PROSPECTUS
468,883 SHARES
COMMON STOCK, NO PAR VALUE
THE KUSHNER-LOCKE COMPANY
The shareholder of The Kushner-Locke Company listed on page 15 may offer and
sell up to 468,883 shares of Kushner-Locke common stock under this prospectus.
We will not receive any part of the proceeds from any such sale.
Our common stock is listed on the NASDAQ National Market under the symbol KLOC
and on the Pacific Stock Exchange under the symbol KLO.
This investment involves a high degree of risk. See "Risk Factors"
beginning on page 4 for a discussion of some of these risks.
_______________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this Prospectus is June 16, 1999
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ABOUT KUSHNER-LOCKE
GENERAL
The Kushner-Locke Company is a leading independent entertainment company which
principally develops, produces, and distributes original feature films and
television programming. Our feature films are developed and produced for the
theatrical, made-for-video and pay cable motion picture markets. Our
television programming has included television series, mini-series,
movies-for-television, animation, reality and game show programming for the
major networks, cable television, first-run syndication and international
markets.
We established our feature film production operations in 1993. In 1994, we
established an international theatrical film subsidiary to expand into foreign
theatrical distribution. In 1995, we formed KLC/New City Tele-Ventures
("KLC/New City"), a joint venture 82.5% owned by us, to acquire films for
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distribution through emerging new delivery systems, including pay cable,
pay-per-view, basic cable, video-on-demand and satellite systems. In late
1997, we acquired control of 800-U.S. Search, a leading provider of fee-based
public record search and other customized individual reference services. In
February 1998, we established KL/Phoenix, an 80% owned entity, which
distributes feature films, television and video product throughout Latin
America and to launch a 24 hour Spanish language movie channel called Gran
Canal Latino.
In 1997 we entered into an agreement in principle with Universal Studios, Inc.,
whereby we have the right to distribute in international territories up to
nine moderate to high-budget motion pictures over a three-year period.
Our feature film activities can be grouped into three areas: production and
distribution of a limited number of higher-budget films intended for
wide-screen domestic theatrical release, production and distribution of
low-to-moderate budget films released direct-to-video or on pay cable
television, and distribution licensing of acquired film rights. Some of our
low-to-moderate budget films may have a limited theatrical release or a pay
cable premiere before being released in home video.
In addition, we continue to acquire domestic cable rights for films for
distribution through KLC/New City, including over 125 low budget feature films
which are distributed to the pay-per-view, pay cable, basic cable and other
ancillary markets. We also continue to acquire the international distribution
rights to films for distribution through Kushner Locke International, Inc.
Since we commenced our business in 1983, we have produced or distributed over
1,000 hours of original television programming, including various television
series, movies-for-television and mini-series.
We own 50% of TV First, a partnership that purchases media time for Christian
music infomercials and commenced retail marketing of compact discs and audio
and video cassettes in fiscal 1999.
Our executive offices are located at 11601 Wilshire Boulevard, Suite 2100, Los
Angeles, California 90025, and our telephone number is (310) 481-2000.
800-U.S. SEARCH
800-U.S. SEARCH, an 80% owned subsidiary, is a leading provider of fee-based
public record search and other customized individual reference services.
Search uses a wide variety of public records and other publicly available
information pertaining to individuals.
Search's services are marketed through its branded "Public Records Portal"
Internet Website 1800USSEARCH.COM and through its direct response 1 (800)
US-SEARCH telephone number. In January 1999, Search introduced Internet based
"Instant Searches," which instantly displays the results of people locate
searches and national death certificate searches. Search operates a 24 hour,
seven days a week sales and service center, where its employees research,
aggregate and cross-check data from a wide variety of sources. Research
results are placed in a pre-formatted template and then delivered to Search's
customers via e-mail, fax or U.S. mail.
Search continues to develop new technologies to provide access to public
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record information databases in a convenient, cost-saving and valuable way.
Search's executive offices are located at 9107 Wilshire Blvd., Suite 700,
Beverly Hills, California 90210, and its telephone number is (310) 553-7000.
