AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
Registration Statement No. 333-
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 94-2907258
- --------------------------------------------------------------------------------
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code)
organization)
1270 Avenue of the Americas
New York, New York 10020
(212) 262-2570
--------------
(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.
------------
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 [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
===================== =============== =========================== ====================== ===================
Title of Securities Amount Being Proposed Maximum Offering Proposed Maximum Amount of
To Be Registered Registered(1) Price Per Security(2) Aggregate Offering Registration Fee
Price
- --------------------- --------------- --------------------------- ---------------------- -------------------
Common 2,561,409 $1.375 $3,521,937 $1,038.97
Stock, par value
$.10 per share
===================== =============== =========================== ====================== ===================
Total Registration $1,038.97
Fee
===================== =============== =========================== ====================== ===================
</TABLE>
(1) Pursuant to Rule 415, the Registration Statement relates to an
indeterminate number of shares of Common Stock which have either
been issued or are issuable upon the exercise of options and
warrants.
(2) 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 April 15, 1998.
<PAGE>
PROSPECTUS
ACTV, INC.
2,561,409 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 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 or
will acquire such shares from the Company previously or will acquire such shares
upon the exercise of currently exercisable options and warrants. The Company
will not receive any of the proceeds from sales of Selling Security Holders'
Shares, but will receive the exercise price upon the exercise of the options or
warrants described above. 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 April 15, 1998, the last reported sale price
of the Common Stock on NASDAQ was $1 3/8.
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 APRIL ___, 1998
1
<PAGE>
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 (two or nine 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, Rule
10b-5, 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.
2
<PAGE>
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) 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.
(2) Current Report on Form 8-K filed on February 6, 1998.
(3) The Company's Proxy Statement for the year ended December
31, 1996.
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
3
<PAGE>
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.
4
<PAGE>
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
individualized television programming ("Individualized Programming") and for
Internet learning systems ("eSchool"). The Company's products, in general, are
tools for the creation of programming that allows viewer participation for both
television and Internet platforms. The chief market presently targeted by the
Company for its Individualized Programming is in-home entertainment,
particularly sports programming, while for the Internet the market focus is
education, with an emphasis on schools and universities in the United States.
For entertainment applications, the Company's 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 education applications, the Company has developed eSchool
Outline(TM) ("eSchool"), a Java-based software suite that combines video from
any source, Internet Web pages with educational content, and collaborative chat
groupware to create a "virtual" classroom. Students can watch a video program
while simultaneously interacting with related World Wide Web material
automatically sent to their computers using Web push technology. 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.
Since its inception, the Company has incurred losses approximating
$51.0 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 the Regional Networks is based
on sports programming provided through the Company's strategic alliance with FOX
Sports Net. 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.
5
<PAGE>
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 Individualized
Programming on a subscription basis.
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. 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 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
6
<PAGE>
Regional Networks, if launched, will generate significant revenues for the
Company.
The target market for the Company's education products includes
schools, state and local agencies, universities and private business. eSchool
consists of a suite of integrated software products, including content creation
software, student and teacher user software, and database assessment software.
In addition, the Company provides Internet content development assistance,
hosting of eSchool programs on its computer servers, and consulting to schools
and universities.
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.
7
<PAGE>
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 years ended
December 31, 1997, 1996 and 1995 (the "1997 Fiscal Year", the "1996 Fiscal
Year," and "1995 Fiscal Year," respectively) were $10,358,683, $10,300,481 and
$6,826,789, respectively. The 1995 Fiscal Year includes an extraordinary gain of
$94,117. Through December 31, 1997, the Company had an accumulated deficit of
approximately $51.0 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
$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.
The Company has not had significant sales of its Individualized
Programming. In the education market, the Company has made only a limited number
of sales of its distance learning and Internet products. 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. With respect to sporting events, viewers will have the ability to
watch the identical program that the Company is delivering on another channel at
the same time that the Company is delivering its individualized version of that
programming. Consequently, viewers may not be willing to pay a premium to see
Individualized Programming where the programming is otherwise available to them
without additional charge. In addition, a lack of sustained interest in
Individualized Programming could cause the Company's Individualized Programming
to, assuming it becomes commercially popular, decline in popularity, which could
have a material adverse affect on the Company's operations and financial
condition. There can be no assurance as to the commercial success of
Individualized Programming, or of sufficient demand and market acceptance for
Individualized Programming 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 December 31, 1997 of approximately $51.0 million. At December 31,
1997, the Company had a working capital deficit of
8
<PAGE>
$1,082,097. To 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 is dependent upon its relationship with Sarnoff in order to
integrate the operational capability of its Individualized Programming into the
various digital platforms, and upon 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.
