As filed with the Securities and Exchange Commission on December 29, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
RENTRAK CORPORATION
(Exact name of Registrant as specified in charter)
Oregon 7227 N.E. 55th Avenue 93-0780536
(State of incorporation) Portland, Oregon 97218 (I.R.S. Employer
(Address of principal executive Identification Number)
offices)
Telephone Number: (503) 284-7581
F. Kim Cox
Executive Vice President
Rentrak Corporation
7227 N.E. 55th Avenue
Portland, Oregon 97218
(Name and address of agent for service)
Telephone Number: (503) 284-7581
Approximate date of commencement of proposed sale to public: From time to
time 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, please 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. [ ]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed Amount of
Title of Each Class of Securities Amount to be Maximum Maximum Registrat
to be Registered Registered Offering Aggregate ion Fee
Price Per Offering
Share Price
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Common Stock, $0.001 par value(1) 878,000 $4.75 $4,170,500 $834
shares
Preferred Share Purchase Rights(2) 878,000 (2) (2) $100
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and
low prices of the Registrant's common stock as reported on the Nasdaq
National Market on December 27, 1995.
(2) Rights are attached to and trade with Common Stock of the Company.
The value attributable to such Rights, if any, is reflected in the
market price of the Common Stock. Fee paid represents the minimum
statutory fee pursuant to Section 6(b) of the Securities Act of 1933.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS
878,000 Shares
RENTRAK CORPORATION
Common Stock ($.001 par value)
This Prospectus relates to 878,000 shares of Common Stock (the "Shares") of
Rentrak Corporation (the "Company") to be offered from time to time by
certain shareholders of the Company named in this Prospectus (the "Selling
Shareholders"). All of the Shares offered hereunder are to be sold on
behalf of the Selling Shareholders, and the Company will not receive any
proceeds from the sale of the Shares. The Company has been advised that
the Selling Shareholders expect to offer the Shares in the over-the-counter
market on the Nasdaq National Market, through negotiated transactions or
otherwise, or in private transactions, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, or at
prices otherwise negotiated. The aggregate proceeds to the Selling
Shareholders from the sale of the Shares will be the purchase price of the
Shares sold less the aggregate brokers' commissions, if any. By agreement,
the Company will pay substantially all of the expenses incident to the
registration of the Shares. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the sale of the Shares hereunder. See "Selling
Shareholders" and "Plan of Distribution."
See "Risk Factors" commencing on page six for certain considerations
relevant to an investment in the common stock.
The Shares were issued by the Company to the Selling Shareholders pursuant
to the Asset Purchase Agreement dated August 25, 1995 (the "Supercenter
Agreement") by and among the Company, Supercenter Entertainment
Corporation, a Delaware corporation ("Supercenter"), and Jack Silverman.
See "The Company" and "Selling Shareholders."
The Common Stock of the Company is traded on the over-the-counter Nasdaq
National Market under the symbol "RENT." On December 28, 1995 the last
reported sale price for the Common Stock of the Company as reported on the
Nasdaq National Market was $4.75 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 29, 1995
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission") in accordance therewith. Such reports, proxy
statements and other information concerning the Company are available for
inspection and copying at the public reference facilities of the Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, and at certain of its Regional Offices at Northwestern Atrium
Center, 500 West Madison Street, Suite 1450, Chicago, Illinois 60661 and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed a registration statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act
concerning the Shares covered by this Prospectus. This Prospectus omits
certain information and exhibits included in the Registration Statement,
copies of which may be obtained upon payment of a fee prescribed by the
Commission or may be examined free of charge at the Commission's Public
Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is traded on the over-the-counter market on the
Nasdaq National Market. Reports and other information concerning the
Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., at 1735 K Street, N.W., Washington, D.C. 20006.
The Company furnishes its shareholders with annual reports containing
financial statements audited by its independent auditors and with quarterly
reports containing unaudited summary financial information for each of the
first three quarters of each fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1995.
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1995.
4. The Company's 1995 Proxy Statement.
5. The Company's Current Reports on Form 8-K dated as of May 18, 1995
(filed on June 2, 1995), August 25, 1995 (filed on September 1, 1995),
August 31, 1995 (filed on September 15, 1995) and August 31,
1995 (filed on November 14, 1995).
6. The description of the Common Stock of the Company which is contained
in the Registration Statement on Form 8-A of the Company filed
pursuant to the Exchange Act, including any amendment or reports
filed for the purpose of updating such description.
All documents and any definitive proxy statements filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of
the offering of the Shares offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of the
Registration Statement and this Prospectus to the extent that a statement
contained in the Registration Statement and this Prospectus or any other
subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus has been delivered, upon the written or oral request
of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates by reference). Requests
should be directed to: F. Kim Cox, Executive Vice President, Rentrak
Corporation, 7227 N.E. 55th Avenue, Portland, Oregon 97218; (503) 284-7581.
