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As filed with the Securities and Exchange Commission on September 18, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE PRODUCERS ENTERTAINMENT GROUP LTD.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-4233050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5757 WILSHIRE BOULEVARD, PENTHOUSE ONE, LOS ANGELES,
CALIFORNIA 90036 (323) 634-8634
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
----------------
IRWIN MEYER
CHIEF EXECUTIVE OFFICER
THE PRODUCERS ENTERTAINMENT GROUP LTD.
5757 WILSHIRE BOULEVARD, PENTHOUSE ONE
LOS ANGELES, CALIFORNIA 90036
(323) 634-8634
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------
Copies to:
LINDA GIUNTA MICHAELSON, ESQ.
TROOP STEUBER PASICH REDDICK & TOBEY, LLP
2029 CENTURY PARK EAST, 24TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 728-3316
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities on this form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title Of Shares Amount To Be Aggregate Price Aggregate Amount Of
To Be Registered Registered Per Share(1) Offering Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 525,000 $0.8125 $426,562.50 $125.84
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of
Registrant's Common Stock reported on the Nasdaq SmallCap Market on
September 17, 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 this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED SEPTEMBER 18, 1998
PROSPECTUS
THE PRODUCERS ENTERTAINMENT GROUP LTD.
525,000 SHARES
COMMON STOCK, PAR VALUE $.001
This Prospectus relates to an aggregate of 525,000 shares of common
stock, par value $.001 per share (the "Common Stock") of The Producers
Entertainment Group Ltd., a Delaware corporation ( the "Company"), which may be
offered from time to time for the account of a certain stockholder of the
Company named herein (the "Selling Stockholder"). Included within the 525,000
shares of Common Stock to which this Prospectus relates are 500,000 shares of
Common Stock issuable upon the conversion of 25,000 outstanding shares of Series
E Preferred Stock, $0.001 par value per share ("Series E Preferred Stock") and
25,000 outstanding shares of Series F Preferred Stock, $0.001 par value per
share ("Series F Preferred Stock") held by the Selling Stockholder. The Series E
Preferred Stock and the Series F Preferred Stock were issued by the Company in
September, 1998, in private placement transactions to persons the Company
reasonably believes to be accredited investors pursuant to exemptions from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The Series E Preferred Stock is convertible immediately at a conversion
price described in "Plan of Distribution." Any Series E Preferred Stock
outstanding at September 30, 2001 may also be converted at the option of the
Company into shares of Common Stock, as described under "Plan of Distribution."
Each share of the Series F Preferred Stock is convertible immediately into one
share of Common Stock at $1.02 per share which is equal to 125% of the closing
bid price of the Common Stock on the date of issuance of such Series F Preferred
Stock, as described under "Plan of Distribution." The Series F Preferred Stock
outstanding upon the expiration of a three year term will be mandatorily
redeemed by the Company at a price equal to the par value per share of the
Series F Preferred Stock multiplied by the number of such shares outstanding.
See "Plan of Distribution." In July and August 1998, 50,000 shares of Series D
Preferred Stock, $0.001 par value ("Series D Preferred Stock" and together with
the Series E Preferred Stock and the Series F Preferred Stock, the "Preferred
Stock") and 50,000 shares of Series F Preferred Stock were issued in private
placement transactions. Until July 31, 2000 the Company is entitled to issue
between 150,000 and 500,000 shares of Series E Preferred Stock, $0.001 par value
per share , if the Company meets certain objective trading and marketing
criteria as set forth in the private placement transaction documents.
For purposes of determining the number of shares to be offered by the
Selling Stockholder for this Prospectus, the number of shares of Common Stock
calculated to be issuable upon conversion of the Series E Preferred Stock is
based on a low conversion price. Such conversion price is used merely for the
purpose of setting forth a number for this Prospectus and is substantially less
than the average closing bid price over the five consecutive trading days
preceding September 17, 1998 which was $0.90. The number of shares of Common
Stock issuable upon conversion of the Series E Preferred Stock is subject to
adjustment depending on the date of the conversion thereof and could be
materially less or more than such estimated amount depending on factors which
cannot be predicted by the Company, including, among other things, the future
market price of the Common Stock.