The Company is engaged in a field 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 in a timely manner, to continually enhance and improve its
Individualized Programming and to adapt to technological changes and advances in
the markets in which it competes. There can be no
9
<PAGE>
assurance that competitors will not develop technologies or products that render
the Company's Individualized Programming 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.
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
10
<PAGE>
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 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.
In order to compete in a marketplace with rapidly changing and
expanding technology, the Company requires employees not only with extensive
management experience, but also with certain technical abilities to direct the
Company's continuing research and development efforts. While the Company
believes that it currently employs such personnel, and that other persons could
be retained in such capacities, 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, the development of the Company's
business would not be delayed. See "Business -- Product Development."
Competition.
The Individualized Programming competes with many other forms of
entertainment and education 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.
In the entertainment market, the Company will compete with many other
companies who provide programming for the television industry and, in
particular, with companies that provide sports
11
<PAGE>
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 unenhanced 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.
In the education market, the Company competes with other providers of
distance learning products. 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, 4,292,969
outstanding shares of Common Stock, assuming the exercise of all currently
exercisable options 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 21% 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 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.
The Securities and Exchange Commission has recently approved new rules
imposing new standards for maintaining a listing on NASDAQ. For continued
listing, an issuer, among other things, must have $2,000,000 in net tangible
assets $1,000,000 in market value of securities in the public float and a
minimum bid price of $1.00 per share. 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
such event, 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.
12
<PAGE>
Rule 144 Sales.
Of the shares of the Common Stock presently outstanding, approximately
3.9 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
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 4,195,926 shares of Common Stock that had
not been exercised. Of the shares of Common
13
<PAGE>
Stock subject to these unexercised options and warrants, 5,000 may be purchased
for less than $1.00; 3,446,926 may be purchased for between $1.00 and $1.99 per
share; 499,500 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 281,000 shares of the 5% Exchangeable Preferred Stock
remain outstanding and such shares would be convertible into approximately 7.0
million shares of Common Stock if exchanged as of April 15, 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 would
be convertible into approximately 1.5 million shares of Common Stock if
exchanged as of April 15, 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
14
<PAGE>
"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."
15
<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. Certain shares registered hereunder will be issued pursuant to
the exercise of options or warrants. Any proceeds received by the Company upon
exercise of such options or warrants will be used for working capital purposes.
See "Selling Security Holders."
16
<PAGE>
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.
17
<PAGE>
SELLING SECURITY HOLDERS
All of the Security Holders' Shares to which this Prospectus relates
may be sold by Selling Security Holders who have acquired or will acquire such
shares from the Company previously or will acquire such shares upon the exercise
of currently exercisable options and warrants. The Company will not receive any
of the proceeds from sales of such shares by Selling Security Holders, but will
receive the exercise price upon the exercise of options or warrants 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 2,561,409
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.
<TABLE>
<CAPTION>
Beneficial
Ownership Beneficial
Prior to Shares Included in Ownership After
Name Offering (1) % This Offering (2) Offering %
---- ------------ - ----------------- -------- -
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Banca del Gottardo 3,042,271 16.3 1,076,666(3) 1,965,605 10.6
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
William C. Samuels 3,770,817 21.5 625,000(4) 3,145,817 18.5
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
David Reese 437,500 2.5 330,000(5) 107,500 *
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
Bruce Crowley 305,000 1.8 201,000(6) 104,000 *
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
Elliott Associates, L.P. 2,081,711 11.0(7) 172,955(8) 1,908,756 10.2
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
Westgate International, L.P. 1,914,948 10.2(7) 93,971(9) 1,820,977 9.7
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
Eric Martinez 11,817 * 11,817(10) 0 *
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
James Crook 74,294 * 25,000(11) 49,294 *
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
Neidiger/Tucker/Bruner 25,000 * 25,000(12) 0 *
- ----------------------------------- ---------------- -------------- ----------------------- ------------------ --------------
</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 April 15, 1998.
