As filed with the Securities and Exchange Commission on April 14, 1998
Registration No. 333-48455
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------
IWERKS ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4439361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4540 WEST VALERIO STREET, BURBANK, CALIFORNIA 91505 (818) 841-7766
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------------
CHARLES GOLDWATER
IWERKS ENTERTAINMENT, INC.
4540 WEST VALERIO STREET
BURBANK, CALIFORNIA 91505
(818) 841-7766
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
---------------------
Copies to:
C.N. FRANKLIN REDDICK III, ESQ.
JULIE M. KAUFER, ESQ.
TROOP MEISINGER STEUBER & PASICH, LLP
10940 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 824-7000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities 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 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 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. [ ]
CALCULATION OF REGISTRATION FEE
============================================================================
Title Of Proposed Proposed
Shares Maximum Maximum Amount of
To Be Amount To Be Aggregate Aggregate Registration
Registered Registered Price Offering Fee
Per Unit(1) Price(1)
- ------------ ------------ ------------ ------------ ------------
Common Stock, 299,101 $3.06 $915,249.06 $295.00
$.001 per
value share
(including
the Preferred
Stock Purchase
Rights) (2)
============================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of
Registrant's Common Stock reported on the Nasdaq Stock Market's National Market
on March 18, 1998.
(2) The Preferred Stock Purchase Rights are attached to and trade with the
shares of VCA Common Stock.
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.
<PAGE>
IWERKS ENTERTAINMENT, INC.
CROSS-REFERENCE SHEET
FORM S-3 ITEM SECTION IN PROSPECTUS
- ----------------------------------- ---------------------------------------
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus........Facing Page; this Cross-Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.......Inside Front and Outside Back Cover Pages
of Prospectus; Incorporation of Certain
Documents by Reference; Available
Information
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges................Prospectus Summary; Risk Factors;
Incorporation of Certain Documents by
Reference
4. Use of Proceeds.................Use of Proceeds
5. Determination of Offering Price. *
6. Dilution....................... *
7. Selling Security Holders........Selling Stockholders and Plan of
Distribution
8. Plan of Distribution............Outside Front and Outside Back Cover
Pages of Prospectus; Selling Stockholders
and Plan of Distribution
9. Description of Securities
to be Registered................ *
10. Interests of Named Experts
and Counsel..................... *
11. Material Changes................ *
12. Incorporation of Certain
Information by Reference........Incorporation of Certain Documents by
Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities..Undertakings
14. Other Expenses of Issuance and
Distribution....................Other Expenses of Issuance and
Distribution
15. Indemnification of Directors
and Officers....................Indemnification of Directors and Officers
16. Exhibits........................Exhibits
17. Undertakings....................Undertakings
(a) Rule 415 Offering..........Undertakings
(b) Filings Incorporating
Subsequent Exchange Act
Documents by Reference.....Undertakings
(h) Request For Acceleration
of Effective Date..........Undertakings
- -----------------
* Omitted because the item is negative or inapplicable.
Page 2
<PAGE>
Subject to Completion, dated April 14, 1998
PROSPECTUS
IWERKS ENTERTAINMENT, INC.
299,101 SHARES OF COMMON STOCK
(par value $0.001 per share)
This prospectus (this "Prospectus") relates to the sale of an aggregate
of 299,101 shares (the "Shares") of the common stock, par value $.001 per share
(together with the Preferred Stock Purchase Rights associated therewith, the
"Iwerks' Common Stock") of Iwerks Entertainment, Inc. (the "Company" or
"Iwerks") offered for the account of certain stockholders of the Company (the
"Selling Stockholders"). The Iwerks' Common Stock offered by the Selling
Stockholders was acquired by the Selling Stockholders in exchange for the
capital stock of Pioneer Marketing Corporation ("Pioneer") and L. Ron Schmidt &
Associates, Inc. ("Associates") owned by the Selling Stockholders and acquired
by the Company in connection with the merger of a subsidiary of the Company
with Pioneer and Associates. See "Selling Stockholders and Plan of
Distribution." The Selling Stockholders may from time to time sell all or a
portion of the Iwerks' Common Stock which may be offered by them under this
Prospectus in routine brokerage transactions in the over-the-counter market, at
prices and terms prevailing at the time of sale. The Selling Stockholders may
also make private sales directly or through brokers. The Selling Stockholders
may pay customary brokerage fees, commissions and expenses. The Company will
pay all other expenses of the offering. The Selling Stockholders and the
brokers executing selling orders on behalf of the Selling Stockholders may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), in which event commissions received by such
brokers may be deemed underwriting commissions under the Securities Act.
The Company will not receive any proceeds from the sale of the Iwerks
Common Stock offered by the Selling Stockholders hereby.
The Iwerks' Common Stock is quoted on the Nasdaq Stock Market's National
Market ("Nasdaq National Market") under the symbol "IWRK." On April 8, 1998,
the closing sale price of the Iwerks' Common Stock on the Nasdaq National
Market was $3.06.
THESE SHARES OF IWERKS' COMMON STOCK HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE SHARES.
_______________
The date of this Prospectus is ___________, 1998
Page 1
<PAGE>
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 or representation must not be relied upon as
having been authorized by the Company or its managers. This Prospectus does
not relate to any securities other than those described herein or constitute an
offer to sell, or the solicitation of an offer to buy, securities in any
jurisdiction where, or to any person to whom, it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement) under the Securities Act with respect to the Iwerks' Common Stock
offered hereby. This Prospectus, which constitutes part of the Registration
Statement does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Iwerks' Common Stock offered hereby, reference
is hereby made to such Registration Statement, and the exhibits and schedules
thereto which may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the fees prescribed by the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement of which this Prospectus forms a part,
each such statement being qualified in all respects by such reference.
