adversely affected
If we are unable to enter into additional revenue sharing agreements with
motion picture studios similar to those entered into by some of our competitors,
we may be at a competitive disadvantage and our business could be adversely
affected. In 1998, a number of studios and certain of our competitors, including
Blockbuster and Hollywood Entertainment, adopted revenue sharing as an
alternative to the historical rental pricing structure, which has led to higher
rental revenues for these competitors as well as for the studios. Studios began
offering these competitors more videocassettes for an individual title at
substantially lower initial cost in exchange for a share of the rental revenue
that those copies generate over their initial release window. In addition,
revenue sharing provides the studios an incentive to market these titles which
improves revenue generated by increased transactions for both the video industry
and the studios.
If recent advances in direct broadcast satellite and cable technologies
adversely affect public demand for video store rentals, our operating
performance and financial condition would be adversely affected
If direct broadcast satellite and digital cable were to become widely
available and accepted, this could cause a smaller number of movies to be rented
due to viewers favoring the expanded number of conventional channels and
expanded programming offered through these services. In addition, pay-per-view
purchases could significantly increase, possibly reducing the public demand for
video store rentals. Recently developed technology has presented cable
providers with the opportunity to use digital technology to transmit many
additional channels of programs over cable lines to subscribers' homes. Direct
broadcast satellite providers transmit numerous channels of programs by
satellite transmission into subscribers' homes. In addition, because of this
increased availability of channels, direct broadcast satellite and digital cable
providers have been able to substantially increase the number and variety of
movies they can offer their subscribers on a pay-per-view basis and to provide
more frequent and convenient start times for the most popular movies. This is
referred to within our industry as "near-video-on-demand." Near-video-on-demand
allows the consumer to avoid trips to the video store for rentals and returns of
movies, which also eliminates the chance they will incur an extended viewing
fee. Currently, newly released movies are made available by the studios to
video stores for rental prior to being made available on a near-video-on-demand
basis, and near-video-on-demand does not allow the consumer to start, stop and
rewind the movie. Increases in the size of this pay-per-view market could lead
to an earlier distribution window for movies on pay-per-view if the studios
perceive this to be a better way to maximize their revenue.
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If video-on-demand technology could be profitably provided at a reasonable price
and newly released movies were made available before or at the same time they
are made available to video stores for rental, it would have a material adverse
effect on our operations
If video-on-demand technology could be profitably provided at a reasonable
price and newly released movies were made available before or at the same time
they are made available to video stores for rental, it would have a material
adverse effect on our operations. Video-on-demand is currently available in
certain test markets. The technology is designed to permit cable and direct
broadcast satellite providers with the capability to transmit movies to
subscribers on demand with interactive capabilities such as start, stop and
rewind. Based upon publicly available information, we believe that technology
has not been developed which would permit video-on-demand to be profitably
provided at a reasonable price. There can be no assurance given, however, that
this technology will not be developed in the future.
If the motion picture studios changed our distribution window, our operating
performance could be materially adversely affected
Our operating performance could be materially adversely affected if the
release window for video stores ceased to be the first following theatrical
release, was shortened or was no longer as exclusive as it is now. A significant
competitive advantage that our industry currently enjoys over most other movie
distribution channels except theatrical release is the early timing of our
distribution "window" which is exclusive against most other forms of non-
theatrical movie distribution, such as pay-per-view, premium television, basic
cable and network and syndicated television. The order, length and exclusivity
of each window for each distribution channel with respect to any movie is
determined solely by the studio releasing the movie. The length of the window
for movie rental varies, typically ranging from 30 to 90 days, after which
movies are made available to television distribution channels.
If we are unable to obtain and maintain sufficient long-term capital to support
our operations, we may have to curtail or suspend our planned business
activities, which could have a significant adverse effect on our financial
results and prospects
If we are unable to obtain and maintain sufficient long-term capital to
support our operations, including our anticipated franchising and licensing
activities, we may have to curtail or suspend our planned business activities,
which could have a significant effect on our financial results and prospects.