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus,
and, if given or made, such information and representation must not be
relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state. Neither the delivery of this
Prospectus nor any sales 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 that any information contained herein is
correct as to any time subsequent to its date.
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TABLE OF CONTENTS
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Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Information by Reference . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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THE COMPANY
The Company's primary business is the distribution of pre-recorded video
cassettes to home video specialty stores under its Pay Per Transaction
program. In addition, the Company operates a number of "store within a
store" retail video outlets which rent and sell video cassettes in Wal-Mart
and K-Mart stores. The Company also operates a number of retail stores
which sell professional and college licensed sports apparel merchandise.
Unless the context otherwise requires, all references herein to the Company
refer to Rentrak Corporation and its wholly owned subsidiaries.
PPT System. The Company distributes pre-recorded video cassettes
("Cassettes") principally to home video specialty stores under its Pay Per
Transaction program (the "PPT System"). The PPT System enables home video
specialty stores and other retailers, including grocery stores and
convenience stores, who rent Cassettes to consumers ("Retailers") to obtain
Cassettes at a significantly lower initial cost than if they purchased the
Cassettes from conventional video distributors. Under the PPT System,
after the Retailer pays a processing fee (the "Processing Fee") to the
Company and is approved for participation in the PPT System, Cassettes are
leased to the Retailer for a one-time fee (the "Handling Fee") plus a
percentage of revenues generated by Retailers from rentals or sales to
consumers (the "Transaction Fee"). The Company pays the appropriate owner
of the Cassette's distributions rights, usually motion picture producers,
licensees or distributors ("Program Suppliers") fees which are calculated
based upon the Company's revenues from Retailers. The anticipated benefit
to the Retailer is a higher volume of rental transactions, as well as a
reduction in capital cost and risk. The anticipated benefit to the Program
Supplier is an increase in the total number of Cassettes shipped, resulting
in increased revenues and opportunity for profit. The anticipated benefit
to the consumer is the potential of finding more copies of certain newly
released hit titles and a greater selection of other titles at Retailers
participating in the PPT System. The Company markets its PPT System
throughout the United States and Canada. The Company also owns a twenty-
five percent interest in a Japanese corporation which markets a similar
system to video retailers in Japan.
To participate in the PPT System, Retailers must have approved computer
software and hardware to process all of their rental and sale transactions.
The Company's Rentrak Profit Maker Software resides on the Retailers' point
of sale computer system and transmits a record of PPT transactions to the
Company over a telecommunications network and assists the Retailer in
ordering newly released titles and in managing Cassette inventory. The
Company's computer systems process these transactions and transmit
information to Retailers on new titles.
Retail Video "Store Within A Store" Outlets -- BlowOut Video and
Entertainment One, Inc. In a series of acquisitions culminating in May
1995, the Company acquired a fifty-seven percent (57%) interest in
Entertainment One, Inc., an Illinois corporation ("E-1"). E-1 operates
"store within a store" retail video outlets which rent and sell video
cassettes, video games, computer games and programs, and CD-ROM titles in
Wal-Mart Supercenter stores under the trade name "BlowOut Video." The
Company also holds additional convertible debt of E-1 which, if fully
converted, would increase its interest in E-1 to approximately ninety-three
percent (93%). As of September 30, 1995, E-1 operated 70 stores in Wal-
Mart Supercenter stores, all of which are participating retailers in the
PPT System. As of September 30, 1995, only 22 of the E-1 stores had been
open for more than a year, and E-1 had not generated a profit.
On August 31, 1995, the Company acquired certain assets of Supercenter
Entertainment Corporation, a Delaware corporation ("Supercenter"),
consisting of 45 retail video "store within a store" outlets in Wal-Mart
Supercenter stores and 25 retail video outlets in K-Mart and K-Mart
"SuperK" stores. Like the E-1 outlets, the acquired stores are operated
under the trade name "BlowOut Video" and are participating Retailers in the
PPT System. These operations were significantly expanded over the last
year and to date have not generated a profit.