18
<PAGE>
(2) Gives effect to the sale of all the shares of Common Stock being
offered hereby.
(3) Shares being registered hereby include 100,000 shares issuable upon
exercise of stock options at an exercise price of $2.50 per share.
Shares not offered in this Offering include 1,382,271 shares
issuable upon conversion of Series A Preferred and 250,000 shares
issuable upon exercise of options at an exercise price of $2.50 per
share.
(4) William C. Samuels is the President, Chief Executive Officer and
Chairman of the Board of the Company. The shares being registered
hereby include 525,000 shares issuable upon exercise of incentive
stock options at an exercise price of $1.50, 350,000 shares of
which are currently exercisable. Shares not offered in this
Offering include 2,341,334 shares of common stock owned by the
Washington Post Company and 206,598 shares owned by Dr. Michael
Freeman which are subject to a voting trust agreement with Mr.
Samuels.
(5) David Reese is an Executive Vice-President of the Company. The
shares being registered hereby consist of 330,000 shares issuable
upon exercise of incentive stock options at an exercise price of
$1.50, 220,000 of which are currently exercisable.
(6) Bruce Crowley is an Executive Vice-President of the Company. The
shares being registered hereby consist of 201,000 shares issuable
upon exercise of incentive stock options at an exercise price of
$1.50, 134,000 of which are currently exercisable.
(7) The Registration Rights and Exchange Agreement, dated as of August
9, 1996, by and among, inter alia, the Company, Elliott Associates,
L.P., Westgate International, L.P. (absent certain permitted
waivers by such Selling Security Holders) limits the exchange
rights of such Selling Security Holders to the extent that the
maximum number of aggregate shares of Common Stock held by such
Selling Security Holders and their affiliates after such exchange
of Preferred Stock would exceed 4.9% of the then total issued and
outstanding shares of the Company's Common Stock following such
exchange.
(8) The shares being registered hereby consist of 91,534 shares
issuable exercise of warrants at an exercise price of $1.71 per
share and 81,421 shares issuable upon exercise of warrants at an
exercise price of $1.70 per share. Shares held prior to the
offering include 165,353 shares of common stock owned by Elliot
Associates, L.P. and 1,743,403 shares issuable upon exchange of the
Exchangeable Preferred Stock, based on the sales price of 1 3/8
per share of the Company Common Stock as of April 15, 1998. The
actual number of shares of Common Stock issuable upon exchange of
the Exchangeable Preferred Stock is subject to adjustment based the
market price of the Common Stock.
(9) The shares being registered hereby consist of 93,971 shares
issuable exercise of warrants at an exercise price of $1.59 per
share. Shares held prior to the offering include 87,174 shares of
common stock owned by Westgate International, L.P. and 1,733,803
shares issuable upon exchange of shares of the Exchangeable
Preferred Stock, based on the sales price of 1 3/8 per share of
the Company Common Stock as of April 15, 1998. The actual number of
shares of Common Stock issuable upon exchange of the shares are
subject to adjustment based the market price of the Common Stock
(10) Shares being registered hereby consist of 11,817 shares issuable
upon exercise of options exercisable at a price of $1.50.
(11) Shares being registered hereby consist of 25,000 shares issuable
upon exercise of options exercisable at a price of $1.50. Shares
not offered in this Offering include currently exercisable options
to purchase up to 46,000 shares as $1.50 per share.
19
<PAGE>
(12) Shares being registered hereby consist of 25,000 shares issuable
upon exercise of options exercisable at a price of $1.50.
20
<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,
16,980,581 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 April 15, 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 conversion is subject to adjustment. As of the
date of this Prospectus, approximately 281,000 shares of the 5% Exchangeable
Preferred Stock remain outstanding and such shares would be convertible into
approximately 7.0 million shares of Common Stock if exchanged as of April 15,
1998. The Company
21
<PAGE>
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 approximately
18,465,324 shares of Common Stock outstanding assuring exchange/conversion of
all derivative securities offered hereunder. 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 800,000 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.