Iwerks is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. These reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of the material can be obtained at
prescribed rates by writing to the Securities and Exchange Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Iwerks Common
Stock is traded on the Nasdaq National Market and the Company's reports, proxy
or information statements, and other information filed with the Nasdaq National
Market may be inspected at the offices of Nasdaq at 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated by reference into
this Prospectus:
1. Iwerks' Annual Report on Form 10-K for the year ended June 30,
1997 (the "Iwerks 10-K");
2. Iwerks' Quarterly Reports on Form 10-Q for the fiscal quarters
ended September 30, 1997 and December 31, 1997;
3. Iwerks' Current Reports on Form 8-K filed August 7, 1997, with
respect to events occurring on July 15, 1997 and August 5, 1997, filed
December 30, 1997 with respect to events occurring on December 29, 1997,
filed February 2, 1998 with respect to events occurring on January 28,
1998, filed February 11, 1998 with respect to events occurring on
February 10, 1998, filed March 23, 1998 with respect to events
occurring on March 23, 1998, filed on March 25, 1998 with respect to
events occurring on March 24, 1998, filed March 26, 1998 with respect
to events occurring on March 25, 1998, filed March 27, 1998 with
respect to events occurring on March 26, 1998, filed on March 30,
1998 with respect to events occurring on March 26, 1998 and filed on
April 2, 1998 with respect to events occurring on March 31, 1998;
Page 2
<PAGE>
4. Iwerks' Definitive Proxy Statement for the 1997 Annual Meeting
of Stockholders;
5. The description of Iwerks' Common Stock contained in the
Registration Statement on Form 8-A filed by Iwerks pursuant to Section 12
of the Exchange Act, and any amendment or report filed for the purpose of
updating such description; and
6. The description of the Series A Preferred Stock, par value
$0.001 per share of Iwerks contained in the Registration Statement on
Form 8-A filed by Iwerks pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the securities covered by this Prospectus shall
be deemed to be incorporated by reference herein and to be part hereof from the
date of filing of such documents. Any statement contained herein or in a
document, all or a portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the oral or written
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such
exhibits are expressly incorporated by reference into such documents). Written
requests for such copies should be directed to Bruce C. Hinckley, Chief
Financial Officer, Iwerks Entertainment, Inc., 4540 West Valerio Street,
Burbank, California 91505. Telephone inquiries may be directed to Iwerks
Entertainment, Inc. at (818) 841-7766.
Page 3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION CONTAINED HEREIN AND IN THE
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
REFERENCES HEREIN TO THE "COMPANY" AND "IWERKS" REFER TO IWERKS ENTERTAINMENT,
INC. AND ITS SUBSIDIARIES. THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS
CONTAIN FORWARD LOOKING STATEMENTS, WHICH ARE INHERENTLY UNCERTAIN. ACTUAL
RESULTS MAY DIFFER FROM THOSE DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS FOR
THE REASONS, AMONG OTHERS, DISCUSSED IN "RISK FACTORS."
THE COMPANY
Iwerks was founded in 1986 and is a leading provider of high-tech
software-based theater attractions for the out-of-home entertainment market.
Iwerks' products combine advanced theater systems with entertainment or
educational software to create high-impact "attractions" which immerse
audiences in the action. Iwerks' products include ride simulations, giant
screen, 360 degree, 3-D films and attractions, and various other specialty
attractions. In addition, Iwerks owns and operates a fleet of touring ride
simulation theaters. Iwerks also produces film and video software for ride
simulators and special format theaters.
Since inception in 1986 and through February 12, 1998, Iwerks has
installed in excess of 250 fixed-base and touring attractions in 28 countries.
Of these, over 100 were ride simulation theaters, which Iwerks supports with a
library of 40 ride simulation films, the industry's largest ride simulation
film library. The Company's ride simulation film projects include: Super
Speedway, a thrill ride through seven North American race tracks hosted by
Craig T. Nelson; Superstition, a haunted scream park adventure hosted by
Elvira-Mistress of the Dark; Secrets of the Lost Temple, an explorer's
adventure through a Mayan temple; Red Rock Run, a computer generated high speed
ride through a volcano; Aliens TM: Ride at the Speed of Fright, based on the
futuristic movie thriller of the same name; Dino Island, a fantasy based on a
newly discovered volcanic island with prehistoric reptiles; Days of Thunder:
The Ride, featuring a "200 mph race" to the checkered flag at the Daytona 500,
for Paramount Parks; RoboCop: The Ride, a futuristic fantasy ride through the
streets of Detroit with the popular movie character, "RoboCop"; The Right
Stuff: Mach One Adventure, a film based upon the theatrical release of the same
name for Time Warner Six Flags theme parks; as well as projects for The Walt
Disney Company, Universal Studios-Florida and NASA.
Iwerks also owns and operates a fleet of 16 portable ride simulation
theaters and is exploring other potential touring opportunities. Further, an
important element of the Company's business strategy is the participation in
the operation of its fixed-base attractions either through direct equity
ownership or through other participation arrangements. The Company is
currently a participant in several joint ventures to own and operate multiple
ride simulation theaters in the United States and Australia. The Company
continues to evaluate new opportunities to participate in the operation of its
fixed-based attractions.