In November 1998, we launched Gran Canal Latino, our first satellite channel,
through KL/Phoenix. KL/Phoenix is a newly-formed 80%-owned subsidiary. Gran
Canal Latino broadcasts 24 hours a day, with a selection of Spanish language
films mostly from Spain. Gran Canal Latino's satellite transmission reaches
the United States and all of Latin America including Mexico. Under a
distributor arrangement with Enrique Cerezo, we are broadcasting selections
from 1,500 Spanish language movie titles.
RISK FACTORS
An investment in our common stock involves a high degree or risk. You should
be aware of the following risks in addition to those risk factors included in
the remainder of this prospectus that may affect our business and results of
operations and the common stock. We caution you, however, that this list of
risk factors may not be exhaustive.
We may need additional working capital that may not be available
We require substantial working capital to fund our current business and
potential future growth. We have experienced negative cash flow from
operations over the past three fiscal years and expect to continue to
experience significant negative cash flow from operations in the future. We
currently believe that we may need to raise additional capital to fund all the
activities in our current business plan for the next 12 months. We may need
additional capital to:
- -- support more rapid production and distribution,
- -- develop new or enhanced products or services,
- -- respond to competitive pressures,
- -- acquire complementary businesses or technologies,
- -- provide additional working capital to fund the operations of Search, or
- -- respond to unanticipated events.
We may be unable to raise additional funds when needed on terms we consider to
be favorable or acceptable. If funds are unavailable when required or on
acceptable terms, we may be unable to develop or enhance our products or
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements. Any of such limitations could
materially and adversely effect our business, financial condition and
prospects. Any possible debt financing, including further increases of our
syndicated revolving credit agreement, if available, may involve covenants
limiting or restricting our operations or future opportunities.
If we raise additional working capital we could dilute existing shareholders
Any additional working capital in the form of equity financing may dilute
existing shareholders. If new equity securities are issued, the percentage
ownership of our shareholders before the issuance will be reduced and the net
book value of their shares may be diluted.
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Our quarterly results fluctuate significantly
Our operating revenues, cash flow and net earnings historically have
fluctuated significantly from quarter to quarter, depending in large part on
the delivery or availability dates of our programs and product and the amount
of production costs incurred and amortized in the period. Therefore,
year-to-year comparisons of quarterly results may not be meaningful and
quarterly results during the course of a fiscal year may not be indicative of
results expected for the entire fiscal year.
We have experienced substantial net losses
Primarily as a result of significant net losses in fiscal 1993, 1994, 1995,
1997 and 1998 and through March 31, 1999 of fiscal 1999, we had an accumulated
deficit of $24,655,000 at March 31, 1999.
We depend on a limited number of projects
We depend on a limited number of films, television programs and other projects
that change from period to period for a substantial percentage of our revenues.
The change in projects from period to period is due principally to the
opportunities available to us and to audience response to our films and
programs which are unpredictable and subject to change. During fiscal 1998, we
recognized approximately 35% of revenues from the delivery and/or availability
of 25 feature films, and approximately 24% of revenues from the delivery
and/or availability of a network series and two first run syndication
television series. During fiscal 1997, we recognized approximately 35% of
revenues from the delivery and/or availability of 18 feature films and
approximately 40% of revenues from the delivery and/or availability of two
network series and two first run syndication television series.
The loss of a major project, unless replaced by new projects, or the failure
or less-than-expected performance of a major project could have a material
adverse effect on our results of operations and financial condition as well as
the market price of our securities. We may be unable to generate the same
level of new projects as we have in the past. Further, the projects we
release may be unsuccessful.
Our accounting policies for program and film revenues may result in
significant write-downs
We generally recognize revenues from a program or film when it is either
delivered or available for delivery. Capitalized production costs are
amortized each period based upon the current period's gross revenues versus
management's estimate of anticipated total gross revenues from the program or
film during its useful life. Accordingly, if management reduces its estimate
of the future revenues of a program or film, a significant write-down and a
corresponding decrease in earnings could result in the quarter and fiscal year
in which the write-down is taken.
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We depend on certain key employees
KUSHNER-LOCKE. We are dependent on the efforts and abilities of Donald
Kushner and Peter Locke, our founders and principal executive officers, and
certain other members of senior management. We have obtained and we are the
beneficiary of term life insurance policies on each of the lives of Messrs.