There can be no assurance that our cash flows from operations, the net proceeds
from the possible sale of debt or equity securities, our assumption of others'
liabilities, trade credit and equipment leases will be available to us as a
source of long-term capital.
If our relationships with our two primary suppliers were terminated and we were
not able to obtain alternative suppliers, our financial condition and results of
operations could be adversely affected
If our relationships with Ingram Entertainment Inc. ("Ingram") and Rentrak
Corporation ("Rentrak") were terminated, and we were not able to obtain
alternative suppliers, our financial condition and results of operations could
be adversely affected. In the past we have purchased or leased approximately
80% of our supply of new release videos from Ingram and Rentrak. Failure to
obtain comparable service, support or payment terms from an alternative supplier
could have a material adverse effect on our financial condition and results of
operations. There can be no assurance that any replacement supplier would
provide service or payment terms as favorable as those currently provided by
Ingram or Rentrak.
If we are not able to retain our Chairman, it will be more difficult for us to
manage our business and our operating performance would suffer
Our business and operations are dependent on the continued efforts of Robert
Y. Lee, our Chairman of the Board and Chief Executive Officer, who is
responsible for our strategic direction and post-acquisition integrative
strategies. The loss of the services of Mr. Lee would materially and adversely
affect our business and prospects.
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The Year 2000 problem could cause us to suffer business interruptions, or
shutdown, reputational harm or legal liability, and as a result, material
financial loss
We expect that West Coast's Year 2000 remediation efforts will be completed
prior to the Closing. However, there can be no assurance that these efforts
will be successful, and, if they are not, it could have a material adverse
effect on our financial condition and results of operations.
We have important and material relationships with a number of vendors and
suppliers and have obtained written verification from them that they expect to
be Year 2000 compliant in time. However, if our vendors and suppliers are
unable to resolve such processing issues in a timely manner, it could result in
material financial risk to us.
Our most likely worst case scenario would be the failure of our video stores'
point of sale system, which keeps track of customer rental transactions. We are
developing back-up systems that do not rely on computers in response to this
unlikely event.
The Year 2000 problem is the result of computer programs written using two
digits rather than four digits to define the applicable year. Any of our
computer systems that use time-sensitive software programming may recognize a
date using "00" as the year 1900 rather than the Year 2000, which could result
in miscalculation or system failure.
We have completed our assessment of all of our information technology systems,
related computer applications, and any embedded systems contained in our
buildings, equipment, and other infrastructure and have determined that we are
ready for the year 2000. Substantially all of our hardware and software systems
have been verified as being Year 2000 compliant.
Our management has determined that the costs of addressing potential problems
are not expected to have a material adverse impact on our financial position,
results of operations or cash flows in the future periods. The estimated total
costs to address our Year 2000 issues is approximately $25,000, which includes
the cost of upgrading software and hardware systems.
There is no assurance that we will complete the pending acquisition of West
Coast Entertainment Corporation
The West Coast Acquisition is subject to a number of substantial terms and
conditions including the obtaining of financing to pay the cash portion of the
acquisition and the expenses of the acquisition, the satisfaction of West
Coast's indebtedness to its lending banks, the approval by the stockholders of
both Video City and West Coast, the obtaining of certain regulatory approvals
and fairness opinions for the transaction, and approval by creditors and other
third parties.
West Coast has incurred an operating loss in its last fiscal year and may never
generate substantial operating profits, if any at all
West Coast has incurred an operating loss of $21,170,000 on revenues of
$120,174,000 for the fiscal year ended January 31, 1999 and an operating loss of
$5,403,000 on revenues of $52,428,000 for the two quarters ended August 1, 1999.
As of August 1, 1999, West Coast had an accumulated deficit of $38,513,000. Our
ability to operate West Coast profitably is dependent upon the successful
execution of our business plan.