The primary markets for Iwerks' attractions are theme parks, museums,
various types of location-based-entertainment centers, visitor centers, world
expositions and special events. The popularity of entertainment attractions of
the type sold by the Company has led to their increasing use as the featured
attraction in these locations. In addition, high-profile retail sites and
casinos are expanding their entertainment offerings to broaden appeal and
stimulate repeat visits. The Company's attractions are well suited to meet
this demand because, in addition to their drawing power, they require
relatively little space and can be easily refreshed by changing the film or
other software.
RECENT DEVELOPMENTS
On March 31, 1998, Iwerks held its 1998 Annual Meeting of Stockholders.
At the meeting, the stockholders rejected the Company's proposed merger with
Showscan Entertainment Inc. With respect to the other matters presented to the
stockholders, Mr. Charles Goldwater was elected to the Board of Directors to
serve a three-year term, and proposed amendments to Iwerks' stock incentive
plan were defeated.
The mailing address of Iwerks' principal executive offices is 4540 West
Valerio Street, Burbank, California 91505; its telephone number is (818)
841-7766.
Page 4
<PAGE>
RISK FACTORS
IWERKS STOCKHOLDERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, AS WELL
AS THE OTHER INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS STATEMENTS THAT CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 21E OF THE EXCHANGE ACT AND SECTION
27A OF THE SECURITIES ACT. THE WORDS "EXPECT", "ESTIMATE", "ANTICIPATE",
"PREDICT", "BELIEVE" AND SIMILAR EXPRESSIONS AND VARIATIONS THEREOF ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS APPEAR IN A
NUMBER OF PLACES IN THIS FILING AND INCLUDE STATEMENTS REGARDING THE INTENT,
BELIEF OR CURRENT EXPECTATIONS OF IWERKS, ITS DIRECTORS OR OFFICERS WITH
RESPECT TO, AMONG OTHER THINGS (A) TRENDS AFFECTING THE FINANCIAL CONDITION OR
RESULTS OF OPERATIONS OF IWERKS, AND (B) THE BUSINESS AND GROWTH STRATEGIES OF
IWERKS. THE STOCKHOLDERS OF IWERKS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED IN THIS PROSPECTUS, FOR THE REASONS, AMONG OTHERS, SET FORTH BELOW.
ANTICIPATED NET LOSS
On August 4, 1997 Iwerks entered into an Agreement and Plan of
Reorganization with Showscan Entertainment Inc. ("Showscan") dated August 4,
1997, as amended on December 29, 1997 pursuant to which IWK-1 Merger
Corporation, a wholly owned subsidiary of Iwerks would merge (the "Merger")
into Showscan and the surviving company would become a wholly owned subsidiary
of Iwerks. The stockholders of Iwerks rejected the Merger at the 1998 Annual
Meeting of Stockholders held on March 31, 1998. However, the Merger related
costs incurred by the Company have had an adverse effect on the business,
results of operations and financial condition of Iwerks. In particular,
primarily as a result of Merger costs accrued during the period, reduced sales
in the Asia-Pacific region, a decline in its Touring Division's revenue, and
due to seasonal factors, Iwerks reported a net loss of $506,000 for the first
quarter of fiscal 1998. As a result of the continuing impact of the foregoing
factors (particularly the increased impact of declining sales in the
Asia-Pacific region reflecting the economic downturn generally being
experienced in that region) Iwerks reported a net loss of $3.5 million for the
second quarter of fiscal 1998. The economic trends in the Asia-Pacific region
are expected to continue to adversely impact Iwerks' results of operations for
the remainder of fiscal 1998. Consequently, Iwerks expects to incur a loss for
the third quarter of fiscal 1998. The third quarter is expected to be
negatively impacted by the accrual of additional Merger related costs. The
estimated non-recurring Merger related costs (which were accrued in each of
the fourth fiscal quarter of 1997 and the first three fiscal quarters of
1998) include investment banking, legal, accounting, printing, severance and
certain other expenses.
DEPENDENCE ON PRODUCTION OF FILM SOFTWARE; FINANCIAL RISKS OF FILM PRODUCTION
Iwerks' ability to implement its business strategy depends in large part
upon its ability to successfully create, produce and market entertainment and
educational film software for exhibition in its theatre systems. The size and
quality of Iwerks' library of film software titles is a material factor in
competing for sales of Iwerks' attractions and developing Iwerks' base of
recurring revenue. Iwerks has invested $2.6 million, $ 0.8 million, $2.5
million and $2.5 million in film software during fiscal 1995, 1996, 1997 and
the six month period ended December 31, 1997, respectively.
Iwerks generally produces and develops specialty films and videos for its
library with production budgets in a range of approximately $100,000 to $2.0
million. While Iwerks may enter into participation, licensing or other
financing arrangements with third parties in order to minimize its financial
involvement in production, Iwerks generally is subject to substantial financial
risks relating to the production and development of new entertainment and
educational software. Iwerks typically is required to pay for the production
of software during the production period prior to release and typically is
unable to recoup these costs from revenues from exhibition licenses prior to 24
to 36 months following release. There can be no assurance that Iwerks will be
able to create and produce additional software for its library which will be
perceived by its customers to be of high quality or high entertainment value.
At December 31, 1997, Iwerks had recorded on its balance sheets $5.0 million
in film library costs. Iwerks periodically reviews the net realizable value of
its film inventory and makes adjustments to its carrying value when
appropriate. In fiscal 1995, Iwerks reduced its film inventory by $3.5
million. While the current carrying value of Iwerks' film inventory reflects
management's belief that it will realize the net value recorded on its balance
sheet, there can be no assurance that it will be able to do so. Any
determination by Iwerks to write down any material portion of its film
inventory will have a materially adverse impact on Iwerks' results of
operations.