Kushner and Locke in the amount of $5,000,000 each. Our business or prospects
may be materially adversely affected if Messrs. Kushner or Locke, or one or
more other key personnel were to leave.
Our syndicated revolving credit agreement with Chase Manhattan Bank, as agent,
includes as events of default:
- -- the failure of either Messrs. Kushner or Locke to be our Chief Executive
Officer, or
- -- any person or group acquiring ownership or control of our capital stock
having voting power greater than the voting power at the time controlled by
Messrs. Kushner and Locke combined (other than an institutional investor
able to report its holdings on Schedule 13G which holds no more than 15% of
the voting power).
If one of the described events of default occurred, the bank may not waive the
default.
SEARCH. Search's success also depends to a significant degree upon the
continued contributions of its executive management team, including [Peter
Locke and Donald Kushner]. Search's success will also depend upon its
technical, marketing and sales personnel as well as its ability to attract and
retain additional highly qualified employees in all of these areas to
supplement existing personnel. Search's employees, including its senior
management, generally may terminate their employment with Search at any time
and competition for qualified employees is intense. The process of locating
and hiring personnel with the combination of skills and attributes required to
carry out Search's strategy is often lengthy and potentially costly. The
loss of the services of key personnel or the inability to attract additional
qualified personnel to supplement or, if necessary, to replace existing
personnel, could have a material adverse effect on our business and prospects.
The costs for our television programming or films may be less than initial
revenue
The revenues from pre-sales, output arrangements and the initial licensing of
television programming or films may be less than the associated production
costs. Our ability to cover the production costs of particular programs or
films is dependent upon the availability, timing and the amount of revenues
obtained from third parties. In any event, we are generally required to fund
at least a portion of production costs, pending receipt of revenues, out of
our lines of credit or working capital. Although our strategy generally is not
to commence principal photography without first obtaining commitments which
cover all or substantially all of the budgeted production costs, from time to
time we may commence principal photography without these commitments. In the
past, we have commenced principal photography on a limited number of projects
before obtaining commitments which cover substantially all of the budgeted
production costs but were able subsequently to obtain commitments to cover
substantially all of these costs. Each project was one which we believed would
be successful and for which we determined it was necessary to begin principal
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photography quickly. We may be unable to cover project costs in the future if
we were to undertake projects before making adequate pre-sales.
The television and feature film industries are very risky
The production and distribution of feature films and television programs
involves a substantial degree of risk. The success of an individual feature
film or television program depends upon subjective factors, such as the
personal tastes of the public and critics, and alternative forms of
entertainment. These factors do not necessarily bear a direct correlation to
the costs of production and distribution. There is a risk that some or all of
our projects will not be successful, resulting in costs not being recouped and
losses from the project.
As we shift towards more film projects from television programs, receipts of
revenues are delayed
Networks typically pay license fees for television projects equal to
approximately 70-90% of the production budget as the project is being
produced. Foreign sales, which are typically paid when the project is made
available or delivered to broadcasters, usually cover the remainder of the
production budget. However, with feature film production, approximately
80-100% of the production budget is covered by foreign and domestic sales
which are typically not paid until the project is available for release in
different media. We have become increasingly subject to the risk of the longer
lead times for completion of new product and receipt of related cash flow from
feature films as we have shifted to a mix of network television and feature
films from exclusively network television programs.
Our businesses are in highly competitive industries
KUSHNER-LOCKE. Competition in the motion picture, television and satellite
distribution industries is intense. We compete with the major motion picture
studios, numerous independent producers of feature films and television
programming and the major U.S. networks for the services of actors, other
creative and technical personnel, creative material and, in the case of
network television programming, for the limited number of time slots for
episodic series, movies-of-the-week and mini-series. Many of our principal
competitors have greater financial, distribution, technical and creative
resources than we do.
The Federal Communications Commission ("FCC") repealed its financial interest
and syndication rules, effective as of September 21, 1995. Those FCC rules,
which were adopted in 1970 to limit television network control over television
programming and thereby foster the development of diverse programming sources,
had restricted the ability of the three established, major U.S. television
networks (i.e., ABC, CBS and NBC) to own and syndicate television programming.