22
<PAGE>
PLAN OF DISTRIBUTION
Up to 1,484,743 of the Selling Security Holders' Shares may be sold by
the Selling Security Holders who have acquired such shares from the Company upon
the exercise of options and warrants. The Company will not receive any of the
proceeds from any sales by Selling Security Holders of the Security Holder
Shares, but will receive the exercise price upon the exercise of options and
warrants by the Security Holders. See "SELLING SECURITY HOLDERS."
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 Rule 10b-6 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.
23
<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, 101 East 52nd Street,
New York, New York 10022. Jay Kaplowitz, a partner in Gersten, Savage, Kaplowitz
& Fredericks, LLP, 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 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.
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
24
<PAGE>
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.
25
<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.
TABLE OF CONTENTS
Page
----
Available Information ................................................
Incorporation of Certain
Information by Reference ............................................
Risk Factors .........................................................
Use of Proceeds ......................................................
Selling Security Holders .............................................
Description of Capital Stock .........................................
Plan of Distribution .................................................
Legal Matters ........................................................
Experts ..............................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACTV, INC.
2,561,409 shares of Common Stock
(1) 1,484,743 shares issuable upon
the exercise of options and warrants
(2) 1,076,666 shares offered by
Selling Security Holders
April __, 1998
- --------------------------------------------------------------------------------
26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee ............................... $1,038.97
Fees and expenses of counsel ....................... 6,000.00
Miscellaneous ...................................... 2,000.00
Total ..................................... $9,038.97
15. 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 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.
II-1
<PAGE>
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
(contained in Exhibit 5)
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.
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement 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 14th of April,
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 April 14, 1998
- ------------------------------ Executive Officer, President and
William C. Samuels Director
/s/David Reese Executive Vice-President, April 14, 1998
- ------------------------------ President--ACTV Entertainment, Inc.
David Reese and Director
/s/ Bruce Crowley Executive Vice-President, April 14, 1998
- ------------------------------ President--ACTV Interactive, Inc.
Bruce Crowley and Director
/s/ Richard Hyman Director April 14, 1998
- ------------------------------
Richard Hyman
/s/ William A. Frank Director April 14, 1998
- ------------------------------
William A. Frank
/s/ Steven W. Schuster Director April 14, 1998
- ------------------------------
Steen W. Schuster
/s/ Jess M. Ravich Director April 14, 1998
- ------------------------------
Jess M. Ravich
/s/Christopher C. Cline Senior Vice President, Chief April 14, 1998
- ------------------------------ Financial Officer and Secretary
Christopher C. Cline
</TABLE>
II-3
Exhibit 5
[Gersten, Savage, Kaplowitz & Fredericks, LLP letterhead]
April 14, 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"), 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 2,561,409 shares
(the "Selling Security Holders' Shares") of common stock (the "Offering"), par
value $.10 (the "Common Stock"). Up to 1,484,743 of the Selling Security
Holders' Shares may be issued by the Company upon the exercise of options and
warrants (the "Option Shares"). 1,076,666 of the Selling Security Holders'
Shares were issued previously by the Company (the "Issued Shares").
We have made such examination of the corporate records and proceedings
of the Company and have taken such further action as we deemed necessary or
appropriate to the rendering of our opinion herein.
Based on the foregoing, we are of the opinion that (i) the Option
Shares, when paid for and issued as contemplated by the respective option and
warrant agreements, will be legally issued, fully paid and non-assessable, and
(ii) the Issued Shares are legally issued, fully paid and non-assessable.
No opinion is expressed herein as to any laws other than the laws of
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 with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the heading "Legal Matters" therein. 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 of the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
GERSTEN, SAVAGE, KAPLOWITZ &
FREDERICKS, LLP
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 15, 1998 as to
Note 16 (which expresses an unqualified opinion and includes an explanatory
paragraph related to the restatement described in Note 16) appearing in the
Annual Report on Form 10-K/A1 of ACTV, Inc. for the year ended December 31,
1997, and to the reference to Deloitte & Touche, LLP under the heading "Experts"
in the Prospectus, which is part of this registration statement.
/s/ DELOITTE & TOUCHE, LLP
New York, New York
April 17, 1998
