AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1998
Registration Statement No. 33-12445
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ACTV, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 4894 94-2907725
-------- ---- ----------
(State or other jurisdiction (IRS Employer (Primary Standard
of incorporation or Identification No.) Industrial Classification
organization) Code)
1270 Avenue of the Americas
New York, New York 10020
(212) 262-2570
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(Address, including zip code and telephone number,
including area code, of Registrant's principal executive offices)
WILLIAM C. SAMUELS
President
ACTV, INC.
1270 Avenue of the Americas
New York, New York 10020
(212) 262-2570
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copies To:
JAY M. KAPLOWITZ, ESQ.
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
(212) 752-9700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and from
time to time.
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If the securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [x]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------- ------------------ ----------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Title of Amount Being Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered Offering Price Per Aggregate Registration Fee
Registered Security(1) Offering Price
- -------------------- ------------------ ----------------------- ------------------ ------------------
Common 1,312,067 1.813 2,378,121.44 701.55
Stock, par value
$.10 per share
- -------------------- ------------------ ----------------------- ------------------ ------------------
Total Registration 701.55
Fee
- -------------------- ------------------ ----------------------- ------------------ ------------------
</TABLE>
(1) Pursuant to Rule 457, estimated solely for the purpose of calculating
the registration fee, based upon the last reported sales price of the
Registrant's Common Stock of the same class as quoted by the National
Association of Securities Dealers Automated Quotation System on June 11,
1998.
* 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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF
1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
PROSPECTUS
ACTV, INC.
1,312,067 SHARES OF COMMON STOCK
All of the shares of Common Stock (the "Security Holders'
Shares"), par value $.10 per share, of ACTV, Inc., a Delaware corporation (the
"Company"), offered hereby are being offered by the
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selling security holders named herein under the caption "Selling Security
Holders" (the "Selling Security Holders"). Such shares may be sold by the
Selling Security Holders who have acquired such shares from the Company
previously. The Company will not receive any of the proceeds from sales of
Selling Security Holders' Shares. See "SELLING SECURITY HOLDERS" and "PLAN OF
DISTRIBUTION."
The Company has agreed with the Selling Security Holders to
register the Selling Security Holders' Shares offered hereby. The Company has
also agreed to pay certain fees and expenses incident to such registration.
The Company's Common Stock ("Common Stock") is traded on the
over-the-counter market on the NASDAQ SmallCap Market ("NASDAQ") and on the
Boston Stock Exchange ("BSE"). On June 11, 1998, the last reported sale price of
the Common Stock on NASDAQ was $1 13/16.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION AND SHOULD BE PURCHASED ONLY BY
PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE ___, 1998
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The Security Holders' Shares that may be offered from time to
time by Selling Security Holders may be sold through ordinary brokerage
transactions in the over-the-counter market or on the Boston Stock Exchange, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or at negotiated prices.
The Selling Security Holders each may be deemed to be "an
underwriter", as defined in the Securities Act of 1933 (the "Securities Act").
If any broker-dealers are used by the Selling Security Holders, any commissions
paid to broker-dealers and, if broker-dealers purchase any shares of Common
Stock as principals, any profits received by such broker-dealers on the resales
of the shares of Common Stock may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any profits realized by the
Selling Security Holders may be deemed to be underwriting commissions. All
costs, expenses and fees in connection with the registration of the securities
offered by the Selling Security Holders will be borne by the Company. All
brokerage commissions, if any, attributable to the sale of the securities
offered by the Selling Security Holders will be borne by the Selling Security
Holders. See "SELLING SECURITY HOLDERS" and "PLAN OF DISTRIBUTION."
No dealer, salesman or other person has been authorized to give
any information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation by anyone in any jurisdiction in
which, such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation.
Under the Securities Exchange Act of 1934 (the "Exchange Act")
and the regulations thereunder, any person engaged in a distribution of the
securities offered by this Prospectus may not simultaneously engage in
market-making activities with respect to shares of the Common Stock during the
applicable "cooling off" period (one or five days) prior to the commencement of
such distribution. In addition, and without limiting the foregoing, the Selling
Security Holders will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation,
Regulation M, in connection with transactions in the securities, which
provisions may limit the timing of purchases and sales of the securities by the
Selling Security Holders.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a registration statement on Form S-3 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act, for the registration of the securities
offered by this Prospectus. This Prospectus does not contain all the information
set forth in the Registration Statement. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith, which
may be inspected without charge at the principal office of the Commission, 450
Fifth Street, NW, Washington, DC, 20549, and copies of the material contained
therein may be obtained from the Commission upon payment of applicable copying
charges. Statements contained in this Prospectus as to the contents of any
contract or other document referred to 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, each such statement being qualified
in all respects by such reference.
The Company is subject to the reporting and other informational
requirements of the Exchange Act and, in accordance therewith, files reports,
proxy statements, and other information with the Commission. Such reports, proxy
statements, and other information can be inspected and copied at the public
reference facilities maintained by the Commission at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, DC,
20549, and at the Commission's regional offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511, and at 7
World Trade Center, New York, New York, 10048. Copies of such materials can also
be obtained by written request to the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, NW, Washington, DC, 20549, at prescribed
rates, or via the Internet Web site (http://www.sec.gov) maintained by the
Commission.
The Common Stock is listed on NASDAQ and the BSE. The Company's
periodic reports, proxy statements, and other information can be inspected at
NASDAQ and the BSE at the offices of NASDAQ at 1735 K Street, NW, Washington,
DC, 20006 or the offices of the BSE at 1 Boston Place, Boston, Massachusetts,
02108.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
are incorporated herein by reference:
(1) Quarterly Report on Form 10Q for the quarter ended March 31,
1998 as filed on May 15, 1998.
(2) Annual Report on Form 10-K for the year ended December 31,
1997 as amended by Form 10-K/A1 filed on April 20, 1998.
(3) Current Report on Form 8-K filed on February 6, 1998.
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(4) The Company's Proxy Statement for the year ended December 31,
1997.
In addition to the foregoing, all documents subsequently filed by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
prior to the filing of a post-effective amendment indicating that all of the
securities offered hereunder have been sold or deregistering all securities then
remaining unsold shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document that 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.