We believe that there has been an increase in in-house productions of
programming for the networks' own use and potentially a decrease of
programming from independent suppliers such as us.
SEARCH. The individual reference service industry is highly competitive and
highly fragmented. Search's primary current competitors in the area of person
locator searches include major telephone companies and other third parties who
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publish free printed or electronic directories and private investigation firms.
Search's primary competitors for individual background searches include these
companies and firms, as well as LEXIS-NEXIS, a division of Reed Elsevier Inc.,
The Dun & Bradstreet Corporation, Reuters Limited, Avert, Inc., and a
significant number of companies operating on either a national scale or a
local or regional basis. Many of these companies have greater financial and
marketing resources than Search and may have significant competitive
advantages through other lines of business and existing business
relationships.
Search also competes with online services and other Web site operators, as
well as traditional media such as television, radio and print, for a share of
advertisers' total advertising space or programs. Furthermore, additional major
Internet and other companies with financial and other resources greater than
those of Search may introduce new Internet products and services in direct
competition with Search. Search's competitors or potential competitors may
develop services that are superior to those of Search, develop services less
expensive than those of Search or achieve greater market acceptance with their
services than Search achieves with its services.
We depend on strategic relationships in the Internet market
An important element of Search's current business strategy is to enter into
agreements with Internet companies to direct and attract traffic to Search's
Web site. Search has recently entered into agreements with Internet companies
to expand opportunities to attract page views to Search's Web site and
generate sales and expects to enter into similar agreements in the future.
Search anticipates that certain up-front and continuing payments and royalty
payments under these agreements will constitute a significant portion of its
expenses in future periods. Search's success will depend upon its ability to
maintain these relationships and develop additional relationships, and upon
these arrangements generating page views to Search's Web site and ultimately
sales of our services. Search may not maintain its existing relationships or
enter into new relationships with Internet companies, and Search may not
generate sales from these relationships. Any early termination of certain
existing agreements, or failure after termination to enter into or to renew
agreements with Internet companies on terms favorable to Search, could
have a material adverse effect on our business, results of operations and
prospects.
We may not be successful in promoting and maintaining awareness of the 1-800-
USSEARCH brand
We believe that establishing and maintaining the 1-800-USSearch brand through
its marketing campaign and creation of consumer confidence in Search's services
is critical to its efforts to attract customers to its Web site. We will be
unsuccessful in promoting and maintaining Search's brand if Search's capital
resources are not sufficient to maintain current and anticipated future levels
of advertising or if customers do not perceive the content of Search's
services to be of high quality. Our financial condition and results of
operations may be materially and adversely affected as Search incurs
additional expenses to improve its services and promote and maintain its
brand.
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Our plan to offer new services may not be successful
Search plans to introduce new and expanded services in order to generate
additional revenues and attract more customers. Search may be unable to offer
new services in a cost-effective or timely manner or customers may not accept
any of these efforts. If offered and accepted, these new services may be
unprofitable. Any new service launched by Search that is not favorably
received by customers could damage Search's reputation for existing services
or its brand name.
Expansion of Search's services will also require significant additional
capital and development and may strain our management, financial and
operational resources. Search's inability to generate revenues from expanded
services sufficient to offset their cost could have a material adverse effect
on our financial condition and results of operations. Finally, certain new
services, like background checks, may be subject to state licensing
requirements. We may be unable to offer these services in one or more
jurisdictions if Search is unable to obtain required licenses.
We may not adequately respond to rapidly changing technology, standards and
consumer demands in our markets
The markets for Search's services are characterized by rapidly changing
technology, emerging industry standards and customer requirements that are
subject to rapid change and frequent new service introductions. These
characteristics are exacerbated by the emerging nature of the electronic
commerce market and the expectation that many companies may introduce new
Internet products and services addressing this market in the near future.
Search may be unsuccessful in developing new services or enhancing its
existing service on a timely basis. If Search develops new services or
enhances existing services, these services may not effectively address
customer requirements and achieve market acceptance. Our business results of
operations and prospects would be materially and adversely affected if Search,
for technological or other reasons, is unable to develop and enhance these
services in a manner compatible with emerging industry standards and that
allows it to attract and expand a customer base.