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West Coast's Independent Certified Public Accountants stated in their opinion
that there is substantial doubt about West Coast's ability to continue as a
going concern
West Coast has approximately $70,000,000 of its credit facility maturing on
February 15, 2000, which raises substantial doubt about West Coast's ability to
continue as a going concern beyond that date. If we acquire West Coast, our
ability to execute our business plan is dependent upon the satisfaction of the
bank debt to the West Coast Bank Group and upon West Coast's operation
continuing as a going concern.
Unforeseen difficulties in managing our operations following the West Coast
Acquisition may cause the disruption of, or a loss of momentum in, our business
and otherwise adversely affect our financial condition and operating results
The West Coast Acquisition, if completed, may place an undue burden on our
existing management, services and support operations, administrative personnel
and other resources. Unforeseen difficulties in managing the larger combined
company and assimilating West Coast's business with our operations, coupled with
the increased demands on management's time, may cause the disruption of, or a
loss of momentum in, the activities of the combined company's business which
could adversely affect our business, financial condition and operating results.
In addition, there can be no assurance that our expenditures and activities
will rectify any problems we encounter or that the acquired business may not be
declining or impaired in ways that have not yet become apparent in financial and
operating reports.
We also may not be able to retain or hire the necessary personnel or acquire
other resources necessary to service West Coast's operations. While we will have
entered into agreements with T. Kyle Standley, Ralph W. Standley III, and
Richard G. Kelly for the provision of transitional consulting services, they
will not become senior executive officers of Video City following the merger.
Many management duties within Video City are presently the responsibility of a
relatively small number of executives and, following the merger, management of
the combined company will be the responsibility of those same executives.
If we acquire West Coast but do not realize the expected benefits from the West
Coast Acquisition, our financial condition and operating results could be
adversely affected
If we acquire West Coast but do not realize the expected benefits from the
West Coast Acquisition, such as cost savings, operating efficiencies and other
synergies, our financial condition and operating results could be adversely
affected. We entered into the merger agreement with West Coast with the
expectation that the merger will result in a number of benefits to the combined
company, including cost savings, operating efficiencies and other synergies.
There can be no assurance given, however, that these cost savings, operating
efficiencies and other synergies will be achieved.
Because West Coast's franchising business may be declining significantly, if we
acquire West Coast but cannot rebuild its franchise network or induce delinquent
franchisees to report and pay the amounts they owe, our financial condition and
operating results could be adversely affected
West Coast's franchise business may be declining significantly due to
franchise defaults and terminations. If we acquire West Coast but cannot rebuild
the franchise network or induce delinquent franchisees to report and pay the
amounts they owe our financial condition and operating results could be
adversely affected. West Coast's franchise program revenues were $2,169,000 for
the year ended January 31, 1999 and $609,000 for the six months ended August 1,
1999. The number of franchised stores declined from 160 at January 31, 1999 to
107 at September 30, 1999. The potential to grow our combined business
operations through franchising is one of the reasons for the West Coast
Acquisition. There can be no assurance given, however, that this franchising
business will, in fact, operate profitably following the Merger.
Any delay in implementing the point of sale system in the West Coast stores
could adversely affect our operating results
Any delay in implementing the point of sale ("POS") system in the West Coast
stores could adversely
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affect our operating results. West Coast has commenced Phase I of the conversion
of its POS systems which will allow West Coast's system to be Internet adaptable
prior to the Closing. Phase II of the conversion, which is anticipated to be
implemented after the Closing, will enable the West Coast stores to report store
level sales and inventory information via Internet transmission. If West Coast
cannot implement both phases of the POS system conversion as scheduled, we may
incur additional costs of obtaining this information, which will adversely
affect our operating results.
If the actual transaction costs for the West Coast Acquisition substantially
exceed our estimates, our financial condition and operating results could be
adversely affected
If the transaction costs for the West Coast Acquisition exceed our estimates
our financial condition and operating results could be adversely affected. We
estimate that, as a result of the merger and the Offering, the combined company
will incur transaction costs of approximately $8.2 million, including note
placement, investment banking, legal and accounting fees and severance payments.