All information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference, except to the extent set forth in
the immediately preceding statement.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the oral or written request of such
person, a copy of any document incorporated in this Prospectus by reference,
except exhibits to such information, unless such exhibits are also expressly
incorporated by reference herein. Requests for such information should be
directed to ACTV, Inc., 1270 Avenue of the Americas, New York, New York 10020,
Attention: Secretary, telephone number (212) 262-2570.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
detailed information appearing elsewhere in this Prospectus including the
documents incorporated herein by reference. To the extent that the information
presented in this Prospectus discusses financial projections, information or
expectations about the Company's products or markets, or otherwise makes
statements about future events, such statements are forward-looking and are
subject to a number of risks and uncertainties that could cause actual results
to differ materially from the statements made. These include, among others, the
successful and timely development and acceptance of new products and markets and
the availability of sufficient funding to effect such product and/or market
development.
The Company
ACTV, Inc. (the "Company") has developed proprietary technologies
for state-of-the-art programming enabled by the emergence of both the digital
television and Internet platforms. The Company's products, in general, are tools
for the creation of programming that allows individual viewer participation. The
chief market presently targeted by the Company for digital television is cable
sports programming and advertising, while for the Internet the market focus is
on schools and universities in the United States.
For digital television applications, the Company's individualized
programming ("Individualized Programming") gives the viewer the ability to make
instant and seamless changes within the live or pre-recorded television
programming being viewed. Individualized Programming is a multi-path broadcast
of several elements of programming material, such as instant replay, isolation
cameras, statistical data, or additional features. There is no limit to the
number of viewers who can interact simultaneously with a program enhanced with
the Company's Individualized Programming ("ACTV Program" or "ACTV Programming").
For Internet applications, the Company has developed eSchool
Online(TM) ("eSchool"), a Java-based software suite that permits an instructor
to use the Internet to create a virtual environment for live events, or
on-demand programs. (Java is a programming language developed for the Internet
by Sun Microsystems). eSchool integrates Web content and a chat application with
educational video to effectively create a "virtual" classroom. In addition, the
Company markets analog and digital systems for televised distance learning
applications that permit point-to-multi-point telecasts that can deliver
pre-recorded individualized lessons as well as integrate individualized lessons
into live distance learning class sessions.
From its inception through March 31, 1998, the Company has
incurred losses approximating $54 million related directly to the development
and marketing of the Individualized Programming and eSchool.
The Company is seeking to exploit the entertainment market,
principally in the U.S., through the launch of regionally based entertainment
networks ("Regional Networks"). The initial development of
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the Regional Networks is based on sports programming provided through the
Company's strategic alliances with FOX Sports Net and most recently with Rainbow
Sports. The Company has the rights to license FOX Sports Net programming from
each of FOX Sports Net's regional sports affiliates and to offer enhanced FOX
Sports Net programming to any distributor that carries the corresponding
regional FOX Sports Net channel. The FOX Sports Net agreement extends through
June 2003.
FOX Sports Net is a service of "National Sports Partners," a
joint venture between Cablevision's Rainbow Media Holdings, Inc. and FOX/Liberty
Networks, which is a 50/50 partnership between News Corp. and
Tele-Communications Inc.'s Liberty Media Corporation. Equally owned by
FOX/Liberty Networks and Cablevision's Rainbow Media Holdings, Inc., the new
venture now reaches more than 58 million homes nationwide.
The Company's business plan is to develop Regional Networks in
regions served by Fox Sports Net, with distribution to be provided by cable
operators that are currently upgrading their service from analog to digital
transmission.
Initially, the Regional Networks will feature sports programming,
with the possible introduction of other types of programming in the future. The
Company believes that the differentiation afforded by the Company's
Individualized Programming will allow distributors to offer their customers a
unique digital application.
The Company plans to launch its first Regional Network in 1998 in
the regions served by FOX Sports Southwest (the "Southwest Regional Network").
FOX Sports Southwest distributes programming to 5.1 million households in Texas,
Louisiana, Arkansas, Oklahoma and nine New Mexico counties. The Southwest
Regional Network will feature individualized telecasts of professional
basketball (Houston Rockets, Dallas Mavericks, San Antonio Spurs), hockey
(Dallas Stars), and baseball (Texas Rangers, Houston Astros), along with college
sports events from the Southeastern, Southland and Western Athletic conferences.
The Company has entered into an agreement with
Tele-Communications Inc. ("TCI") under which TCI will distribute and market the
Southwest Regional Network to its digital subscribers in Texas. The agreement
also contemplates potential nationwide distribution by TCI of the Company's
regional sports networks.
The Company also plans to launch additional individualized
networks in regions served by FOX Sports Net and Rainbow Sports. The planned
Regional Networks will feature FOX Sports Net regional programming enhanced by
the Company's Individualized Programming. The Company will be responsible for
the incremental content, transmission, delivery and master control costs
incurred in connection with the product enhancement of the Individualized
Programming to be presented through its Regional Networks.
In August 1997, General Instrument Corp. ("GI") invested $1
million in common stock of ACTV, Inc. (the "Common Stock") and agreed to market,
jointly with the Company, Individualized Programming applications. GI is the
leading supplier of digital television headend systems and digital
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set-top terminals. The Company and GI had previously announced that the
Company's Individualized Programming would be incorporated into GI's new MPEG-2
digital set-top cable and wireless terminals.
It is the Company's belief that it has adequate funding to launch
the Southwest Regional Network in 1998. However, there is no assurance that it
will secure the funding necessary to effect additional launches in other
regions, or that other factors might not delay or prohibit the successful
implementation of the Company's Regional Network strategy.
The projected Southwest Regional Network and additional network
expansion are part of the Company's plan to develop the entertainment division
of its business, which to date, does not generate any revenue for the Company.
There can be no assurance that the Southwest Regional Network or other Regional
Networks, if launched, will generate significant revenues for the Company.
The target market for the Company's Internet products includes
schools, state and local agencies, universities and private businesses. eSchool
consists of a suite of integrated software products, including content creation
software, student and teacher user software, and database assessment software.
All of the eSchool software is accessed over the Internet or an intranet, and
can be displayed in a Web browser. The Company also provides Internet content
development assistance, hosting of eSchool software on its computer servers, and
training and consulting to schools and universities.
The Company intends to provide a greater integration of the
Internet for its clients, from the "virtual classroom," which eSchool currently
provides, to larger groupware activities that may enable more efficient
communications and resource sharing among teachers, students and parents in an
entire educational entity or school district, to more efficient communications
and resource sharing between educational entities or school districts.