We face risks associated with government regulation
LOCAL CONTENT AND QUOTA REQUIREMENTS. Our programming may be subject to local
content and quota requirements, and/or other limitations, in international
markets which prohibit or limit the amount of programming produced outside of
the local market. These restrictions, or new or different restrictions, could
have an adverse impact on our operations in the future should we be unable to
perform under those requirements or limitations. We believe these requirements
have not affected our licensing of programs in international markets to date.
FCRA AND ADA. In connection with certain services Search provides,
particularly individual background checks used for employment purposes, Search
may be considered a "consumer reporting agency" as this term is used in the
Fair Credit Reporting Act ("FCRA") and, therefore, may be required to comply
with the various consumer credit disclosure requirements of the FCRA. While
Search intends to comply with the FCRA as a "consumer reporting agency" in
connection with providing individual background checks for employment purposes
in the future, the procedures which we implement may be deemed insufficient.
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Search's limited procedures to date to avoid being regulated as a consumer
reporting agency by attempting to restrict its individual background check
service to permissible purposes (which excludes employment purposes).
However, these procedures may be deemed insufficient. Willful or negligent
noncompliance with the FCRA, including with respect to Search's prior
operations, could result in civil liability to the subjects of reports.
The Americans with Disabilities Act of 1990 ("ADA") contains pre-employment
inquiry and confidentiality restrictions designed to prevent discrimination in
the hiring process against individuals with disabilities. The ADA regulates
the use by Search's customers of certain information sold to them, both in
respect to the type of information and the timing of its use. A number of
states have laws similar to the FCRA, and some states have laws more
restrictive than the ADA. Many state laws limit the type of information which
can be made available to the public. Certain state laws may require Search to
be licensed in order to conduct its background check business within those
states. Customers in these states can access Search's Web site, which may
subject Search to the laws of these states because its residents order
services through Search's Web site and Search mails, faxes or e-mails reports
to the resident within the state. In the event Search is determined to have
violated any of the applicable federal or state laws, Search could be subject
to substantial civil and/or criminal liability which would have a material
adverse effect on our business and prospects.
PRIVACY AND CONSUMER ISSUES. Many privacy and consumer advocates and federal
regulators have become increasingly concerned with the use of personal
information, particularly consumer credit reports (which Search does not
provide). Search uses the social security numbers of individuals to search
various databases, including those of consumer credit reporting agencies.
Various federal regulators and organized groups have attempted and continue
attempting to adopt new or additional federal and state legislation to
regulate the use of personal information. Federal and/or state laws relating
to access and use of personal information, in particular, and privacy and
civil rights, in general, amended or enacted in the future could materially
adversely impact our business and prospects.
GENERAL BUSINESS ISSUES. Search is also subject to regulations applicable to
businesses generally and laws or regulations directly applicable to access to
online commerce. A number of new or changed laws, governmental policies and/or
regulations may be adopted, or cases may be decided, with respect to the
Internet or commercial online services covering issues such as property
ownership, user privacy, libel, pricing, acceptable content, copyrights,
trademarks and/or other intellectual property rights, distribution, taxation,
access charges and other fees, and quality of products and services. These
laws, governmental policies and/or regulations could significantly increase
the costs incurred by Internet Service Providers ("ISPs"), and the increased
costs could be passed along ultimately to end users, including Search. These
cost increases could dampen the growth in use of the Internet generally and
decrease the acceptance of the Internet as a communications and commercial
medium, which could have a material adverse effect on our business, results of
operations and prospects. Certain telephone carriers have petitioned
governmental bodies to regulate ISPs and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on ISPs
and online service providers. The carriers are concerned because of the
Internet's increasing burden on the existing telecommunications infrastructure
and resulting interruptions in phone service, the present policy of the
Federal Communications commission of not imposing access charges or Universal
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Service Fund funding obligations on ISPs, the ability of ISPs to route long
distance telephone-type traffic over the Internet in competition with the
services of traditional long distance telephone carriers, or for other
competitive concerns. The costs of communicating on the Internet would
increase substantially if any of these petitions or the relief sought therein
is granted, potentially adversely affecting the growth in use of the Internet.