The amount of the transaction costs is a preliminary estimate and is subject to
change. No assurance can be given as to what the amount of actual transaction
costs for the West Coast Acquisition will, in fact, be.
Our Stock Underlying the Warrants is Volatile
The trading price of our Common Stock (and, thus, the value of the Warrants)
may fluctuate widely in response to quarter-to-quarter variations in our
operating results, announcements regarding acquisitions, financial matters,
competitive changes, general industry conditions and other events or factors,
including factors such as analysts' expectations, which are beyond our control.
The relatively small trading volume in our stock also makes our stock price
susceptible to rapid price fluctuations. In recent years and months, broad stock
market indices in general, and the securities of "micro cap" companies such as
Video City in particular, have experienced substantial price fluctuations. Such
broad market fluctuations also may adversely affect the future trading price of
our Common Stock. The sale prices of our Common Stock have ranged from $2.688 to
$0.375 during the period from October 1, 1998 to October 29, 1999.
Our Outstanding Options and Warrants May Adversely Affect the Trading Price of
Our Common Stock
As of November 1, 1999, there were 8,605,734 shares of Common Stock reserved
for issuance upon the exercise of outstanding stock options and warrants at
exercise prices ranging from $.01 to $3.04 per share. Our outstanding options
and warrants could adversely affect our ability to obtain future financing or
engage in certain mergers or other transactions, since the holders of options
and warrants can be expected to exercise them at a time when we may be able to
obtain additional capital through a new offering of securities on terms more
favorable to us than the terms of outstanding options and warrants. For the life
of the options and warrants, the holders have the opportunity to profit from a
rise in the market price of the Common Stock without assuming the risk of
ownership. To the extent the trading price of the Common Stock at the time of
exercise of any such options or warrants exceeds the exercise price, such
exercise will also have a dilutive effect to our stockholders.
USE OF PROCEEDS
We will bear the costs and expenses of registering the shares offered by the
selling securityholders, which are estimated at $15,000. Other than the exercise
of the warrants described herein (to the extent they may be exercised), we will
not receive any of the proceeds from the sale of the shares offered by the
selling securityholders. The holders of the warrants are not obligated to
exercise the warrants, and there can be no assurance that they will choose to do
so. If all of the warrants are exercised in full, we will receive $1,547,152
upon exercise.
The Company intends to use any proceeds it receives from the exercise of
warrants for working capital and general corporate purposes.
8
<PAGE>
SELLING SECURITYHOLDERS
Selling Securityholder Table
The following table sets forth certain information regarding the beneficial
ownership of our common stock by the selling securityholders on November 1,
1999. To our knowledge, each of the selling securityholders has sole voting and
investment power with respect to the shares of common stock shown, subject to
applicable community property laws.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering (1)
----------------- ------------------
Selling Securityholder Number of Number of Number of Percent(2)
- --------------------- Shares Percent(2) Shares Shares ---------
------ --------- Being Offered ------
-------------
<S> <C> <C> <C> <C> <C>
The Value Group, LLC/(3)/ 381,951 /(4)/ 2.5% 37,500 /(5)/ 344,451 2.2%
Alexander W. Rangos 150,000 /(5)/ * 150,000 /(5)/ -0- --
DAZ Systems, Inc./(6)/ 50,000 /(5)/ * 50,000 /(5)/ -0- --
D. Jonathan Merriman 50,000 /(5)/ * 50,000 /(5)/ -0- --
Terri A. Loetz IRA/(7)/ 25,000 /(5)/ * 25,000 /(5)/ -0- --
Jack A. McCleod 12,500 /(5)/ * 12,500 /(5)/ -0- --
Martin T. Goldblum/(8)/ 12,500 /(5)/ * 12,500 /(5)/ -0- --
William J. Feis/(9)/ 12,500 /(5)/ * 12,500 /(5)/ -0- --
Steven P. Brown and Barbara C. Brown/(10)/ 12,500 /(5)/ * 12,500 /(5)/ -0- --
Interstate Personnel, Inc./(11)/ 50,000/(12)/ * 50,000/(12)/ -0- --
Ingram Entertainment Inc./(13)/ 3,723,104/(14)/ 22.2% 561,726/(15)/ 3,161,378 19.5%
Pro Active Management, Inc./(16)/ 75,000/(15)/ * 75,000/(15)/ -0- --
X-it Marketing, Inc./(17)/ 100,000/(18)/ * 100,000/(18)/ -0- --
</TABLE>
_______________________
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options, warrants and
convertible securities currently exercisable or convertible, or exercisable
or convertible within 60 days, are deemed outstanding, including for
purposes of computing the percentage ownership of the person holding such
option, warrant or convertible security, but not for purposes of computing
the percentage of any other holder.