To date, nearly all of the Company's revenues have been derived
from sales to the education market of eSchool and individualized educational
programs and products. There is no assurance that the Company will be able to
successfully compete in this market, where many of its current and potential
competitors are companies with significantly greater resources than those of the
Company.
The Company was incorporated under the laws of the State of
Delaware on July 24, 1989. The Company is the successor, by merger effective
November 1, 1989, to ACTV, Inc., a California corporation, organized on July 11,
1983. The Company's executive offices are located at 1270 Avenue of the
Americas, New York, New York 10020, telephone number (212) 262-2570.
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RISK FACTORS
Prospective investors should carefully consider the following
factors, in addition to the other information contained in this Prospectus, in
connection with investments in the Shares offered hereby. This Prospectus
contains certain forward-looking statements, which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including those set forth below and elsewhere in this Prospectus. An investment
in the Shares offered hereby involves a high degree of risk.
Operating Losses and Limited Revenues to Date.
The Company has operated at a loss through the date of this
Prospectus. The Company's losses applicable to common stock shareholders for the
quarter ended March 31, 1998, the years ended December 31, 1997, 1996 and 1995
(the "1997 Fiscal Year", the "1996 Fiscal Year," and "1995 Fiscal Year,"
respectively) were $2,772,137, $10,358,683, $10,300,481 and $6,826,789,
respectively. The 1995 Fiscal Year includes an extraordinary gain of $94,117.
Through March 31, 1998, the Company had an accumulated deficit of approximately
$54 million. There can be no assurance the Company will achieve profitability in
the future.
To date, the Company has had limited revenues, including revenues
of $361,247 in the first quarter of 1998, $1,650,955 in the 1997 Fiscal Year,
$1,476,329 in the 1996 Fiscal Year and $1,311,860 in the 1995 Fiscal Year. There
can be no assurance that the Company will generate significant revenues in the
future.
Unproven Business Strategy.
In the Internet market, the Company made its first sale in the
second quarter of 1997, and has had only a limited number of additional sales to
the kindergarten to 12th grade market segment, which itself is a newly
developing market in a process of evolution. Also the Company has not had
significant sales of its Individualized Programming. While the Company's planned
commercialization of its Individualized Programming in conjunction with FOX
Sports Net is based on certain test marketing of the concept, the Company has
not yet introduced this product on a commercial basis. Therefore, the Company's
products should be viewed as newly introduced products, the demand for, and
market acceptance of which, are subject to a high degree of uncertainty. There
can be no assurance as to the commercial success of either Individualized
Programming or of the Company's Internet products, or of sufficient demand and
market acceptance for these products to become profitable. See "Business."
Need for Additional Financing; Working Capital Deficit.
To date, the Company's capital requirements to develop the
Individualized Programming, produce programming, develop marketing approaches
and strategic alliances, and to cover costs of selling, general and
administrative expenses, have been significant, resulting in an accumulated
deficit as of March 31, 1998 of approximately $54 million. The Company has also
experienced working capital deficits. To
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date, the Company has not generated revenues sufficient to sustain its
operations, and cannot generate such revenues, if at all, without raising
additional funds to implement its business plan. The Company has issued debt to
raise funds for the development of its Southwest Regional Network; however, it
is not yet delivering its product to consumers or deriving any revenue from the
Southwest Regional Network. There can be no assurances that the funds raised
will be sufficient to fund the development of the Texas Regional Network or to
fund the operations of the Company. Should proceeds prove to be insufficient to
fund operations, the Company would be required to seek additional financing. The
Company will also require additional financing to open other regional networks
and achieve profitability. The Company has no current arrangements with respect
to, or sources of, additional financing and there can be no assurance that
additional financing will be available to the Company on acceptable terms, or at
all. Additional equity financing may involve substantial dilution to the
interests of the Company's then existing stockholders. See "Use of Proceeds."
Timely Upgrade of Cable Headends for Digital Delivery.
The Company's initial entertainment business strategy depends in
large part on the ability of major cable system operators to upgrade their
systems for digital programming and to deploy digital set-top boxes, and upon
the manufacturers of the set-top boxes to manufacture the boxes compatible with
the Company's downloadable software. In order to utilize Individualized
Programming, subscribers must have a digital television set-top box installed in
their homes. The timely deployment of digital television set-top boxes is
entirely out of the control of the Company, and there can be no assurance that a
sufficient number of potential subscribers will receive digital television
set-top boxes in the near future so as to enable the Company to deploy its
Individualized Programming in accordance with its business plan. Material delays
in the upgrade of cable headends or the deployment of digital television set-top
boxes could have a material effect on the Company's results of operations and
financial condition. See "Business-Industry Overview."
Dependence on Strategic Relationships.
The Company's Entertainment Division, which is the division
responsible for the development and marketing of Individualized Programming, is
dependent upon its relationship with General Instruments and other digital
set-top box manufacturers to sell such digital boxes to cable systems. The
Company is also dependent upon the cooperation of FOX Sports Net in connection
with the marketing of the Company's regional sports networks to cable systems.
There can be no assurance that these third parties will dedicate sufficient
resources to their respective relationships with the Company, or will perform
their obligations to the Company in a time frame that will allow the Company to
implement its current business plan. Their failure to do so could have a
material adverse effect on the Company's operations, or result in delays in the
Company's ability to implement its business plan in a timely manner. See
"Business-Product Development" and "Business-Programming Relationship with FOX
Sports Net."
Technological Obsolescence.
Both the digital television and Internet platforms are
characterized by extensive research efforts and rapid, significant technological
change, often resulting in product obsolescence or short product life cycles.
Accordingly, the Company's ability to compete will depend in large part on its
ability to introduce its Individualized Programming and Internet products in a
timely manner, to continually enhance
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and improve its Individualized Programming and Internet products, and to adapt
to technological changes and advances in the markets in which it competes. There
can be no assurance that competitors will not develop technologies or products
that render the Company's Individualized Programming and/or Internet products
obsolete or less marketable or that the Company will be able to keep pace with
the demands of an ever-changing marketplace. See "Business-Competition" and
"Business Research and Development."
Possible Shortage of Available Channels for In-Home Cable Applications.