Together, the Company and E-1 are the sole operators of the "store within a
store" video outlets in Wal-Mart stores and the largest operator of "store
within a store" outlets in K-Mart stores. The Company and E-1 have each
entered into master leases with Wal-Mart. The Company has also entered
into a master lease with K-Mart. Each individual video outlet lease under
the Wal-Mart and K-Mart master leases is for a five-year term with an
option to extend for an additional five years. Although the master leases
do not require the Company or E-1 to open additional video outlets in
either Wal-Mart or K-Mart stores, and do not require Wal-Mart or K-Mart to
lease additional video outlets to either the Company or E-1, E-1 has
committed to Wal-Mart to open video outlets within 45 Supercenters in 1996. <PAGE>
Wal-Mart has recently announced that it intends to open 110 Supercenters
during 1996. Assuming Wal-Mart consents to leasing additional video
outlets in such stores and assuming sufficient capital resources are
available to the Company or E-1, it is the Company's intention to open, or
to cause E-1 to open, additional video outlets in substantially all, if not
all, of such Supercenters. It is anticipated that the Company and E-1 each
will incur substantial opening and start-up costs in connection with the
opening of additional stores (currently estimated to be $80,000 to $100,000
per store), and there can be no assurance that the Company's or E-1's
"store within a store" video operations will generate a profit in the
foreseeable future. The retail video business currently is operated
through four wholly owned subsidiaries of the Company and E-1. The Company
plans to reorganize its retail video business by combining three of the
wholly owned subsidiaries and E-1 into one entity that would be owned by
Rentrak and the other shareholders of E-1.
Sports Apparel Retailing - The Pro Image, Inc. and Team Spirit, Inc. As of
December 1, 1995, the Company, through its wholly owned subsidiaries, The
Pro Image, Inc. ("TPI") and Team Spirit, Inc. ("Team Spirit"), owned or
franchised approximately 240 retail outlets which sell sports-oriented
products and apparel featuring products licensed by college and
professional sports teams. The Company's sports apparel retail outlets are
primarily located in 45 states and Canada. The Company also has a limited
number of franchised stores in Mexico, Germany and Japan.
The Company was incorporated in Oregon in 1977 and until September 1988
operated under the name "National Video, Inc." Initially, the Company's
principal business activity was the sale of franchises for the operation of
video specialty stores. In September 1988, the Company sold its franchise
operations in order to develop the PPT System, which is now the Company's
primary business. The Company's principal executive offices are located at
7227 N.E. 55th Avenue, Portland, Oregon 97218 ((503) 284-7581).
RISK FACTORS
In addition to the material contained, or incorporated by reference
elsewhere, in this Prospectus, investors should carefully consider the
following factors.
PPT Business
Dependence on PPT System. A substantial portion of the Company's revenues
(approximately 71% in fiscal year 1995) are derived from the PPT System.
The Company began to market the program in January 1989. Although the
Company has continued to expand its distribution system, there can be no
assurance that the Company will be able to continue to market the PPT
System successfully or that the Company will realize profits from its
operations in the future.
Acquisition of Cassettes for Distribution. The Company's success depends,
among other things, on its ability to provide a sufficient quantity and
variety of Cassettes to Retailers. This in turn depends on the willingness
of Program Suppliers to supply the Company with Cassettes on acceptable
terms and conditions. The Company's existing arrangements with Program
Suppliers are of varying duration, scope and formality. In the six month
period ended September 30, 1995, Cassettes supplied by the Company's two
largest Program Suppliers (the "Major Suppliers") accounted for twenty-
eight percent (28%) and seventeen percent (17%) of its revenues,
respectively. Cassettes from no other Program Supplier accounted for more
than ten percent (10%) of the Company's revenues during the same period.
During the last three years, the Company has not experienced any material
difficulty in acquiring Cassettes which are suitable for the Company's
markets on acceptable terms and conditions from Program Suppliers.
Moreover, the Company continues to seek involvement of additional Program
Suppliers. Based upon existing commitments from Program Suppliers and past
experience, the Company currently has, and believes that for the reasonably
foreseeable future it will have, an adequate supply of Cassettes, on
acceptable terms and conditions, which are suitable for the Company's
markets. There can be no assurance, however, that Program Suppliers will
continue to distribute through the PPT System, continue to have available
for distribution Cassettes which the Company can distribute on a profitable
basis, or continue to remain in business. In addition, some of the
Company's agreements with Program Suppliers may be terminated upon a
relatively short notice, and any such termination or other discontinuation
of its supply of Cassettes, including with respect to either of its Major
Suppliers, could have a material adverse effect on the revenues of the
Company. Even if Cassettes are otherwise available from Program Suppliers
to the Company, there can be no assurance that they will be made available
on terms acceptable to the Company.
Certain Program Suppliers have requested financial or performance
commitments from the Company, including advances, letters of credit or
guarantees as a condition to obtaining certain titles. In certain cases,
the Company has provided such commitments to induce Program Suppliers to
begin participation in the PPT System and to demonstrate its financial
benefits. The Company determines whether to provide such commitments on a
case-by-case basis, depending upon the Program Supplier's success with such
titles prior to home video distribution and the Company's assessment of
expected success in home rental distribution. This practice could result
in losses which may be material.