(2) Included as outstanding for this purpose are 14,987,997 shares outstanding
on November 1, 1999, plus, in the case of each of these selling
securityholders, the shares issuable upon exercise and conversion of the
warrants and/or shares of convertible preferred stock held by such selling
securityholder (but not including shares issuable upon exercise or
conversion of any other warrants, convertible preferred stock or other
securities held by any other person).
(3) The Value Group, LLC provides us with investment banking services. John T.
Sheehy, one of our directors, is a principal of The Value Group.
(4) Includes 10,639 shares owned outright, 62,500 shares issuable upon
conversion of outstanding shares of series AA convertible redeemable
preferred stock, 189,000 shares issuable upon conversion of outstanding
shares of series C convertible redeemable preferred stock, and 119,812
shares of common stock issuable upon exercise of warrants.
(5) Issuable upon conversion of outstanding shares of series C convertible
redeemable preferred stock.
(6) DAZ Systems, Inc. provides computer consulting services to Video City.
(7) Terri A. Loetz is the spouse of Richard T. Gibson; Mr. Gibson is the
president and chief operating officer of Video City.
(8) Martin T. Goldblum is a member of Troy & Gould Professional Corporation,
which provides legal services to Video City.
(9) William J. Feis is of counsel to Troy & Gould Professional Corporation,
which provides legal services to Video City.
(10) Steven P. Brown provides consulting services to Video City.
(11) Interstate Personnel, Inc. provided temporary employment services to Video
City.
(12) Includes up to 35,000 shares issuable upon conversion of outstanding shares
of series E convertible preferred stock; and 15,000 shares issuable upon
exercise of warrants at $2.00 per share.
(13) Ingram Entertainment, Inc. is one of our suppliers.
(14) Includes 1,500,00 shares owned outright; a warrant to purchase 404,403
shares from Robert Y. Lee; and warrants to purchase 1,818,701 shares from
Video City.
(15) Issuable upon exercise of warrants at $2.00 a share. Warrants for 50,000
shares are currently exercisable and warrants for the remaining 25,000
shares will become exercisable on July 7, 2000.
9
<PAGE>
(16) Pro Active Management, Inc. provided finance consulting services to Video
City. Robert W. Crawford, the Chief Financial Officer of Video City, is the
beneficial owner of Pro Active Management, Inc.
(17) Robert W. Crawford, the Chief Financial Officer of Video City, is the
beneficial owner of 33.3% of X-it Marketing, Inc
(18) Issuable upon exercise of warrants at $2.437 per share. Warrants for
50,000 shares are currently exercisable and warrants for the remaining
50,000 shares will become exercisable on July 1, 2000.
PLAN OF DISTRIBUTION
The purpose of this prospectus is to permit the selling securityholders, if
they desire, to dispose of some or all of their shares at such times and at such
prices as each may choose. Whether sales of shares will be made, and the timing
and amount of any sale made, is within the sole discretion of each selling
securityholder.