Page 5
<PAGE>
DEPENDENCE OF OWNED AND OPERATED OPERATIONS UPON SPONSORSHIP REVENUES; LOSS OF
AT&T CORP. SPONSORSHIP
Iwerks derived $3.7 million, $7.4 million, $2.9 million and $0.7 million of
revenues for fiscal 1995, 1996, 1997 and the six month period ended December
31, 1997, respectively, from sponsorship of its fleet of touring motion
simulators. Sponsorship revenues prior to January 1996 were primarily derived
from a single contract with a major telecommunications company (AT&T Corp.)
that sponsored Iwerks' touring motion simulators from March 1994 through
September 1996. Revenues from AT&T Corp. were 11.5%, 9.9% and 3.7% of total
revenue for fiscal 1995, 1996 and 1997, respectively. In January 1996, Iwerks
entered into a sponsorship contract with a foreign sponsor, which contract
expired in August 1996. Iwerks currently has limited sponsorship contracts.
There can be no assurance that Iwerks will be able to extend or replace its
existing sponsorship arrangements when they expire. The fourth quarter of
fiscal 1997 includes a non-cash charge of $5.6 million to record the impact of
the adoption of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." This charge consisted
primarily of a reduction in the carrying value of the portable simulation
business (touring) to the net present value of the future cash flows expected
from these assets. Of the charge, $1.8 million reduced goodwill, and the
balance reduced Iwerks' fixed assets. The loss of AT&T Corp. which utilized
five of the Reactors throughout fiscal 1996 resulted in excess capacity between
early fall and late spring of fiscal 1997. Since that time, and through the
fourth quarter, Iwerks has aggressively pursued new sponsorship opportunities
and other options to replace these revenues. The failure to consummate these
opportunities prior to the end of the fiscal year and the lack of sponsorship
backlog as of June 30, 1997 prompted Iwerks to take the charge under SFAS 121.
If Iwerks is unable to maintain sponsorship revenues in the future at levels
commensurate with that experienced in the past, it could have a material
adverse effect on the revenues and gross profit margins derived by Iwerks from
its Owned and Operated attractions which would be mitigated, in part, by any
additional revenues derived by Iwerks from deployment of the touring units at
other venues.
INTENSE COMPETITION; UNPREDICTABILITY OF CONSUMER TASTES
Competition in each of the markets in which Iwerks competes is intense. The
principal direct competition for customers comes from manufacturers of
competing movie-based attractions, and in the case of amusement and theme
parks, manufacturers of traditional amusement park attractions. In addition to
direct competitors, there is also competition from systems integrators and some
amusement and theme parks developing and constructing their own attractions.
Many of Iwerks' competitors have better name recognition and substantially
greater financial and other resources than Iwerks.
Imax Corporation ("Imax") and a number of smaller competitors are growing
competitors of Iwerks in the ride simulation business and have dedicated
substantial resources to entering this market. In the large screen, special
format motion picture business, Iwerks' main competitor is Imax. The 15
perforation 70 millimeter ("15/70") film format appears to be emerging as the
most popular large format due primarily to the large number of films available
in that format. Imax is by far the dominant company in this market.
Additionally, the out-of-home entertainment industry in general is
undergoing significant changes, primarily due to technological developments as
well as changing consumer tastes. Numerous companies are developing and are
expected to develop new entertainment products or concepts for the out-of-home
entertainment industry in response to these developments that are or may be
directly competitive with existing products. There is severe competition for
financial, creative and technological resources in the industry and there can
be no assurance that existing products will continue to compete effectively or
that products under development will ever be competitive. Further, the
commercial success of products is ultimately dependent upon audience reaction.
Audience reaction will to a large extent be influenced by the audience's
perception of how Iwerks' products compare with other available entertainment
options out of the home. There can be no assurance that new developments in
out-of-home entertainment will not result in changes in consumer tastes that
will make Iwerks' products less competitive.
HISTORY OF OPERATING LOSSES; FLUCTUATING PERIODIC OPERATING RESULTS AND CASH
FLOW
Iwerks has sustained substantial losses in three of its last five fiscal
years. Further, Iwerks sustained a $4.0 million loss in the first six months
of fiscal 1998 and expects to sustain a loss in the third quarter of fiscal
1998. As of December 31, 1997, Iwerks' accumulated deficit was $33.7 million.
For the fiscal year ended June 30, 1995, 1996 and 1997 and the six months ended
December 31, 1997, Iwerks' ratio of indebtedness to total capitalization was
7.3%, 6.9%, 5.5% and 5.0%, respectively. For the fiscal year ended June 30,
1995, Iwerks had a net decrease in cash of $2.7 million primarily as a result
of large cash investments in the touring business and additions to film
inventory partially offset by cash provided by operating activities. For the
fiscal year ended June 30, 1996, Iwerks had a net increase in cash of $6.9
million due to the cash provided by operating activities being only partially
offset by the
Page 6
<PAGE>
relatively low amounts of spending on film inventory and other
financing activities and an increase in cash provided by financing activities.
For the fiscal year ended June 30, 1997, Iwerks had a net decrease in cash of
$9.1 million primarily resulting from cash used in financing activities
including investments in joint ventures, purchases of property and equipment,
additions to film inventory, the purchase of Pioneer Marketing Corporation and
a related patent and the investment in additional debt securities. For the six
months ended December 31, 1997, Iwerks had a net increase in cash of $54,000
primarily due to an increase in cash due to operating activities of $2.9
million, partially offset by investing activities of $2.4 million and financing
activities of $443,000.