In order for the Company's Individualized Programming to be
delivered over cable, DBS or wireless cable systems for the in-home
entertainment market, it must compete for channel space on cable, DBS and
wireless cable systems, most of which have limited available analog channel
capacity. Although a simpler form of individualization can be achieved by the
Company's using one channel of analog band-width, the more sophisticated
applications of Individualized Programming currently require three to four
channels of analog band-width. The digital technologies recently deployed and
those currently under development would enable the Company to use Individualized
Programming's more advanced applications within one 6MHz channel of band-width.
The Company believes, although there can be no assurance, that the cable, DBS
and wireless cable industry is, in general, moving in the direction of
increasing channel capacity. There is no assurance that cable, DBS and wireless
operators will devote a sufficient number of channels of band-width to the
Company's Individualized Programming in the future, even if cable, or DBS and
wireless operators continue to upgrade their headends for digital delivery. See
"Business - Industry Overview."
Patents and Proprietary Information.
The Company has obtained patents covering certain aspects of the
Individualized Programming and has patents pending with respect to other
developments or enhancements thereof. However, there can be no assurance (i)
that patents applied for will be granted, (ii) that the patents the Company owns
or has rights to or that may be granted or obtained by the Company in the future
will be enforceable or will provide the Company with meaningful protection from
competition, (iii) that any products developed by the Company will not infringe
any patent or rights of others, or (iv) that the Company will possess the
financial resources necessary to enforce any patent rights that it holds. See
"Business -- Patents, Applications and Proprietary Information."
The Company requires each of its employees, consultants and
advisors to execute a confidentiality and assignment of proprietary rights
agreements upon the commencement of employment or a consulting relationship with
the Company. These arrangements generally provide that all inventions, ideas and
improvements made or conceived by the individual arising out of the employment
or consulting relationship shall be the exclusive property of the Company. In
addition, all proprietary information is required to be kept confidential and
not disclosed to third parties except by consent of the Company or in other
specified circumstances. There can be no assurance, however, that these
agreements will provide effective protection of the Company's proprietary
information in the event of unauthorized use or disclosure of such information.
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Changes in Government Funding
The Company's Internet Division is dependent on public schools'
continuing to receive various federal and state funding for Internet
connectivity and a broader distribution of computers. If such government funding
were to be substantially reduced or eliminated, it could have a material adverse
effect on the Internet Division.
Government Regulation.
The Company believes that neither its present or future
implementation of its Individualized Programming is subject to any substantial
government regulation. However, the broadcast industry in general, and cable
television, DBS and wireless communication in particular are subject to
substantial government regulation.
Pursuant to federal legislation enacted in 1992 ("1992 Cable
Act"), the Federal Communications Commission ("FCC") substantially re-regulated
the cable television industry in various areas including rate regulation,
competitive access to programming, "must carry" and retransmission consent for
broadcast stations. These rules, among other things, restrict the extent to
which a cable system may profit from, or recover costs associated with, adding
new program channels, impose certain carriage requirements with respect to
television broadcast stations, limit exclusivity provisions in programming
contracts and require prior notice for channel additions, deletions and changes.
The United States Congress and the FCC also have under consideration, and may in
the future adopt new laws, regulations and policies regarding a wide variety of
matters which could, directly or indirectly, materially adversely affect the
operations of the Company.
The Company is unable to predict the outcome of future federal
legislation or regulatory proposals or the impact of any current or future laws
or regulations on its operations. There can be no assurance that the Company
will be able to comply with any future laws or regulations that may be imposed
on its operations. See "Business-Government Regulation."
Dependence Upon Key Management and Technical Personnel.
The Company has been largely dependent upon the efforts of
William C. Samuels, its Chairman of the Board, President and Chief Executive
Officer, David Reese, its Executive Vice President, President of ACTV
Entertainment and a Director of the Company, and Bruce Crowley, its Executive
Vice President, President of ACTV Net, Inc. and a Director of the Company. The
Company has entered into five-year employment agreements with Mr. Samuels, Mr.
Reese and Mr. Crowley. The Company currently does not maintain "key employee"
insurance on the lives of Messrs. Samuels, Reese or Crowley and there can be no
assurance that such insurance would be available at an acceptable cost to the
Company, should it seek to acquire such insurance in the future.
The Company's Internet division is dependent on a group of
employees who are expert in the Java computer language. The Internet is a field
characterized by intense competition for and a high turnover rate of qualified
Java programmers. There can be no assurance that if the Company were required to
replace such personnel, it could readily do so, or that, even if such qualified
replacements were retained,
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the development of the Company's business would not be delayed. See "Business --
Product Development."
Competition.
In the Internet market, the Company competes with other providers
of educational or groupware applications, as well as traditional distance
learning providers. In the entertainment market, Individualized Programming
competes with many other forms of entertainment content, many of which are
significantly more established, including the basic television industry, the
movie industry, cable television, programming services and other forms of
entertainment.
The Company's Entertainment Division competes with many other
companies that provide programming for the television industry and, in
particular, with companies that provide sports programming. Moreover, the
Company will compete in the markets in which its enhanced version of FOX Sports
Net is telecast with the simultaneous broadcast of the un-enhanced version of
the same event. In addition, the Individualized Programming technology may
compete with other technologies described as interactive television, some of
which may be developed or promoted by companies with resources significantly
greater than the Company's.
Nearly all of the competitors of the Company have greater
financial, and other, resources than the Company. See "Competition."
Control by Officers, Directors and Principal Stockholders.
The Company's officers and directors own, of record,
approximately 6.2 million outstanding shares of Common Stock, assuming the
exercise of all currently exercisable options and the conversion of all
outstanding convertible securities held by such individuals and including shares
beneficially owned pursuant to voting trust agreements. William C. Samuels,
Chairman, President, Chief Executive Officer and a director of the Company,
pursuant to a voting agreement, has voting control of the 2,341,334 shares of
Common Stock owned of record by the Washington Post Company. Consequently, Mr.
Samuels has voting control over 3,595,817 shares of Common Stock, or
approximately 18% of the outstanding shares of Common Stock, assuming issuance
of 350,000 shares of Common Stock upon the exercise of options. Accordingly, Mr.
Samuels could have substantial influence over the affairs of the Company,
including the election of directors.
Limited Trading Market for Common Stock; Possible Volatility of Securities
Prices; Possible Delisting of Common Stock.