The common stock covered by this prospectus may be offered for sale from time
to time by the selling securityholders to or through underwriters or directly to
other purchasers or through agents in one or more market transactions, in one or
more private transactions or in a combination of such methods of sale, at prices
then prevailing, at prices related to such prices or at negotiated prices. Such
methods of distribution may include, without limitation (a) a block trade in
which the broker-dealer so engaged will attempt to sell the common stock as
agent but may position and resell a portion of the block as a principal to
facilitate the transaction; (b) purchases by a broker-dealer as a principal and
resale by such broker-dealer for its own account pursuant to the Registration
Statement of which this prospectus is a part; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
face-to-face transactions between sellers and purchasers without a broker or
dealer. This prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution.
In connection with distributions of the common stock or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with such transactions, brokers-dealers
or other financial institutions may engage in short sales of common stock in the
course of hedging the positions they assume with the selling securityholders.
The selling securityholders may also enter into options or other transactions
with broker-dealers or other financial institutions which require the delivery
to such broker-dealer or financial institution of the shares of common stock
offered hereby, which such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction). The selling securityholders may also pledge the shares offered
hereby to a broker-dealer or other financial institution and, upon a default,
such broker-dealer or other financial institution may effect sales of the
pledged shares pursuant to this prospectus (as supplemented or amended to
reflect such transaction). In addition, any common stock covered by this
prospectus that so qualifies may be sold under Rule 144 under the Securities
Act.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling securityholders in
amounts to be negotiated in connection with sales pursuant thereto. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales and any such commission, discount or concession may be deemed to
be underwriting discounts or commissions under the Securities Act.
We will bear the costs, expenses and fees in connection with the registration
of the shares of common stock offered hereby. Commissions, discounts and
transfer taxes, if any, attributable to the sales of the common stock will be
borne by the selling securityholders. The selling securityholders have agreed
or may agree to indemnify the Company or any underwriter, as the case may be,
and any of their respective affiliates, directors, officers and controlling
persons, against certain liabilities in connection with the offering of the
common stock pursuant to this Registration Statement, including liabilities
arising under the Securities Act. In addition, we have agreed to indemnify the
selling securityholders or any underwriter, as the case may be, and any of their
respective affiliates, directors, officers and controlling persons, against
certain liabilities in connection with the offering of the common stock pursuant
to this prospectus, including liabilities arising under the Securities Act.
10
<PAGE>
We have informed certain of the selling securityholders that the anti-
manipulation provisions of Regulation M under the Exchange Act may apply to
their sales of the shares offered hereby and have furnished each of such selling
securityholders with a copy of these provisions. We have also advised the
selling securityholders of the requirement for delivery of this prospectus in
connection with any public sale of the shares.
DESCRIPTION OF OUR COMMON STOCK
Our authorized capital consists of 30,000,000 shares of common stock, $.01 par
value, and 2,000,000 shares of preferred stock, $.01 par value.
As of November 1, 1999, there were 14,987,997 shares of common stock
outstanding held by approximately 540 holders of record. Our common
stockholders are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. Until February 1, 2000, our
common stockholders are entitled to cumulative voting rights with respect to the
election of directors. Beginning February 1, 2000, they will not be entitled to
these cumulative voting rights, and, as a result, minority stockholders may not
be able to elect directors on the basis of their votes alone. Our common
stockholders are entitled to receive ratably any dividends declared by our board
of directors out of legally available funds, after payment of any dividends
required on our outstanding preferred stock. Upon our liquidation, dissolution
or winding up, our common stockholders are entitled to share ratably in all
assets that are legally available for distribution, after payment of or
provision for all debts and liabilities and any payments with respect to the
preferred stock. Our common stockholders have no preemptive, subscription or
conversion rights, and there are no redemption or sinking fund provisions
applicable to shares of our common stock. All of the outstanding shares of
common stock are fully paid and nonassessable. The rights, preferences and
privileges of holders of our common stock are subject to the rights of the
holders of shares of our outstanding preferred stock, and may be subject to the
rights of the holders of any preferred stock we issue in the future.