Turnover of Retailers; Compliance with PPT System Policies; Retailer
Financing Program. The video retail market is subject to a significant
turnover of Retailers each year due to such factors as business failure,
consolidation or acquisition. In addition, Retailers who remain in
business may experience adverse operating results which would affect their
ability to make payments to the Company. There can be no assurance that
changes adverse to Retailers may not occur which might have a material
adverse effect on the Company's operations.
Moreover, certain Retailers in the past have failed to follow the Company's
policies for handling Cassettes, rental transactions and reporting.
Although the Company has compliance standards, audit procedures and
computerized transaction monitoring which can lead to the expulsion of a
non-complying participating Retailer from the PPT System, there can be no
assurance that such procedures will adequately guard against abuses of the
Company's policies. The inability to adequately prevent such abuses could
have a material adverse effect on the Company's operations.
The Company has established a retailer financing program whereby the
Company will provide financing on a selective basis to certain Retailers
which the Company believes demonstrate prospects for substantial growth in
the industry. In connection with these financings, the Company typically
makes a loan and/or equity investment in the Retailer. Each loan or
investment generally ranges from $100,000 to $2.0 million. As part of such
financing, the Retailer typically agrees to cause all of its current and
future retail locations to participate in the PPT System for a designated
period of time. The Board of Directors has authorized up to $14 million to
be used in connection with the Company's retailer financing program, and as
of September 30, 1995, the Company had loaned or invested approximately
$7.5 million and had made oral or written commitments for substantially the
rest of the authorized amount. These financings are speculative in nature
and involve a high degree of risk, and no assurance can be given that the
Company will earn a satisfactory return, if any, from such investments. As
of September 30, 1995, the Company had reserved approximately $2.4 million,
or 33% of the total amount the Company had made in loans and investments
under its retailer financing program. In this regard, the Company's
acquisition of its initial interest in E-1 resulted from an investment made
pursuant to its retailer financing program.
Seasonality of the Home Video Industry. Program Suppliers tend to
introduce hit titles during two periods of the year, the early summer and
the Christmas holiday season. Since the release to home video usually
follows the theatrical release by approximately six months (though
significant variations do occur with respect to certain titles), the
seasonal peaks for home video also generally occur during the early summer
and the Christmas holiday season. The Company believes that its volume of
rental transactions reflects, in part, this seasonal pattern, although
growth in the numbers of Program Suppliers, titles available to the Company
and participating Retailers may tend to obscure any seasonal effect. The
Company believes that such seasonal variations may be reflected in future
quarterly patterns of its revenues and earnings.
Competition in the Video Distribution Industry. The home video industry is
highly competitive. The Company has one direct competitor presently
distributing cassettes on a basis similar to the PPT System, SuperComm,
Inc., a wholly-owned subsidiary of the Walt Disney Company, which has thus
far concentrated its efforts primarily in the supermarket industry. In
addition, the Company faces substantial competition from conventional
distributors. Many of the Company's competitors, including SuperComm,
Inc., have existing distribution networks, long-standing relationships with
Program Suppliers and Retailers, and/or significantly greater financial
resources than the Company.
Competition from Alternative Delivery Technologies. In addition to the
direct competition described above, the Company faces indirect competition
from alternative delivery technologies which are intended to provide video
entertainment directly to the consumer. These technologies include: (1)
direct broadcast satellite transmission systems, which broadcast movies in
digital form direct from satellites to small antennas in the home; (2)
cable systems which may transmit digital format movies to the home over
cable systems employing fiber optic technology; and (3) pay cable
television systems which may employ digital data compression techniques to
increase the number of channels available and hence the number of movies
which can be transmitted. Another source of indirect competition comes
from Program Suppliers releasing titles intended for "sell-through" rather
than rental to consumers at approximately $10 to $30. To date, such "sell-
through" pricing has generally been limited to certain newly released hit
titles with wide general family appeal. As the Company's business is
dependent upon the existence of a home video rental market, a substantial
shift in the video business to alternative technologies or "sell-through"
policies could have a material adverse effect on the Company's operations.
Dependence on Computerization. The success of the PPT System depends,
among other things, on the ability of the Company to track each rental or
sale of Cassettes which are in the PPT System. The Company continues to
expand and refine its computer system. There can be no assurance that the
Company will not experience future problems with computer software or
hardware, and such problems could have a material adverse effect on the
Company's operations.