The average number of shares of the Company's Common Stock traded
on the NASDAQ and Boston Stock Exchange has been limited. As a result, the
ability of a stockholder to sell his or her shares may be limited and the sale
of a large number of shares at any time may adversely affect the trading market
to a greater extent than would be the case if the shares were more actively
traded. The market price of the Company's securities may be highly volatile, as
has been the case with the securities of other companies engaged in high
technology research and development. Factors such as announcements by the
Company or its competitors concerning technological innovations, new commercial
products or procedures, proposed government regulations and developments or
disputes relating to patents or proprietary rights may
II-13
<PAGE>
have a significant impact on the market price of the Company's securities. Such
volatility may be increased as a result of the limited trading market.
In order to continue to be listed on the Nasdaq, the Company is
required to maintain (i) net tangible assets of at least $2,000,000, or market
capitalization of $35,000,000 or $500,000 in net income for two of the last
three years (ii) total stockholders' equity of $1,000,000, (iii) a minimum bid
price of $1.00, (iv) two market makers, (v) 300 stockholders, (vi) at least
500,000 shares in the public float, (vii) a minimum market value for the public
float of $1,000,000 and (viii) compliance with certain corporate governance
standards. If the Company is unable to satisfy NASDAQ's maintenance criteria in
the future, its Common Stock may be delisted from the NASDAQ. The BSE requires
the Company to have total assets of at least $1,000,000 and total stockholder
equity of $500,000 to maintain its listing. In the event of delisting, trading,
if any, would be conducted only in the over-the-counter market in the so-called
"pink sheets" or the NASD's "Electronic Bulletin Board." As a consequence of
such delistings, an investor would likely find it more difficult to dispose of,
or to obtain quotations as to, the price of the Company's Common Stock.
Rule 144 Sales.
Of the shares of the Common Stock presently outstanding,
approximately 5.1 million are "restricted securities" as that term is defined by
Rule 144 promulgated under the Securities Act and in the future may be sold only
in compliance with Rule 144 or pursuant to registration under the Securities Act
or pursuant to another exemption therefrom. For so long as the Registration
Statement of which the this Prospectus is a part is current and effective, the
shares being offered may be sold without regard to the volume limitations,
described below, set forth in Rule 144. Generally, under Rule 144, each person
having held restricted securities for a period of one year may, every three
months, sell in ordinary brokerage transactions an amount of shares which does
not exceed the greater of one percent (1%) of the Company's then outstanding
shares of Common Stock, or the average weekly volume of trading of such shares
of Common Stock as reported during the preceding four calendar weeks. A person
who has not been an affiliate of the Company for at least the three months
immediately proceeding the sale and who has beneficially owned shares of the
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above. Of the restricted
shares, a substantial number have been held by non-affiliates of the Company for
more than two years or have been held by affiliates of the Company for more than
one year. Actual sales, or the prospect of sales by the present stockholders of
the Company or by future holders of restricted securities under Rule 144, or
otherwise, may, in the future, have a depressive effect upon the price of the
Company's shares of Common Stock in any market that may develop therefor, and
also could render difficult sales of the Company's securities purchased by
investors herein.
Penny Stock Regulation.
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current
prices and volume information with respect to transactions in such securities
are provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
II-14
<PAGE>
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson it he transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules generally require that prior to a transaction in a penny stock the
broker-dealer make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject tot he penny stock rules. If the Company's securities
become subject to the penny stock rules, stockholders may find it more difficult
to sell their securities.
Outstanding Options and Warrants.
As of the date of this Prospectus, the Company had granted
options and warrants to purchase an aggregate of 4,273,426 shares of Common
Stock that had not been exercised. Of the shares of Common Stock subject to
these unexercised options and warrants, 3,534,426 may be purchased for between
$1.00 and $1.99 per share; 494,500 may be purchased for between $2.00 and $2.99
per share; 162,000 may be purchased for between $3.00 and $3.99 per share;
50,000 may be purchased for between $4.00 and $4.99 per share; and 32,500 may be
purchased for between $5.00 to $5.99 per share. To the extent that the
outstanding stock options and warrants are exercised, dilution to the interests
of the Company's stockholders will occur. Moreover, the terms upon which the
Company will be able to obtain additional equity capital may be affected
adversely, since the holders of the outstanding options and warrants can be
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company than
those provided in the outstanding options and warrants.
Effect of Conversion of Exchangeable Preferred Stock and Convertible Preferred
Stock.
In August 1996, one of the Company's wholly-owned subsidiaries
conducted a private placement in which it issued an aggregate of 400,000 shares
of 5% Exchangeable Preferred Stock at $25.00 per share and Placement Agent's
Warrants to purchase an aggregate of 36,000 shares of 5% Exchangeable Preferred
Stock at $25.00 per share. The 5% Exchangeable Preferred Stock is exchangeable
for the Common Stock of the Company based an a value per share of Common Stock
of the lower of (i) $1.10 or (ii) a 30.375% discount to the market price. For
purposes of this calculation, the 5% Exchangeable Preferred Stock is to be
valued at its liquidation value of $25.00 plus accrued dividends. Thus, the
number of shares issuable upon conversion is subject to adjustment. As of the
date of this Prospectus, approximately 222,000 shares of the 5% Exchangeable
Preferred Stock remain outstanding and such shares would be convertible into
approximately 5.6 million shares of Common Stock if exchanged as of June 12,
1998. The Company believes that it is highly likely that the holders of the
Exchangeable Preferred Stock will elect to convert their stock into Common Stock
of the Company.
In November 1997, the Company issued 86,200 shares of Series A
Convertible Preferred Stock ("Series A Preferred"). The Series A Preferred,
together with accrued dividends, is convertible into Common Stock based upon a
conversion rate of $1.50 per share of Common Stock. The Series A Preferred
II-15
<PAGE>
would be convertible into approximately 1.5 million shares of Common Stock if
exchanged as of June 12, 1998.
Common Stock holders will be diluted by these exchanges or
conversions to Common Stock. Additionally, since such shares of Common Stock
will be registered for sale in the marketplace, future offers to sell such
shares could have a potentially depressive effect upon the price of the Common
Stock and render difficult sales by the Company or by others of the Common
Stock. See "Description of Securities."
Possible Issuance of Preferred Stock; Affiliate's Option to Acquire Voting
Control of Certain Subsidiaries; Anti-takeover Provisions.