It is possible that the governments of other states or foreign countries might
attempt to regulate Search's business or levy sales or other taxes relating
specifically to the activities engaged in by Search due to the global nature
of the Internet. Tax authorities in a number of states are currently reviewing
the appropriate tax treatment of companies engaged in online commerce, and new
state tax regulations may subject Search to additional state sales and income
taxes. There is no assurance that state or foreign governments will not allege
or charge violations of local laws, that Search might not unintentionally
violate these laws or that these laws will not be modified, or new laws
enacted, in the future. Any of the foregoing developments could have a
material adverse effect on our financial condition and results of operations.
Search may be unable to acquire or maintain relevant domain names and may be
unable to prevent third parties from acquiring similar domain names
Search currently holds various Web domain names relating to its brand,
including the 1800USSEARCH.COM domain name. Governmental agencies and their
designees generally regulate the acquisition and maintenance of domain names
and this regulation is subject to change. As a result of changes in government
regulation, Search may be unable to acquire or maintain relevant domain names
in some or all of the countries in which it conducts business.
The relationships between regulation governing domain names and laws
protecting trademarks and similar proprietary right, is uncertain at present.
Accordingly, Search may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the
value of its trademarks and other proprietary rights. Any such inability could
have a material adverse effect on our business, financial condition, results
of operations and prospects.
We could face problems related to the "Year 2000 Issue"
The "Year 2000 Issue" is typically the result of certain firmware limitations
and of limitations of certain software written using two digits rather than
four to define the applicable year. If software and firmware with
date-sensitive functions are not Year 2000 compliant, they may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, interruptions in customer service operations,
a temporary inability to process transactions, conduct searches, or engage in
similar normal business activities.
We have upgraded or replaced virtually all firmware in part to mitigate Year
2000 exposure. We utilize off-the-shelf and custom software developed
internally and by third parties. We believe that our off-the-shelf software
is Year 2000 compliant. However, there is no assurance that we will not be
required to modify or replace significant portions of our software so that our
systems will function properly with respect to dates in the year 2000 and
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thereafter. We are engaged in a two-phase process to evaluate our internal
status with respect to the Year 2000 issue. In phase one, we are completing a
Year 2000 evaluation, including Information Technology ("IT") systems,
non-IT systems, and critical third-party entities with which we transact
business. Either of the following problems could have a material adverse
effect on our business, financial condition, results of operations and
prospects: (1) our failure to make, or timely complete, required modifications
to existing software and firmware or conversions to new software or firmware;
or (2) a malfunction in software or firmware used on computer systems utilized
by our service providers. Further, our failure to successfully resolve these
issues could result in a shut-down of some or a substantial portion of our
operations (including those of Search), which could have a material adverse
effect on our business, financial condition, results of operations and
prospects.
Search depends on information contained primarily in electronic format in
Internet databases and computer systems maintained by third parties. The
disruption of these third-party systems and the supply of information provided
through these systems could have a material adverse effect on Search's, and
therefore our, business, financial condition, results of operations and
prospects. In addition, Search relies on the integration of various systems
in aggregating the content from multiple sources. The failure of any of those
systems as a result of Year 2000 compliance issues could prevent Search from
delivering its products and services, which could have a material adverse
effect on Search's, and therefore our, business, financial condition, results
of operations and prospects. Search does not currently have any information
concerning the Year 2000 compliance status of its customers and their Internet
service providers. In the event that substantial numbers of Internet users do
not successfully and timely achieve Year 2000 compliance, Search's, and
therefore our, business, financial condition, results of operations and
prospects could be adversely affected.
We are developing a comprehensive contingency plan to address situations that
may result if we are unable to achieve Year 2000 readiness of our critical
operations, and in particular those related to Search. There is no assurance
that our contingency plan will adequately address all Year 2000 issues. Our
failure to implement, if necessary, an appropriate contingency plan could have
a material impact on our business, financial condition, results of operations
and prospects.