Iwerks has experienced quarterly fluctuations in operating results and
anticipates that these fluctuations will continue in future periods. Operating
results and cash flow can fluctuate substantially from quarter to quarter and
periodically as a result of the timing of theatre system deliveries, contract
signings, sponsorships, the mix of theatre systems shipped, the completion of
custom film contracts, the existence of world expos, amount of revenues from
portable simulation theatre and film licensing agreements, the timing of sales
of ride simulation attractions, the timing of delivery and installation of such
sales (pursuant to percentage of completion accounting) and any delays therein
caused by permitting or construction delays at the customer's site, the size,
type and configuration of the attractions sold, the timing of film rental
payments from existing attractions and the performance of those attractions
that pay film rental based on a percentage of box office and the timing of
sales and marketing efforts and related expenditures. In particular,
fluctuations in theatre system sales and deliveries from quarter to quarter can
materially affect quarterly and periodic operating results, and theatre system
contract signings can materially affect quarterly or periodic cash flow.
Accordingly, Iwerks' revenues and earnings in any particular period may not be
indicative of the results for any future period.
The seasonal fluctuations in earnings also may cause volatility in the stock
price of Iwerks. While a significant portion of Iwerks' expense levels are
relatively fixed, the timing of increases in expense levels is based in large
part on Iwerks' forecasts of future sales. If net sales are below expectations
in any given period, the adverse impact on results of operations may be
magnified by Iwerks' inability to adjust spending quickly enough to compensate
for the sales shortfall. Iwerks may also choose to reduce prices or increase
spending in response to market conditions, which may have a material adverse
effect on Iwerks' results of operations.
Over the last four years certain events have contributed to fluctuations in
Iwerks' results of operations and financial condition. In the fourth quarter
of fiscal 1994, Iwerks experienced certain cost overruns on two of its new
products, along with some accelerated research and development costs associated
with those products. In the third quarter of fiscal 1995, Iwerks' cost of
sales increased dramatically as a percent of sales as a result of a one-time
$4.5 million write-down of certain assets, primarily film costs, and third and
fourth quarter sales and general administration expenses increased as a result
of restructuring charges related to the closure of Iwerks' Sarasota, Florida
facility, its consolidation of its operations and litigation costs associated
with the settlement of a securities class action lawsuit, pursuant to which
certain common stock and warrants have been issued. In the fourth quarter of
fiscal 1997, Iwerks took approximately $8.7 million in charges, including a
loss on impairment of assets, legal and dispute reserve, additional film
amortization expense and an increased bad debt reserve. The first six months
of fiscal 1998 were adversely impacted by Merger costs accrued during the
period, reduced sales in the Asia-Pacific region, a decline in its Touring
Division's revenue, and seasonal factors. The economic trends in the
Asia-Pacific region are expected to continue to adversely impact Iwerks results
of operations for the remainder of fiscal 1998. Consequently, Iwerks
anticipates it will incur a loss for the third quarter of fiscal 1998 (even
before Merger related costs are taken into account). The estimated non-
recurring Merger related costs (which were accrued in each of the fourth
fiscal quarter of 1997 and the first three fiscal quarters of 1998) include
investment banking, legal, accounting, printing, severance, and certain other
expenses.
From time to time Iwerks considers the acquisition of businesses, products
or technologies complementary to its current business although it has no
current agreements relating to any such acquisitions. If Iwerks does effect an
acquisition, it may finance such acquisition by any one or a combination of
cash, stock or notes. If cash or debt is used to effect an acquisition, such
financing would have an impact on cash flow during future periods.
NEW PRODUCT DEVELOPMENT
Iwerks operates in a technology driven segment of the entertainment
business. As such, it must continually improve its products to increase their
entertainment value while also facing pressure to continually reduce the price
of its products to respond to competitive pressures. The inability of Iwerks
to develop new products and to respond to technological developments of its
competitors could have a materially adverse effect on its business, operations
and financial condition.
Page 7
<PAGE>
INTERNATIONAL OPERATIONS
A significant portion of Iwerks' sales and film licensing are made to
customers located outside of the United States, primarily, in the Far East,
Europe, South America and Canada. During fiscal 1995, 1996, 1997 and the six-
month period ended December 31, 1997, 55%, 49%, 55% and 47% of Iwerks'
revenues, respectively, were derived from sales outside the United States.
During fiscal 1997, the Asia and South America markets were the only foreign
markets with revenues over 10% of Iwerks's revenues with 35% and 14%,
respectively. Iwerks maintains one office in Hong Kong to support sales to
Asia and one office in London to support sales in Europe. International
operations and sales of Iwerks may be subject to political and economic risks,
including political instability, currency controls, exchange rate fluctuations
(which, in the event of a decrease in value of foreign currency to the dollar,
can significantly affect the affordability of Iwerks' products overseas),
changes in import/export regulations, tariff and freight rates, longer accounts
receivable collection patterns, changes in regional or worldwide economic or
political conditions and natural disasters. Specifically, in the first and
second quarters of fiscal 1998, Iwerks has experienced significantly weakened
sales in the Asia-Pacific region. As a result, revenues from sales to this
region were $5.4 million less for the first six months of fiscal 1998 than the
comparable six-month period in fiscal 1997. The economic trends in the
Asia-Pacific region are expected to continue to adversely impact Iwerks'
results of operations for the remainder of fiscal 1998. In addition, various
forms of protectionist trade legislation have been proposed in the United
States and certain other countries. Any resulting changes in current tariff
structures or other trade and monetary policies could adversely affect
Iwerks' and the combined company's international operations. Political and
economic factors have been identified by Iwerks with respect to certain of
the markets in which it competes. There can be no assurance that these
factors will not result in customers of Iwerks defaulting on payments due
to it, or in the reduction of potential purchases of their products. Iwerks
does not engage in any currency hedging programs.