Retail Video Business
Expansion Strategy; Lack of Profitability. Both E-1, and, to a lesser
extent, the Company, are following aggressive expansion and growth
strategies for opening additional "store within a store" outlets in Wal-
Mart and K-Mart stores in 1996. Substantial capital outlays are required
to open each new store. The Company does not anticipate that its and E-1's
current credit facilities will be sufficient to fund all of the planned
expansion, and as a result the Company and E-1 may have to obtain other
debt or equity financing or expand less aggressively. There can be no
assurance that either the Company or E-1 will be able to obtain any such
additional financing on reasonable terms. In addition, management
resources will be required to expand these operations. There can be no
assurance that the Company and E-1 will be able to attract and retain a
sufficient number of skilled store managers to implement this growth
strategy. Furthermore, neither E-1 nor the former Supercenter business has
operated at a profit, and there can be no assurance that either E-1 or the
Company will be able to meet the demands of a growth strategy and operate
at a profit at any time in the foreseeable future.
Dependence on Wal-Mart and K-Mart. The Company has entered into master
leases with Wal-Mart and K-Mart, respectively, for its stores, and E-1 has
entered into a similar master lease with Wal-Mart. The master leases
provide for an initial five-year term for each new store, with an
additional five-year optional renewal term. Either party to the Wal-Mart
lease can elect to close stores which fail to generate a minimum level of
revenues, and any such closure at the request of the Company or E-1, as the
case may be, would require such party to pay Wal-Mart a termination fee
(equal to $3,000) for each store closed. Neither the Company nor E-1 has
any exclusive right to open stores or any control over the geographic area
or market in which the new stores will be located. The master leases also
allow Wal-Mart or K-Mart, under certain conditions, to restrict the ability
of the Company and E-1 to sell videocassette titles which are being sold in
particular Wal-Mart or K-Mart stores, respectively.
Both the Company and E-1 are highly dependent on their relationships with
their host stores. There can be no assurance that Wal-Mart or K-Mart will
open additional stores in locations which are commercially viable for
retail video operations, or that the number of future stores opened by Wal-
Mart or K-Mart will meet the Company or E-1's current expansion plans.
Either host store could change its development or operation plans at any
time, and there can be no assurance that either the Company or E-1 will be
able to operate stores within either the Wal-Mart or K-Mart stores for any
period of time following the terms provided in the master leases.
Furthermore, if either Wal-Mart or K-Mart terminates its relationship with
the Company or E-1, there can be no assurance that the Company or E-1 could
find a suitable national retail mass merchant with sufficient stores to
support their "store within a store" retail concept.
Geographic Diversity; Efficiencies of Operations. The Company and E-1
operate "store within a store" outlets in 21 different states. The
geographic diversity of these states poses special challenges with respect
to store management, inventory controls and communications. The opening of
additional stores in new states or regions could lead to redundancies and
inefficiencies in operations.
Competition. The video rental industry is highly competitive, with
numerous national, regional and local video operators. Competitors such as
Blockbuster Video have substantially greater financial resources and
marketing capabilities. Because a majority of the Wal-Mart and K-Mart
stores in which the Company and E-1 operate retail video outlets are
located in rural areas, the video operations also face competition from
supermarket rental operations, one of the fastest growing segments of the
video rental market. In addition, the Company and E-1 compete with a
number of other leisure and retail entertainment providers, including
television, movie theaters, bowling alleys and sporting events.
Alternative Delivery Technologies. Both the Company's and E-1's retail
video operations are subject to the same competition from alternative
delivery technologies for home video entertainment as the PPT System. See
the Risk Factor "Alternative Delivery Technologies" under PPT Business for
further information.
Quarterly Fluctuations. Future operating results may be affected by the
number and timing of store openings, the quality of new release titles
available for rental and sale, weather and other special and unusual
events. Spending on entertainment items such as video rentals and
purchases is discretionary and may be particularly susceptible to regional
and national economic conditions. In addition, any concentration of new
store openings and related new store pre-opening costs near the end of a
fiscal quarter could have an adverse effect on the financial results for
that quarter. Operating results for the Company's and E-1's retail video
operations may also be affected by seasonal fluctuations in the release of
home video titles. See the Risk Factor "Seasonality of the Home Video
Industry" under PPT Business for further information.
Integration of Retail Video Operations into Rentrak. Through its
acquisition of the Supercenter operations and a controlling interest in
E-1, the Company has significantly increased the overall level and scope of
its business operations. The expansion in the scope of the Company's
operations has resulted in a need for a significant investment in
infrastructure and systems. The challenges of the Company's expansion are
expected to be magnified with the opening of additional outlets. These
challenges include, without limitation, securing adequate financial
resources to successfully integrate and manage the operation, retention of
key employees, integration of the outlets into the PPT Program and
consolidation of certain operations, each of which could pose significant
challenges. The Company's or E-1's inability to meet these challenges
could adversely affect their ability to expand or attain profitability for
the retail video operations.