Finally, we are also vulnerable to external forces that might generally affect
industry and commerce, such as utility or transportation company or Internet
Year 2000 compliance failures and related service interruptions. Any
significant interruption of general access to the Internet, or the customary
function and operations of, the Internet could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Some commentators have predicted significant litigation regarding Year 2000
compliance issues. Because of the unprecedented nature of such litigation, it
is uncertain whether or to what extent we may be affected by it.
We currently believe that this issue will not pose significant operational
problems, however delays in the modification or conversion of our or Search's
systems, or those of our or Search's vendors and suppliers of services, or the
failure to fully identify all Year 2000 dependencies in the systems could have
a material adverse effect on the our business, financial condition, results of
operations and prospects.
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Until the completion of phase one, we cannot quantify the impact of the Year
2000 issue. However, failure of critical internal IT systems, non-IT systems,
third-party vendors and financial institutions may limit or prevent is from
performing services for our customers, and could have a material adverse
effect on our business, financial condition, results of operations and
prospects. Through March 31, 1999 we incurred no material year 2000
remediation costs, and presently anticipate incurring no material remediation
costs in the future.
We may face labor problems as a result of collective bargaining agreements
We and certain of our subsidiaries are parties to several collective
bargaining agreements. Our union contracts are industry-wide and our labor
relations are not entirely dependent on our activities or decisions alone. A
labor dispute or strike could have a material adverse effect on our future
business, results of operations and prospects.
We do not plan to pay and are restricted from paying cash dividends
We have never paid any cash dividends and have no present intention to declare
or to pay cash dividends. The payment of dividends also is restricted by
covenants in our credit agreement and the indentures and fiscal agency
agreements under which our Convertible Subordinated Debentures were issued. It
is our present policy to retain any earnings to finance our business growth
and development.
We can not guarantee an adequate market for our common stock
Our common stock is currently listed on the NASDAQ National Market. We may be
unable to maintain our listings. It is possible that no adequate market for
our common stock will exist or, if it exist, that it will continue.
Shares available for futures sale may depress the market price of our common
stock
Substantially all of the 13,644,291 shares of common stock outstanding as of
June 3, 1999 and the 2,965,019 shares of common stock issuable upon exercise
of outstanding options or warrants or upon conversion of outstanding
convertible subordinated debentures will be freely tradeable in the public
markets pursuant to a registration statement or available exemption from
registration. Approximately 2,070,102 of these shares are issuable at or below
$10.00 per share. The availability or perception of availability of shares for
public sale may have a depressive effect on the market price of the common
stock.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
You should be aware that this prospectus contains forward-looking statements.
Forward looking statements discuss future expectations, contain projections of
results of operations or financial condition, or general business prospects.
Words such as "expects," "may," "will," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," and similar expressions often identify
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forward-looking statements. The forward-looking statements in this prospectus
reflect the good faith judgment of our management. However, forward-looking
statements can only be based on facts and factors currently known.
Consequently, actual results and outcomes may differ materially from the
results and outcomes discussed in the forward-looking statements. You should
carefully consider the risk factors described above together with all of the
other information included or incorporated by reference in this prospectus
before you decide to purchase any securities.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C., 20549, or the SEC's public reference rooms in
New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's Website at
"HTTP://WWW.SEC.GOV" or on our Website at "HTTP://WWW.KUSHNER-LOCKE.COM."
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
- -- Our Annual Report on Form 10-K for the fiscal year ended September 30, 1998
as amended on Forms 10-K/A filed on January 28, 1999 and February 22, 1999.
- -- Our quarterly report on Form 10-Q for the quarters ended December 31, 1998
and March 31, 1999.
- -- Our Proxy Statement dated April 29, 1999.
- -- Our Current Reports on Form 8-K filed on October 27, 1998, April 16, 1999
and May 3, 1999.
- -- Our registration statement on Form 8-A filed on July 16, 1996.
We will provide a copy of the documents incorporated by reference upon your
request. You may request a copy of these filings, at no cost, by writing or
telephoning our Senior Vice President and Chief Financial Officer, Mr. Robert
Swan, at the following address:
The Kushner-Locke Company
11601 Wilshire Blvd. 21st Floor
Los Angeles, California 90025
(310) 481-2000
This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information. We are not making an offer of these securities in any state where
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the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
USE OF PROCEEDS
All net proceeds from the sale of the common stock covered by this prospectus
will go to the selling shareholder. Accordingly, we will receive no proceeds
from the sale of these securities.