CURRENT TRENDS IN THE GLOBAL ECONOMY
Iwerks' revenues and profitability are dependent on the strength of the
national and international economies. In a recessionary environment, sales of
Iwerks' products and products of other entertainment companies may be adversely
affected. Theme parks and other out-of-home entertainment venues may also
experience a downturn in sales which could reduce the funds available for
capital improvements resulting in price and other concessions and discounts by
Iwerks in order to maintain sales activity. Iwerks has experienced
significantly weakened sales in the Asia-Pacific region which it believes is
primarily due to the decline in value of the Asian currency compared to the
dollar. Although Iwerks has not experienced a reduction in unit sales of its
products to date in the United States, certain of its competitors have reported
that the recent recession in the United States has had an adverse impact on
their sales activity. Consequently, Iwerks is not able to predict to what
extent, or for what period, a recessionary climate would adversely affect sales
of its products.
DEPENDENCE ON SENIOR MANAGEMENT; RECENT CHANGES TO KEY PERSONNEL
Since January 1995, all except two members of the Iwerks Board have changed
and Iwerks has had substantial changes in its management personnel. Effective
February 23, 1998, Iwerks announced the appointment of Charles Goldwater as
Chairman of the Board, Chief Executive Officer and President of Iwerks.
Iwerks' turnover in management personnel has placed, and could continue to
place, a significant strain on Iwerks' management and other resources. Iwerks'
ability to recruit, retain and motivate skilled directors, executives, sales,
technical and creative personnel and other employees is and will continue to be
important to the operations of Iwerks. In addition, there is competition for
management and creative personnel in the industries in which Iwerks operates.
There can be no assurance that Iwerks will not encounter difficulties in
recruiting and retaining qualified personnel in the future. Should any key
executive officer cease to be affiliated with Iwerks before a qualified
replacement is found, Iwerks' business could be materially adversely affected.
VOLATILITY OF STOCK PRICE
Iwerks' stock price has been, and could continue to be, highly volatile.
The market price of Iwerks' Common Stock has fluctuated substantially in recent
periods. During the 12 months prior to February 12, 1998, Iwerks' market price
has ranged from a low of $1.875 per share, to a high of $6.00 per share.
Future announcements concerning Iwerks or its competitors, quarterly variations
in operating results, introduction of new products or changes in product
pricing policies by Iwerks or its competitors and acquisition or loss of
significant customers may affect or be perceived to affect Iwerks' operations,
or changes in earnings estimates by analysts, among other factors, could cause
the market price of Iwerks' Common Stock to fluctuate substantially. In
addition, stock markets have experienced extreme price and volume volatility
in recent years. This volatility has had a substantial effect on the
market prices of securities of
Page 8
<PAGE>
many smaller public companies for reasons frequently unrelated to the
operating performance of the specific companies. These broad
market fluctuations may adversely affect the market price of Iwerks'
Common Stock.
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATIONS
Under various Federal, state and local environmental laws and regulations, a
current or previous owner or occupant of real property may become liable for
the costs of removal or remediation of hazardous substances at such real
property. Such laws and regulations often impose liability without regard to
fault. Iwerks leases its corporate headquarters and its manufacturing
facilities and sales offices. Iwerks could be held liable for the costs of
remedial actions with respect to hazardous substances on such properties under
the terms of the governing lease and/or governing law. Although Iwerks has not
been notified of, nor is otherwise aware of, any current environmental
liability, claim or non-compliance, there can be no assurance that Iwerks will
not be required to incur remediation or other costs in the future in connection
with these leased properties. In addition, Iwerks' subcontractors and other
third parties, with which it has contractual relations, are similarly subject
to such laws. Iwerks believes it is in compliance with all applicable Federal,
state and local environmental laws and regulations.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Iwerks Board has the authority to issue up to 1,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by Iwerks' stockholders.
The rights of the holders of Iwerks' Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of preferred stock. While
Iwerks has no present intention to issue shares of preferred stock, such
issuance, while providing desirable flexibility in connection with the possible
acquisitions and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in control of Iwerks and entrenching existing
management. In addition, such preferred stock may have other rights, including
economic rights senior to Iwerks' Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Iwerks'
Common Stock.
A number of provisions of Iwerks' Certificate of Incorporation and By-Laws
and the Delaware General Corporation Law and regulations relating to matters of
corporate governance, certain rights of Directors and the issuance of preferred
stock without stockholder approval, may be deemed to have and may have the
effect of making more difficult, and thereby discouraging, a merger, tender
offer, proxy contest or assumption of control and change of incumbent
management, even when stockholders other than Iwerks' principal stockholders
consider such a transaction to be in their best interest.
In addition, Iwerks has adopted a Stockholder Rights Plan (the "Rights
Agreement"). Pursuant to the Rights Agreement each outstanding share of
Iwerks' Common Stock has received one right entitling the holder to purchase
1/100th of a share of Series A Preferred Stock of Iwerks for each share of
Iwerks' Common Stock then held by such holder. Each right becomes exercisable
upon certain triggering events related to an unsolicited takeover attempt of
Iwerks.