Sports Apparel Business
Competition. The Company's sports apparel business faces intense
competition for customers and for suitable store locations from a variety
of retailers. TPI and Team Spirit compete with traditional and specialty
retailers (regional chains, specialty stores, local operators and mail
order companies), mass merchandisers (discount stores and department
stores) and large format retailers (warehouse and superstore operators).
Some of these competitors have substantially greater resources than the
Company.
Seasonality. The sports apparel businesses is heavily dependent upon the
Christmas holiday selling season. It is estimated that approximately
between 30% to 40% of the Company's revenues from its sports apparel
business and substantially all of its profits are generated during that
time period. Any substantial decrease in sales for such period could have
a material adverse effect on the profitability of the Company's sports
apparel business. Although the Company does not yet have complete
information regarding the results of the 1995 Christmas holiday selling
season, the Company currently expects that sales at retail sports apparel
stores owned or franchised by the Company may be lower than sales during
such season in recent years.
Economic Conditions. The retail sports apparel industry is dependent upon
the economic environment and the level of consumer spending. Spending on
items sold in the Company's sports apparel business is discretionary and
may be particularly susceptible to regional and national economic
conditions. There can be no assurance that a prolonged economic recession
would not have a material adverse effect on the Company's sports apparel
business.
Dependence on Key Personnel
The Company's future success depends on the continued contributions of Ron
Berger, the Company's founder and Chief Executive Officer. The loss of Mr.
Berger's services could have a material adverse effect on the Company's
operations. There can be no assurance that the Company could find a
suitable replacement in a timely manner. The Company maintains a
$5.0 million "key man" life insurance policy on Mr. Berger and has entered
into an employment agreement with Mr. Berger that expires on May 31, 1999.
SELLING SHAREHOLDERS
The following table identifies each of the Selling Shareholders and
provides certain information with respect to the Shares beneficially held
and to be offered under this Prospectus from time to time by each Selling
Shareholder.
<TABLE>
<CAPTION>
Number of
Name Shares Held
<S> <C>
Jack Silverman 600,000
James Robert Silverman 50,000
Linda Ann Carlquist 50,000
Robert Joel Silverman 50,000
Steven Charles Silverman 50,000
David A. Silverman 50,000
Rita A. Brown 26,000
Paul Gerson 1,000
Harold W. Heyer, Jr. 1,000
</TABLE>
All of the Shares offered hereby are to be sold on behalf of the Selling
Shareholders, and the Company will not receive any proceeds from the sale
of the Shares. Because the Selling Shareholders may sell all or part of
their Shares pursuant to this Prospectus, and this Offering is not being
underwritten, no estimate can be given as to the number of and percentage
of Shares that will be held by the Selling Shareholders upon termination of
this Offering. If all the Shares listed below are sold, the Selling
Shareholders will not hold any outstanding shares of the Company's Common
Stock issued in connection with the Acquisition (as defined below) upon
termination of this Offering.
The Selling Shareholders received the Shares in connection with the
Company's acquisition of certain assets of Supercenter in August 1995 (the
"Acquisition"). Jack Silverman, one of the Selling Shareholders, is the
sole shareholder of Supercenter. In connection with such acquisition, the
Company agreed to file this Registration Statement with the Commission
covering the Shares offered hereby and to indemnify each such Selling
Shareholder against claims made against them arising out of, among other
things, statements or omissions made in this Registration Statement,
including this Prospectus. Except for the Supercenter Agreement and the
transactions contemplated thereby, the Company is unaware of any material
relationship between any of such respective Selling Shareholders and the
Company or its affiliates in the past three years.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders
directly or through brokers, agents or dealers who may receive compensation
in the form of commissions. The Shares may be sold in the over-the-counter
market on the Nasdaq National Market, through negotiated transactions or
otherwise, or in private transactions, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, or at
prices otherwise negotiated. Any such brokers, agents or dealers who
effect a sale of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act.
The Company has advised each Selling Shareholder that he or she and any
such brokers, dealers or agents who effect a sale of the Shares are subject
to the prospectus delivery requirements under the Securities Act. The
Company also has advised each Selling Shareholder that in the event of a
"distribution" of his Shares, such Selling Shareholder and any broker,
dealer or agent who participates in such distribution may be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rule 10b-6.
The Company will pay substantially all of the expenses incident to the
registration of the Shares, estimated to be approximately $70,000.00, as
generally required pursuant to the agreements referred to elsewhere herein
setting forth the Company's obligations to register the respective Shares
owned by the Selling Shareholders. In addition, under such agreements, the
Selling Shareholders will generally be indemnified by the Company against
certain liabilities, including liabilities under the Securities Act.