SELLING SHAREHOLDER
An aggregate of 468,883 shares of common stock are being registered in this
offering for the account of the selling shareholder. The selling shareholder
may sell its shares commencing on the effective date of the registration
statement of which this prospectus is a part. Sales of the common stock may
depress the price of the common stock in any market for the common stock.
The table below presents certain information with respect to the selling
shareholder for whom we are registering securities for resale to the public.
The selling shareholder has not held any position or office or had a material
relationship with us or any of our affiliates within the past three years
other than as a result of the ownership of our common stock.
<TABLE>
<CAPTION>
Selling Shares Owned Number of Shares Owned
Shareholder Prior to Offering Shares Offered After Offering
----------- ----------------- -------------- --------------
<S> <C> <C> <C>
The Harvey
Entertainment Company 468,883 468,883 0
</TABLE>
PLAN OF DISTRIBUTION
We will pay all of the expenses, including, but not limited to, fees and
expenses of compliance with federal and state securities or blue sky laws,
incident to the registration of the shares, other than underwriting discounts
and selling commissions, and fees or expenses, if any, of counsel or other
advisors retained by the selling shareholder.
The selling shareholder may offer the securities covered by this Prospectus
at various times in one or more of the following transactions:
- -- on the National Association of Securities Dealers Automated Quotation
System National Market;
- -- on the Pacific Stock Exchange;
- -- in a transaction other than on such market or exchange;
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- -- in connection with short sales of the securities;
- -- by pledge to secure debts and other obligations;
- -- in connection with the writing of non-traded and exchange traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
- -- in a combination of any of the above transactions.
The selling shareholder may sell its securities at market prices prevailing at
the time of sale, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices. The selling shareholder may use
broker-dealers to sell its securities. If this happens, broker-dealers will
either receive discounts or commissions from the selling shareholder, or they
will receive commissions from purchasers of securities for whom they acted as
agents.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock. At
June 10, 1999, we had 13,644,291 shares of common stock issued and outstanding.
Each holder of common stock is entitled to one vote for each share held of
record on the applicable record date on all matters submitted to the
shareholders. In electing directors, however, each shareholder is entitled to
cumulate votes for any candidate if, before the voting, the candidate's name
has been placed in nomination and any shareholder has given notice of an
intention to cumulate votes. The common stock is not subject to redemption or
to liability for further calls or assessment. Holders of common stock will be
entitled to receive dividends as may be declared by our Board of Directors out
of funds legally available therefore and to share pro rata in any distribution
to shareholders. The shareholders have no conversion, preemptive or other
subscription rights.
SHARES ELIGIBLE FOR FUTURE SALE
Substantially all of the 13,644,291 shares of common stock outstanding as of
June 10, 1999, and, subject to issuance, the 2,965,019 shares of common stock
issuable upon exercise of outstanding options or warrants, or issuable upon
conversion of outstanding convertible securities, will be freely tradeable in
the public markets, in certain cases pursuant to a registration statement or
available exemption from registration. Of the shares issuable upon exercise or
conversion of outstanding securities, approximately 2,070,102 shares are
issuable at or below $10.00 per share. The availability of shares for public
sale, or the perception of this availability, may have a depressive effect on
the market price of the common stock.
EXPERTS
Our consolidated financial statements and the financial statement schedule
included in our report on Form 10-K/A of the Company as of and for the year
ended September 30, 1998, have been audited by PricewaterhouseCoopers,
independent accountants, as set forth in their reports, dated December 24,
1998, accompanying such financial statements and financial statement schedule,
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and are incorporated herein by reference in reliance upon the reports of such
firm, which reports are given upon their authority as experts in accounting
and auditing. The consolidated financial statements and schedule of The
Kushner-Locke Company as of September 30, 1997 and for each of the years in
the two-year period ended September 30, 1997, have been incorporated by
reference herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
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