The Company's Certificate of Incorporation permits its Board of
Directors to designate the terms of, and issue, up to 1,000,000 shares of
Preferred Stock without further stockholder approval. The issuance of shares of
Preferred Stock by the Board of Directors could adversely affect the rights of
the holder of the Common Stock by, among other things, establishing preferential
dividends, liquidation rights and voting power. As of the date of this
Prospectus, 86,200 shares of Preferred Stock have been issued. See "Description
of Securities."
The Company has issued to William C. Samuels, its President and a
director, David Reese, its Executive Vice President and a director, Bruce
Crowley, its Executive Vice President, Christopher Cline, its Senior Vice
President, Chief Financial Officer and Secretary and three other employees,
options to acquire Class B Common Stock of certain material subsidiaries of the
Company. The ten year options vest commencing in July 1997 until January 1,
1999. In each case, the Class B Common Stock is identical to the Common Stock of
each such subsidiary that is owned by the Company, but has voting rights of 25
votes per share. If exercised, such options will result in the optionees' having
approximately 52% of the voting power of each subsidiary, increasing to in
excess of 75% as the options vest. As a result, should such options be exercised
as to any such subsidiary, the holders thereof would have the right to elect the
Board of Directors of such subsidiary and otherwise control its business and
affairs. The holders have also entered into an agreement as to the voting of
certain of such shares if issued.
The issuance of the Preferred stock, or the exercise by the
holders of the options to acquire the Class B Stock of such subsidiaries, either
alone or together, might render it more difficult, and therefore discourage, an
unsolicited takeover proposal such as a tender offer, proxy contest or removal
of incumbent management, even if such actions would be in the best interest of
the Company's stockholders. See "Management" and "Description of Securities."
II-16
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Security Holders' Shares offered hereby. All proceeds from the sale of the
Security Holders' Shares will be for the account of the Selling Security Holders
described herein. See "Selling Security Holders."
MATERIAL CHANGES
There have been no material changes since the filing of the
Company's Form 10-K for the year ended December 31, 1997 on March 31, 1998 as
amended by the Company's Form 10-K/A1 filed on April 20, 1998, except as set
forth on the Form 10-Q for the period ended March 31, 1998, as filed on May 15,
1998
SELLING SECURITY HOLDERS
All of the Security Holders' Shares to which this Prospectus
relates may be sold by Selling Security Holders who have acquired such shares
from the Company previously. The Company will not receive any of the proceeds
from sales of such shares by Selling Security Holders.
All costs, expenses and fees in connection with the registration
of the Security Holders' Shares will be borne by the Company. All brokerage
commissions, if any, attributable to the sale of Security Holders' Shares by
Selling Security Holders will be borne by such Selling Security Holders.
The Selling Security Holders are offering hereby a total of
1,312,067 shares of Common Stock. The following table sets forth the name of
each person who is a Selling Security Holder, the number of securities owned by
each such person at the time of this offering and the number of shares of Common
Stock such person will own after the completion of this offering. The following
table assumes the exercise of all options and warrants beneficially owned by
each such security holder.
II-17
<PAGE>
<TABLE>
<CAPTION>
Beneficial
Ownership Beneficial
Prior to Shares Included in Ownership
Name Offering (1) % This Offering (2) After Offering %
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Banca del Gottardo 3,614,403 18.2% 1,076,667 2,537,736 12.7%
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
Corporate Counselors 38,500 * 13,500 25,000 *
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
Bratskeir & Company, Inc. 21,900 * 21,900 0 *
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
Dorsey & Whitney LLP 175,000 * 150,000 25,000 *
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
Gersten, Savage, Kaplowitz 50,000 * 50,000 0 *
& Fredericks, LLP
- ----------------------------- ------------- ----------- -------------------- -------------- ------------
</TABLE>
- ----------
* Less than one percent
(1) Includes (i) shares issuable upon exercise of all options and warrants
based on current conversion prices and formulas (some of which are subject
to adjustment based on market fluctuations) for which the underlying
shares of Common Stock are being offered hereby (ii) shares issuable upon
exercise of all options, warrants, Exchangeable Preferred Stock and Series
A Preferred, based on current conversion prices and formulas provided such
securities are exercisable within the sixty days commencing on the date of
the Prospectus and (iii) shares that have been registered on previous
registration statements but have not been sold as of June 19, 1998.
(2) Gives effect to the sale of all the shares of Common Stock being offered
hereby.
(3) Shares not offered in this Offering include 1,412,403 shares issuable upon
conversion of Series A Preferred and 350,000 shares issuable upon exercise
of options at an exercise price of $2.50 per share.
II-18
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The total authorized capital stock of the Company consists of
65,000,000 shares of Common Stock, par value $0.10 per share, and 1,000,000
shares of Preferred Stock, par value $0.10 per share. The following descriptions
of capital stock are qualified in all respects by reference to the Restated
Certificate of Incorporation and By-Laws of the Company, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
COMMON STOCK
The holders of Common Stock will elect all directors and are
entitled to one vote for each share held of record. As of the date of this
Prospectus, 19,908,439 shares of Common Stock were issued and outstanding. All
shares of Common Stock will participate equally in dividends, when and as
declared by the Board of Directors and in net assets on liquidation. The shares
of Common Stock will have no preference, conversion, exchange, preemptive or
cumulative voting rights.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
1,000,000 shares of Preferred Stock with designations, rights and preferences
determined from time to time by its board of directors. Accordingly, the
Company's Board of Directors is empowered, without stockholder approval, to
issue Preferred Stock with dividend, liquidation, conversion or other rights
that could adversely affect the rights of holders of the Common Stock. Except as
set forth below, the Company has no current plans to issue any shares of its
Preferred Stock, but there can be no assurance that it will not do so in the
future.
The Company has designated 120,000 shares of its Preferred Stock
as Series A 7% Convertible Preferred Stock ("Series A Preferred"). In November
1997, the Company issued 86,200 shares of the Series A Preferred in exchange for
consideration equal to $25.00 per share. The Series A Preferred has a
liquidation preference $25.00 per share and pays a dividend, in cash or
accumulated and pain in Common Stock upon conversion, of 7% per annum. The
Series A Preferred is convertible into Common Stock. The number of shares issued
upon conversion are determined by dividing the liquidation value of $25.00 plus
accrued dividends by the conversion price of $1.50 per common share. The Series
A Preferred would be convertible into approximately 1.5 million shares of Common
Stock if exchanged as of June 12, 1998.