PATENTS AND TRADEMARKS
Iwerks has several United States and selected other countries' patents on
various processes and elements related to film projection and ride simulation.
Iwerks has registered its principal trademarks in the United States and
selected other countries. The most important of Iwerks' patents expires in
October 2001. While Iwerks' patents have not been challenged and believes that
its patents are valid, third parties could still challenge the patents and a
court could determine that one or more of them are invalid. Declarations of
invalidity, particularly of Iwerks' key patents, could adversely affect the
marketability of Iwerks' products and services. In addition, Iwerks always
faces the risk that new technologies could be discovered that are superior
to its patents.
EMPLOYEES
At February 12, 1998, Iwerks employed 134 persons, of whom 20 were employed
in management, finance and administration, 21 were employed in sales and
marketing, and 93 were employed in operations. Although Iwerks has not
experienced difficulties in obtaining qualified personnel and anticipates that
each will be able to continue to recruit qualified personnel for its
operations, there can be no assurance that such personnel will be available
when required. None of Iwerks' employees are represented by a collective
bargaining agreement.
Page 9
<PAGE>
BUSINESS DISRUPTION
The corporate headquarters of Iwerks, including its research and development
operations, are located in Los Angeles County, California, a region known for
seismic activity. Operating results could be materially affected by a
significant earthquake or other natural disaster.
ABILITY TO PRODUCE ADDITIONAL FILMS
One of the primary factors considered by potential purchasers of ride
simulation attractions is the quality and extent of films available to be shown
at the attraction. Iwerks believes that a large portion of its competitive
advantage resides in its popular and extensive library of ride films. To
maintain this competitive edge it must produce or acquire the distribution
rights to several new films each year. Film production is expensive and
requires the investments of funds (to the extent that investors cannot be
located) with no assurance that the films produced will be popular. Certain
competitors have indicated that they are devoting substantial portions of their
assets to the production of new ride simulation films. Both the short and long
term financial performance of Iwerks will be adversely affected if the
perceived quality and popularity of its film library declines either alone or
in comparison to the films of its competitors.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Securities
offered by the Selling Stockholders hereunder.
Page 10
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Shares were issued by the Company on February 28, 1997 in a private
placement pursuant to Regulation D under the Securities Act. The purpose of
this Registration Statement is to register the Shares. The following table
sets forth certain information regarding the beneficial ownership of the Iwerks
Common Stock by the selling stockholders listed below (the "Selling
Stockholders") as of March 18, 1998, and as adjusted to reflect the sale of
299,101 shares by the Selling Stockholders. Prior to March 4, 1997, the
Selling Stockholders had never held any position or office with or been
employed by the Company or any of its affiliates. Since March 4, 1997, the
Selling Stockholders have been full-time employees of the Company. The Selling
Stockholders have the sole voting and investment power with respect to the
shares owned, subject to applicable community property laws. As of April 8,
1998, the Company had outstanding 12,321,497 shares of Iwerks' Common Stock,
par value $.001 per share, the only outstanding voting security of the
Company. The address of each Selling Stockholder is c/o Iwerks
Entertainment, Inc., 4540 West Valerio Street, Burbank, California 91505.
Common Stock Owned
Common Stocked Owned Prior to After the
Offering (1) Offering (1)(2)
------------------------------- -------------------
Number of Percent Number of Number of Percent
Shares of Class Shares to Shares of Class
be Sold
______ ______ ______ ______ ______
L. Ron Schmidt 199,401 1.6% 199,401 0 *
Donald E. Stults 99,700 * 99,700 0 *
- -----------------------
* Less than one percent.
(1) Assumes no purchase of additional shares of the Iwerks' Common Stock.
(2) Assumes that all of the Shares will be sold in the Offering.
The Selling Stockholders may sell all or a portion of the shares of Iwerks
Common Stock offered hereby from time to time in brokerage transactions in the
over-the-counter market at prices and terms prevailing at the times of such
sales. The Selling Stockholders may also make private sales directly or through
brokers. The Selling Stockholders may individually pay customary brokerage
commissions and expenses. In connection with any sales, the Selling
Stockholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act, in which event
commissions received by such brokers may be deemed underwriting commissions
under such Act.
Under the Exchange Act and the regulations thereunder, any person engaged in
a distribution of the shares of Iwerks' Common Stock offered by this Prospectus
may not simultaneously engage in market making activities with respect to the
shares of Iwerks' Common Stock during the applicable "cooling off" periods
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will need to comply with
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of shares of Iwerks' Common Stock by
the Selling Stockholders. Regulation M contains certain limitations and
prohibitions intended to prevent issuers and selling security holders and other
participants in a distribution of securities from conditioning the market
through manipulative or deceptive devices to facilitate the distribution.
Page 11
<PAGE>
LEGAL MATTERS
The validity of the Iwerks' Common Stock offered hereby will be passed upon
for the Company by Troop Meisinger Steuber & Pasich, LLP, Los Angeles,
California.