We have appointed Chase Mellon Shareholder Services as the transfer agent and
registrar for our common stock.
INDEMNIFICATION
Our Certificate of Incorporation and Bylaws permit us to indemnify our
officers and directors to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law. Section 145 of the Delaware General
Corporation Law makes provision for the indemnification of officers, directors
and other corporate agents in terms sufficiently broad to indemnify such
persons, under certain circumstances, for liabilities (including reimbursements
of expenses incurred) arising under the Securities Act.
We have entered into indemnity agreements with our directors and executive
officers. Pursuant to such indemnity agreements, we have agreed to indemnify
each director and executive officer who is a party to the indemnity agreement
under certain circumstances in which such person or we are named as a party to a
proceeding (as that term is defined).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, we have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon by Troy &
Gould Professional Corporation, Los Angeles, California. The Troy & Gould firm
owns 46,233 shares of our common stock, in addition to an aggregate of 25,000
shares of common stock issuable to Messrs. Goldblum and Feis upon conversion of
outstanding series C convertible preferred stock as shown in the table under
"Selling Securityholders" above.
11
<PAGE>
EXPERTS
The financial statements incorporated by reference in this prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report incorporated herein by
reference, and are incorporated herein in reliance upon such report given upon
the authority of said firm as experts in auditing and accounting.
12
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFERING HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY SELLING SECURITYHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES TO ANY PERSON IN ANY
STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company............................................ 2
Available Information.................................. 2
Incorporation of Certain
Documents by Reference.............................. 3
Forward Looking Statements............................. 3
Risk Factors........................................... 3
Use of Proceeds........................................ 8
Selling Securityholders................................ 8
Plan of Distribution................................... 10
Description of Our Common Stock........................ 11
Indemnification........................................ 11
Legal Matters.......................................... 11
Experts................................................ 12
</TABLE>
COMMON STOCK
VIDEO CITY, INC.
1,149,226 SHARES
____________
PROSPECTUS
____________
______________, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distributions
described in this Registration Statement will be as set forth below. Such costs
and expenses shall be borne by the Company. Any commissions, discounts and
transfer taxes, if any, attributable to the sales of the shares being registered
hereunder will be borne by the Selling Securityholders.
<TABLE>
<S> <C>
SEC registration fee................................................................. $ 513
Printing expenses.................................................................... $ 1,000
Accounting fees and expenses......................................................... $ 8,000
Legal fees and expenses.............................................................. $ 5,000
Miscellaneous........................................................................ $ 487
-------
Total $15,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws permit the Company to
indemnify officers and directors of the Company to the fullest extent permitted
by Section 145 of the Delaware General Corporation Law. Section 145 of the
Delaware General Corporation Law makes provision for the indemnification of
officers, directors and other corporate agents in terms sufficiently broad to
indemnify such persons, under certain circumstances, for liabilities (including
reimbursements of expenses incurred) arising under the Securities Act.
The Company has entered into indemnity agreements with its directors and
executive officers. Pursuant to such indemnity agreements, the Company has
agreed to indemnify each director and executive officer who is a party to the
indemnity agreement under certain circumstances in which such person or the
Company is named as a party to a proceeding (as that term is defined).
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference as a
part of this Registration Statement:
5 Opinion of Troy & Gould Professional Corporation.*
23.1 Consent of Troy & Gould Professional Corporation (included in
Exhibit 5).*
23.2 Consent of BDO Seidman, LLP.*
24 Power of Attorney (included on page II-4 hereof).*
- -----------------------
* Included herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, and the information required to be included in a post-
effective amendment is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(d) The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Torrance, State of California, on
November 15, 1999.
VIDEO CITY, INC.