OTHER DERIVATIVE SECURITIES
In August 1996, one of the Company's wholly-owned subsidiaries conducted
a private placement in which it issued an aggregate of 400,000 shares of 5%
Exchangeable Preferred Stock at $25.00 per share and Underwriter's Warrants to
purchase an aggregate of 36,000 shares of 5% Exchangeable Preferred Stock at
$25.00 per share. The 5% Exchangeable Preferred Stock is convertible into the
Common Stock of the Company based an a value per share of Common Stock of the
lower of (i) $1.10 or (ii) a 30.375% discount to the market price. For purposes
of this calculation, the 5% Exchangeable Preferred Stock is to be valued at its
liquidation value of $25.00 plus accrued dividends. Thus, the number of shares
issuable upon
II-19
<PAGE>
conversion is subject to adjustment. As of the date of this Prospectus,
approximately 222,000 shares of the 5% Exchangeable Preferred Stock remain
outstanding and such shares would be convertible into approximately 5.6 million
shares of Common Stock if exchanged as of June 12, 1998. The Company believes
that it is highly likely that the holders of the Exchangeable Preferred Stock
will elect to convert their stock into the Common Stock of the Company. See
"Risk Factors -- Effect of Exchangeable Preferred Stock; Adjustment to Common
Stock."
TRANSFER AGENT
The Company's transfer agent is Continental Stock Transfer &
Trust Company, New York, New York 10007.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, there will be 19,908,439 shares
of Common Stock outstanding. Of these shares, the Shares being registered hereby
will be freely tradeable without restriction under the Securities Act, for so
long as this Prospectus is kept current by the Company.
An aggregate of approximately 5.1 million shares of Common Stock held by
existing stockholders will be "restricted" shares as defined in Rule 144. In
general, under Rule 144 a person (or group of persons whose shares are
aggregated) who has beneficially owned restricted shares of the Company for at
least two years, including any person who may be deemed to be an "affiliate" of
the Company (as the term "affiliate" is defined under the Securities Act), is
entitled to sell in normal brokerage transactions during the periods when
certain information regarding the Company is publicly available, within any
three-month period, an amount of shares that does not exceed the greater of (i)
the average weekly trading volume in the Company's shares during the four
calendar weeks preceding such sale or (ii) 1% of the shares then outstanding. A
person who has not been an "affiliate" of the Company for the three months prior
to such sale and who has held restricted shares for at least three years would
be entitled to sell such shares without restriction. Most of such restricted
shares have been held by non-affiliates of the Company for more than three years
or by affiliates of the Company for more than two years. Actual sales, or the
prospect of sales by the present stockholders of the Company, or by future
holders of restricted securities under Rule 144, or otherwise, may, in the
future, have a depressive effect upon the price of the Company's shares of
Common Stock in any market that may develop therefor.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Security Holders have advised the Company that the
sale or distribution of the Common Stock may be effected directly to purchasers
by the Selling Security Holders as principals or through one or more
underwriters, brokers, dealers or agents from time to time in one or more
transactions (which may involve crosses or block transactions) (i) on the Boston
Stock Exchange, in the NASDAQ SmallCap Market, or in the over-the-counter
market, (ii) in transactions otherwise than on any stock exchange or in the
over-the-counter market, or (iii) through the writing of options (whether such
options are listed on an options exchange or otherwise) on, or settlement of
short sales of, the Common Stock. Any of such transactions may be effected at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices, in each case a determined by the Selling Security
Holder or by agreement between the Selling Security Holder and underwriters,
brokers, dealers or agents or purchasers. If the Selling Security Holders effect
such transactions by selling Common Stock to or through underwriters, brokers,
dealers or agents, such underwriters, brokers, dealers or agents may receive
compensation in the form of discounts, concessions or commissions from the
Selling Security Holders or commissions from purchaser of Common Stock for whom
they may act as agent (which discounts, concessions or commissions as to
particular underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved). The Selling Security Holders
and any brokers, dealers or agents that participate in the distribution of the
Common Stock may be deemed to be underwriters, and any profit on the sale of
Common Stock by them and any discounts, concessions or commissions received by
any such underwriters, brokers, dealers or agents may be deemed to be
underwriting discounts and commissions under the Securities Act.
Because the Selling Security Holders may each be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act, the
Selling Security Holders will be subject to prospectus delivery requirements
under the Securities Act. Furthermore, in the event of a "distribution" of its
shares, the Selling Security Holder, any selling broker or dealer and any
"affiliated purchasers" may be subject to Regulation M under the Exchange Act
until its participation in that distribution is completed.
At the time of a particular offer of Security Holders' Shares is
made by or on behalf of any of the Selling Security Holders, to the extent such
offer constitutes a distribution under the Securities Act, a supplement to this
Prospectus will be distributed, which will set forth the type and number of
securities being offered by such Selling Security Holders and the terms of such
offering, including the name or names and addresses of any underwriters, dealers
or agents, the purchase price paid by any underwriter for securities purchased
from the Selling Security Holder and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, and the proposed selling price to the
public.
The Company will bear all costs and expenses of the registration
under the Securities Act and certain state securities laws of the Security
Holders' Shares. However, all brokerage commissions, if any, attributable to the
sale of such shares by holders thereof will be borne by such holders.
II-21
<PAGE>
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of
the shares of Common Stock offered by the Company, are being passed upon for the
Company by Gersten, Savage, Kaplowitz & Fredericks, LLP ("GSKF"), 101 East 52nd
Street, New York, New York 10022. GSKF owns 50,000 shares which are being
registered hereby and Jay Kaplowitz, a partner in GSKF, the Company's counsel,
owns options to purchase 25,000 shares.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K/A1 for the year ended December 31, 1997
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, (which report expresses
an unqualified opinion and includes an explanatory paragraph related to the
restatement described in Note 16), and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to paragraph "Twelfth" of the Restated
Certificate of Incorporation of the Registrant (Exhibit 3(i)), which contains a
provision, as permitted by Section 145 of the Delaware General Corporation Law,
which eliminates the personal liability of directors to the Registrant and its
stockholders for monetary damages for unintentional breach of a director's
fiduciary duty to the Registrant. This provision does not permit any limitation
on, or elimination of the liability of a director for disloyalty to the
Registrant or its stockholders, for failing to acting good faith, for engaging
in intentional misconduct or a knowing violation of law, for obtaining an
improper personal benefit or for paying a dividend or approving a stock
repurchase that was illegal under the Delaware General Corporation Law.