The Company's Common Stock is traded over-the-counter on the Nasdaq
National Market. The last reported sale of the Company's Common Stock as
of a recent date is set forth on the cover page of this Prospectus.
Prospective purchasers should obtain current information regarding the
trading price of the Common Stock.
LEGAL MATTERS
The legality of the Shares offered hereby is being passed upon for the
Company by Garvey, Schubert & Barer, Portland, Oregon.
EXPERTS
The consolidated financial statements and schedule included in the
Company's 1995 Annual Report on Form 10-K for the year ended March 31, 1995
and the financial statements of Supercenter Entertainment Corporation as of
December 31, 1994 and 1993 and for the years then ended included in the
Company's Form 8-K dated August 31, 1995, which are incorporated by
reference herein, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are incorporated by reference in reliance upon the authority of said firm
as experts in giving said reports.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses relating to the registration of the Shares will be borne by
the Company. Such expenses are estimated to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee $ 934
Accountant's fees* 15,000
Legal fees* 50,000
Miscellaneous/Blue Sky* 4,066
Total $ 70,000
* Estimated
</TABLE>
Item 15. Indemnification of Directors and Officers.
Article VIII, Section 2 of the Company's amended and restated articles of
incorporation ("Article VIII") and Article X of the Company's restated
bylaws ("Article X") require the Company to indemnify officers, directors
and employees to the fullest extent authorized by the Oregon Business
Corporation Act ("the Act"). The effect of these provisions is summarized
below but the description is qualified in its entirety by reference to the
Act, Article VIII and Article X.
Indemnification is granted in respect to any action, suit or proceeding
(other than an action by or in the right of the corporation) against all
expense, liability and loss reasonably incurred (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement), if the indemnitee's conduct was in good faith, the indemnitee
reasonably believed that his conduct was in the best interests of the
Company, or at least not opposed to its best interests, and, with respect
to any criminal proceeding, the indemnitee had no reasonable cause to
believe his conduct was unlawful. Indemnification is not permitted in
connection with a proceeding in which a person is adjudged liable on the
basis that personal benefit was improperly received, unless indemnification
is permitted by a court upon a finding that the person is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances.
In addition, indemnification is granted in respect to any proceeding by or
in the right of the Company against the expenses (including attorneys'
fees) actually and reasonably incurred if the person acted in good faith
and a manner reasonably believed to be in, or not opposed to, the best
interests of the Company. No right of indemnity is granted if the person
is adjudged liable to the Company, unless permitted by the court.
Termination of a proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the person did not meet the standard of conduct
described above. If wholly successful on the merits of a proceeding, a
person is entitled to indemnity as a matter of right. Because the limits
of indemnity under Oregon law are not clearly defined, Article VIII and
Article X may provide indemnity broader than that described above.
Article VIII and Article X provide that the right of indemnification is a
contract right and include the right to be paid by the Company the expenses
incurred in defending a proceeding in advance of its final disposition;
provided that, if required by Oregon law, the person seeking advances
provides to the Company an undertaking to repay advanced amounts if it is
determined by a final adjudication that the recipient is not entitled to
indemnity. Any person claiming indemnity is explicitly authorized to sue
the Company for payment and the Company will have the burden of proving the
claimant failed to meet the standards of conduct making indemnity
permissible. If the person claiming indemnity is successful in whole or in
part in such a suit (or in a suit brought by the Company to recover an
advancement of expenses), the person claiming indemnity shall also be
entitled to be paid the expense of prosecuting (or defending) the suit.
Article VIII and Article X also provide that the Company may maintain
insurance to protect itself and its directors, officers, employees or
agents against any expense, liability or loss whether or not the Company
has the power to indemnify such person against such expense, liability or
loss under Oregon law. The Company currently has liability insurance to
indemnify its directors and officers against expense, liability or loss
arising from claims by reason of their acts or omissions as officers and
directors.
The rights of indemnification described above are not exclusive of any
other rights of indemnification to which the persons indemnified may be
entitled under any agreements, statute, vote of shareholders, action of
directors or otherwise.
Item 16. List of Exhibits.
Exhibit Number Description
2 Asset Purchase Agreement, dated as of August 25,
1995, among Rentrak Corporation, Supercenter
Entertainment Corporation and Jack Silverman, and
the principal exhibits thereto (the "Asset
Purchase Agreement"). (1)
3.1 Amended and Restated Articles of Incorporation of
the Company and amendments thereto. (2)
3.2 By-laws of the Company.(3)
5 Opinion re: legality.
23.1 Consent of Attorneys (incorporated in Exhibit 5
hereof).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included on Page II-4 hereof).