By: /s/ ROBERT Y. LEE
------------------------------------
Robert Y. Lee
Chairman and Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert Y. Lee and Timothy J. Denari his
true and lawful attorneys-in-fact and agents, with full power of substitution,
for him in any and all capacities, to sign this Registration Statement and any
amendments hereto, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as he might do or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ ROBERT Y. LEE Chairman of the Board and November 15, 1999
- ------------------------
Robert Y. Lee Chief Executive Officer
/s/ ROBERT W. CRAWFORD Chief Financial Officer
- ------------------------
Robert W. Crawford (Principal Financial and November 15, 1999
Accounting Officer)
/s/ JAMES CRAIG KELLY Director November 15, 1999
- ------------------------
James Craig Kelly
/s/ DAVID A. BALLSTADT Director November 15, 1999
- ------------------------
David A. Ballstadt
/s/ MICHAEL T. ANDERSON Director November 15, 1999
- ------------------------
Michael T. Anderson
/s/ BARRY L. COLLIER Director November 15, 1999
- ------------------------
Barry L. Collier
/s/ CHARLES E. COOKE Director November 15, 1999
- ------------------------
Charles E. Cooke
/s/ STEPHEN C. LEHMAN Director November 15, 1999
- ------------------------
Stephen C. Lehman
/s/ JOHN T. SHEEHY Director November 15, 1999
- ------------------------
John T. Sheehy
/s/ GERALD W.B. WEBER Director November 15, 1999
- ------------------------
Gerald W.B. Weber
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number
------
5 Opinion of Troy & Gould Professional Corporation.*
23.1 Consent of Troy & Gould Professional Corporation (included in
Exhibit 5).*
23.2 Consent of BDO Seidman, LLP.*
24 Power of Attorney (included on page II-4 hereof).*
____________________
* Included herewith.
II-5
<PAGE>
EXHIBIT 5
---------
TROY & GOULD
PROFESSIONAL CORPORATION
1801 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CALIFORNIA 90067
TELEPHONE (310) 553-4441
November 16, 1999
Video City, Inc.
370 Amapola Ave., Ste. 208
Torrance, California 90501
Re: REGISTRATION STATEMENT ON FORM S-3
At your request, we have examined the Registration Statement on Form S-3 (the
"Registration Statement") of Video City, Inc. (the "Company"), which has been
prepared for filing with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to 1,149,226 shares of the Company's common stock (the "Shares")
issuable upon the exercise of certain warrants or upon the conversion of certain
convertible preferred stock, as described in the Registration Statement. The
Shares are to be offered for resale by certain selling securityholders as
described therein. Capitalized terms not defined herein shall have the
definitions ascribed to them in the Registration Statement.
We are familiar with the corporate proceedings heretofore taken or proposed to
be taken by the Company in connection with the authorization for issuance of the
Shares. In addition, we have examined such records of the Company as in our
judgment were necessary or appropriate to enable us to render the opinions
expressed herein.
Based on the foregoing, it is our opinion that the Shares have been duly and
validly authorized and, when issued in accordance with the warrants relating
thereto or the certificate of designations authorizing the series of the
convertible preferred stock converted thereto, as applicable, will be duly and
validly issued, fully paid and nonassessable.
We consent to the use of our name under the caption "Legal Matters" in the
Registration Statement and the Prospectus made part thereof, and to the filing
of this opinion as an exhibit to the Registration Statement. By giving you this
opinion and consent, we do not admit that we are experts with respect to any
part of the Registration Statement or Prospectus within the meaning of the term
"expert" as used in Section 11 of the Act, or the rules and regulations
promulgated thereunder, nor do we admit that we are in the category of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ TROY & GOULD
Troy & Gould
Professional Corporation
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Video City, Inc.
Torrance, California
We consent to the incorporation by reference in the Prospectus constituting a
part of this Registration Statement of our report dated May 14, 1999, relating
to the consolidated financial statements of Video City, Inc. appearing in the
Company's Annual Report on Form 10-K for the year ended January 31, 1999.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/S/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Los Angeles, California
November 12, 1999