The Restated Certificate of Incorporation and By-Laws of the
Registrant require the Registrant to indemnify directors and officers against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation (a "derivative action") if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys fees)
incurred in connection with defense or settlement of such an action. Moreover,
the Delaware General Corporation Law requires court approval before there can be
any indemnification where the person seeking indemnification has been found
liable to the Company.
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<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) in connection with the securities being registered, the Registrant
will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
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<PAGE>
No underwriter, dealer, salesman or other person has been authorized to give any
information or to make any representations other than those 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. This Prospectus does
not constitute an offer or solicitation to any person in any jurisdiction where
such offer or solicitation would be unlawful. Neither delivery of this
Prospectus nor any Common Stock sale hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof.
ACTV, INC.
1,312,067 shares of Common Stock
offered by Selling Security Holders
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Available Information ..................................................... 2
Incorporation of Certain................................................... 3
Information by Reference..................................................
Risk Factors............................................................... 8
Use of Proceeds............................................................ 17
Selling Security Holders................................................... 17
Description of Capital Stock............................................... 19
Plan of Distribution....................................................... 21
Legal Matters.............................................................. 23
Experts.................................................................... 23
</TABLE>
June ___, 1998
II-24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee $ 806.14
Fees and expenses of counsel 5,000.00
Miscellaneous 2,000.00
Total $7,806.14
</TABLE>
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to paragraph "Twelfth" of the Restated Certificate of
Incorporation of the Registrant (Exhibit 3(i)), which contains a
provision, as permitted by Section 145 of the Delaware General
Corporation Law, which eliminates the personal liability of directors to
the Registrant and its stockholders for monetary damages for
unintentional breach of a director's fiduciary duty to the Registrant.
This provision does not permit any limitation on, or elimination of the
liability of a director for disloyalty to the Registrant or its
stockholders, for failing to acting good faith, for engaging in
intentional misconduct or a knowing violation of law, for obtaining an
improper personal benefit or for paying a dividend or approving a stock
repurchase that was illegal under the Delaware General Corporation Law.
The Restated Certificate of Incorporation and By-Laws of the Registrant
require the Registrant to indemnify directors and officers against
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation (a
"derivative action") if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe their conduct was unlawful. A similar
standard of care is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys fees)
incurred in connection with defense or settlement of such an action.
Moreover, the Delaware General Corporation Law requires court approval
before there can be any indemnification where the person seeking
indemnification has been found liable to the Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or
II-25
<PAGE>
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
16. EXHIBITS
5. Opinion of Gersten, Savage, Kaplowitz & Fredericks, LLP
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Gersten, Savage, Kaplowitz & Fredericks, LLP
17. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or in the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the Offering.
II-26
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer, or controlling person of the Company in the
successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing a Post-Effective Amendment No. 1 to Registration on Form
S-3 and has duly caused this Post-Effective Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 22nd of June, 1998.
ACTV, INC.
By: /s/William C. Samuels
---------------------
William C. Samuels
Chairman of the Board, Chief
Executive Officer, President and
Director
Pursuant to the requirements of the Securities Act of 1933, this Form
S-3 registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/William C. Samuels Chairman of the Board, Chief June 22, 1998
- --------------------- Executive Officer, President and
William C. Samuels Director
/s/David Reese Executive Vice-President, June 22, 1998
- ------------------------ President--ACTV Entertainment, Inc.
David Reese and Director
/s/ Bruce Crowley Executive Vice-President, June 22, 1998
- ----------------- President--ACTV Net, Inc.
Bruce Crowley and Director
</TABLE>
II-27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Richard Hyman Director June 22, 1998
- -----------------
Richard Hyman
/s/ William A. Frank Director June 22, 1998
- --------------------
William A. Frank
/s/ Steven W. Schuster Director June 22, 1998
- ----------------------
Steven W. Schuster
/s/ Jess M. Ravich Director June 22, 1998
- ------------------
Jess M. Ravich
/s/ Christopher C. Cline Senior Vice President, Chief Financial June 22, 1998
- ------------------------ Officer, Secretary and Chief Accounting Officer
Christopher C. Cline
</TABLE>
II-28
<PAGE>
II-29
<PAGE>
EXHIBIT INDEX
5. Opinion of Gersten, Savage, Kaplowitz & Fredericks, LLP
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Gersten, Savage, Kaplowitz & Fredericks, LLP
II-30
EXHIBIT 5
[Gersten, Savage, Kaplowitz & Fredericks, LLP Letterhead]
June 23, 1998
ACTV. Inc.
1270 Avenue of the Americas
New York, New York 10020
Gentlemen:
You have requested our opinion, as counsel for ACTV, Inc., a Delaware
corporation (the "Company"), in connection with the registration statement on
Form S-3 "the "Registration Statement" on Form S-3 (the "Registration
Statement"), under the Securities Act of 1933 (the "Act"), being filed by the
Company with the Securities and Exchange Commission.
The Registration Statement relates to an offering of 1,312,067 shares (the
"Selling Security Holders' Shares") of common stock (the "Offering"), per value
$ .10 (the "Common Stock"). The Security Holders' Shares may be sold by security
holders who have previously acquired such shares from the Company.
We have examined such records and documents and made such examination of law as
we have deemed relevant in connection with this opinion. It is our opinion that
when there has been compliance with the Act, the Selling Security Holders'
Shares, when issued, delivered, and paid for, will be fully paid, validly issued
and nonassessable.
No opinion is expressed herein as to any laws other than the State of New York,
of the United States and the corporate laws of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Gersten, Savage, Kaplowitz &
Fredericks, LLP
GERSTEN, SAVAGE, KAPLOWITZ &
FREDERICKS, LLP
II-31
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
ACTV, Inc. on Form S-3 of our report dated March 18, 1998 (April 17, 1998, as to
Note 16)(which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the restatement described in Note 16),
appearing in the Annual Report on Form 10-K/A-1 of ACTV, Inc. for the year ended
December 31, 1997, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche, LLP
- --------------------------
New York, New York
June 22, 1998
II-32
EXHIBIT 23.2
The consent of Gersten, Savage, Kaplowitz & Fredericks, LLP is contained
in Exhibit 5.
II-33