(1) Filed as an exhibit to the Company's Current Report on Form 8-K dated
August 25, 1995 (filed September 1, 1995), and incorporated by
reference herein.
(2) Filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-3 filed on November 21, 1994, and incorporated by reference herein.
(3) Filed as Exhibit 10.8 to the Company's 1991 Annual Report on Form
10-K filed on May 6, 1991, and incorporated by reference herein.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously discussed in the registration statement
or any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by registrant pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration, by means of a post-effective
amendment, any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(h) Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer of
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Portland, State of Oregon on
December 29, 1995.
Registrant: Rentrak Corporation
By /s/ Ron Berger
Ron Berger,
Chairman of the Board, Chief
Executive Officer and President
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Ron Berger and F. Kim Cox,
and each of them, with full power of substitution and full power to act
without the other, his true and lawful attorney-in-fact and agent to act
for him in his name, place and stead, in any and all capacities, to sign
any or all amendments to this registration statement on Form S-3, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, 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 in order to effectuate the same as fully, to
all intents and purposes, as they or he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<C> <C> <C>
/s/ Ron Berger Chairman of the Board, Chief Executive December 29, 1995
Officer and President
Ron Berger (Principal Executive Officer)
/s/ F. Kim Cox Executive Vice President-Finance and December 29, 1995
Chief Financial Officer
F. Kim Cox (Principal Financial Officer)
/s/ Karl Wetzel Chief Accounting Officer December 29, 1995
Karl Wetzel
/s/ James P. Jimirro Director December 29, 1995
James P. Jimirro
/s/ Muneaki Masuda Director December 29, 1995
Muneaki Masuda
/s/ Peter Dal Bianco Director December 29, 1995
Peter Dal Bianco
/s/ Bill LeVine Director December 29, 1995
Bill LeVine
/s/ Stephen Roberts Director December 29, 1995
Stephen Roberts
</TABLE>
EXHIBIT INDEX
Exhibit Number Description
2 Asset Purchase Agreement, dated as of August 25,
1995, among Rentrak Corporation, Supercenter
Entertainment Corporation and Jack Silverman, and
the principal exhibits thereto (the "Asset
Purchase Agreement"). (1)
3.1 Amended and Restated Articles of Incorporation of
the Company and amendments thereto. (2)
3.2 By-laws of the Company.(3)
5 Opinion re: legality.
23.1 Consent of Attorneys (incorporated in Exhibit 5
hereof).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included on Page II-4 hereof).
(1) Filed as an exhibit to the Company's Current Report on Form 8-K dated
August 25, 1995 (filed September 1, 1995), and incorporated by
reference herein.
(2) Filed as Exhibit 3.1 to the Company's Registration Statement on Form
S-3 filed on November 21, 1994, and incorporated by reference herein.
(3) Filed as Exhibit 10.8 to the Company's 1991 Annual Report on Form
10-K filed on May 6, 1991, and incorporated by reference herein.
EXHIBIT 5
December 29, 1995
Rentrak Corporation
7227 N.E. 55th Avenue
Portland, OR 97218
Re: Legality of 878,000 Shares of Common Stock
to be registered on Form S-3 Registration Statement
Dear Sirs:
We have been requested by you to render this opinion in connection with the
proposed registration of 878,000 shares of common stock, par value $.001
per share, pursuant to a registration statement on Form S-3 (the
Registration Statement ) to be filed with the Securities and Exchange
Commission on or about December 29, 1995.
We have reviewed the Articles of Incorporation of Rentrak Corporation, as
amended, and the resolutions of the Board of Directors of Rentrak
Corporation authorizing the Supercenter Agreement (as that term is defined
in the Registration Statement). We have also reviewed such other
documents, corporate records, and other instruments as we have deemed
necessary for purposes of this opinion. As to matters of fact which have
not been independently established, we have relied on representations of
officers of the Company.
Based on such review, we are of the opinion that under the corporate laws
of Oregon, the 878,000 currently outstanding shares of the Company's common
stock being registered are validly issued, fully paid and non-assessable
shares of common stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
Legal Matters in the Registration Statement and related Prospectus
relating to an offering of common stock, par value $.001 per share, of
Rentrak Corporation, by certain selling shareholders.
Sincerely,
Garvey, Schubert & Barer
82440/30086.00717
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3 covering the
registration of 878,000 shares of Rentrak Corporation common stock of our
reports dated May 26, 1995 included in Rentrak Corporation's Form 10-K for
the year ended March 31, 1995, and our reports dated October 16, 1995,
relating to the financial statement of Supercenter Entertainment
Corporation as of December 31, 1994 and 1993, appearing in Rentrak
Corporation's Form 8-K dated August 31, 1995, and to all references to our
firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Portland, Oregon,
December 27, 1995