EXPERTS
The consolidated financial statements of Iwerks appearing in Iwerks' Annual
Report (Form 10-K) for the year ended June 30, 1997, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended September 30, 1997 and September
30, 1996 and for the three- and six-month periods ended December 31, 1997 and
December 31, 1996, incorporated by reference in this Prospectus, Ernst & Young
LLP have reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report, included in Iwerks Entertainment, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997 and December 31, 1997, and
incorporated herein by reference, states that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted
considering the limited nature of the review procedures applied. The
independent auditors are not subject to the liability provisions of Section 11
of the Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
Page 12
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering are as follows:
Amount
------------
Registration Fee Under Securities Act of 1933 $ 295
NASD Filing Fee $ 5,983
Blue Sky Fees and Expenses $ *
Printing and Engraving Certificates $ *
Legal Fees and Expenses $ 2,000
Accounting Fees and Expense $ 10,000
Registrar and Transfer Agent Fees $ *
Miscellaneous Expenses $ *
------------
TOTAL $ 18,278
============
- ---------------
* Not applicable or none.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Iwerks' Certificate of Incorporation provides that to the fullest extent
permitted by the DGCL, no director of Iwerks shall be personally liable to
Iwerks or its stockholders for monetary damages for any breach of fiduciary
duty as a director. Under the current DGCL, liability of a director may not be
limited (a) for any breach of the director's duty of loyalty to Iwerks or its
stockholders, (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) in respect of certain
unlawful dividend payments or stock redemptions or repurchases and (d) for any
transaction from which the director derives an improper personal benefit. The
effect of such provision in Iwerks' Certificate of Incorporation is to
eliminate the rights of Iwerks and its stockholders (through stockholders'
derivative suits on behalf of Iwerks) to recover monetary damages against a
director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (a) through (d) above. This provision does not
limit or eliminate the rights of Iwerks or any stockholder to seek nonmonetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, Iwerks' Certificate of Incorporation
provides that Iwerks shall indemnify its directors, officers, employees and
agents against losses incurred by any such person by reason of the fact that
such person was acting in such capacity or serving, at the request of Iwerks,
any other corporation, plan or other entity in any capacity. The limitations
on liability above do not eliminate monetary liability of directors under
Federal Securities Laws.
In addition, Iwerks has entered into agreements (the "Indemnification
Agreements") with each of the directors and officers of Iwerks pursuant to
which Iwerks has agreed to indemnify such director or officer from claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of his or her
capacity as a director, officer, employee and/or agent of Iwerks or any other
corporation of which he or she is a director or officer at the request of
Iwerks to the maximum extent provided by applicable law.
Page 13
<PAGE>
In addition, such director or officer is entitled to an advance of expenses
to the maximum extent authorized or permitted by law.
To the extent that the Iwerks Board of Directors or the stockholders of
Iwerks may in the future wish to limit or repeal the ability of Iwerks to
provide indemnification as set forth in Iwerks' Certificate of Incorporation,
such repeal or limitation will not have any effect on the liability of any
director for acts or omissions occurring prior to such repeal or limitation.
Moreover, any such repeal or limitation may not be effective as to directors
and officers who are currently parties to the Indemnification Agreements,
because their rights to full protection would be contractually assured by the
Indemnification Agreements. It is anticipated that similar contracts may be
entered into, from time to time, with future directors of Iwerks.
Additionally, Iwerks' Bylaws, similar to its Certificate of Incorporation,
provide for the indemnification of Iwerks' directors, officers, employees and
agents to the full extent permitted by the DGCL.
ITEM 16. EXHIBITS.
See the Exhibit Index of this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement 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;
(2) That, for the purpose of determining 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; and
(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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of the
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.
Page 14
<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 Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on
April 9, 1998.
IWERKS ENTERTAINMENT, INC.
(Registrant)
By: /S/ CHARLES GOLDWATER
-------------------------
Charles Goldwater
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement on Form S-3 has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Charles Goldwater President, Chief Executive Officer April 9, 1998
- ------------------- and Chairman of the Board (Principal
Charles Goldwater Executive Officer and Director)
* Vice Chairman and Director April 9, 1998
- -------------------
Donald W. Iwerks
* Executive Vice President, Chief April 9, 1998
- ------------------- Financial Officer and Secretary
Bruce C. Hinckley
- ------------------- Director April __, 1998
Gary J. Matus
*
- ------------------- Director April 9, 1998
Dag Tellefsen
*/s/Charles Goldwater
- -------------------
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
No. Item Page
- --- ---- ----
5.1 Opinion of Troop Meisinger Steuber & Pasich, LLP*
15.1 Letter from Ernst & Young LLP regarding Interim
Financial Statements
23.1 Consent of Ernst & Young LLP
23.2 Consent of Troop Meisinger Steuber & Pasich, LLP *
(included as part of Exhibit 5.1)
- -------------------------
*previously filed
<PAGE>
ERNST & YOUNG LLP Suite 2100 Phone 310.551.5500
1999 Avenue of the Stars
Los Angeles, California 90067
April 9, 1998
The Board of Directors
Iwerks Entertainment, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-3 No. 333-48455) of Iwerks Entertainment, Inc. for the registration of
299,101 shares of its common stock of our reports dated October 29, 1997 and
February 10, 1998, except for Note 8 as to which the date is February 20, 1998,
relating to the unaudited condensed consolidated interim financial statements
of Iwerks Entertainment, Inc. that are included in its Forms 10-Q for the
quarters ended September 30, 1997 and December 31, 1997.
/s/ Ernst & Young LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement (From S-3 No. 333-48455) and related Prospectus
of Iwerks Entertainment, Inc. for the registration of 299,101 shares of its
common stock and to the incorporation by reference therein of our report dated
August 5, 1997, with respect to the consolidated financial statements and
schedule of Iwerks Entertainment, Inc. included in its Annual Report (Form
10-K) for the year ended June 30, 1997 filed with the Securities Exchange
Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
April 9, 1998