The Company will not receive any proceeds from this offering. The aggregate
proceeds to the Selling Stockholder from the sale of the Common Stock will be
the offering price of the Common Stock sold, less applicable agents' commissions
and underwriters' discounts, if any. The Company will pay all expenses incident
to the preparation and filing of a registration statement for the Common Stock
under the federal securities laws, as well as certain other expenses incident to
the registration and sale of the Common Stock. The Selling Stockholder, or its
pledges, donees, transferees or other successors in interest that receive the
Common Stock, may sell the Common Stock from time to time on terms to be
determined at the time of sale, either directly or through agents, dealers or
underwriters designated from time to time. To the extent required, the number of
shares of Common Stock to be sold, the offering price thereof, the names of each
Selling Stockholder and each agent, dealer and underwriter, if any, and any
applicable commissions or discounts with respect to a particular offering will
be set forth in an accompanying Prospectus Supplement. See "Plan of
Distribution."
The Company's Common Stock is publicly traded on the Nasdaq SmallCap Market
under the symbol "TPEG" and on the Boston Stock Exchange under the symbol "TPG."
On September 17, 1998, the closing bid price for the Common Stock on the Nasdaq
SmallCap Market was $0.8125.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY 1S A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
state.
THE DATE OF THIS PROSPECTUS IS_____________ __, 1998
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FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND
INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE
COMPANY WITH RESPECT TO (I) THE INTEGRATION OF RECENT ACQUISITIONS BY THE
COMPANY, (II) TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF
OPERATIONS, (III) THE IMPACT OF COMPETITION AND (IV) THE EXPANSION OF THE
COMPANY'S DOMESTIC AND INTERNATIONAL OPERATIONS. THE WORDS "EXPECT," "ESTIMATE,"
"ANTICIPATE," "PREDICT," "BELIEVE" AND SIMILAR EXPRESSIONS AND VARIATIONS
THEREOF ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. THE ACCOMPANYING
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE
INFORMATION UNDER "RISK FACTORS," IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE
SUCH DIFFERENCES.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement, and the exhibits and schedules thereto which may be
obtained from the Commission's principal offices at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the
Commission. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. These reports, proxy statements and other information can be
inspected and copied at the Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the Commission 1-800-SEC- 0330. The Commission
also maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Common Stock is traded on the Nasdaq
SmallCap Market and the Company's reports, proxy or information statements, and
other information filed with the Nasdaq SmallCap Market may be inspected at the
offices of Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006.
No dealer, salesperson 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 representations must not
be relied upon as having been authorized by the Company or the Selling
Stockholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy to any person in any jurisdiction in which such
offer or solicitation would be unlawful or to any person to whom it is unlawful.
Neither the delivery of this Prospectus nor any offer or sale made hereunder
shall, in any circumstances, create any implication that there has been no
change in the affairs of the Company or that the information contained herein is
correct as of any time subsequent to the date hereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated by reference into this Prospectus:
(1) Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997;
(2) Registrant's Quarterly Reports on Form 10-QSB for the quarters ended
September 30, 1997, December 31, 1997 and March 31, 1998;
(3) Registrant's Reports on Form 8-K, filed on November 3, 1997 (as
amended on December 29, 1997), May 5,1998, June 29,1998 and July 31,1998; and
(4) The description of the Common Stock contained in the Registrant's
Registration Statement on Form 8-A filed on September 9, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the securities covered by this Prospectus shall
be deemed to be incorporated by reference
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herein and to be part hereof from the date of filing of such documents. Any
statement contained herein or in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the oral or written
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such exhibits
are expressly incorporated by reference into such documents). Written requests
for such copies should be directed to Arthur Bernstein, Executive Vice
President, The Producers Entertainment Group Ltd., 5757 Wilshire Boulevard,
Penthouse One, Los Angeles, California, 90036. Telephone inquiries may be
directed to The Producers Entertainment Group Ltd., at (323) 634-8634.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED
INFORMATION AND FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES HEREIN TO THE "COMPANY" REFER TO
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND ITS CONSOLIDATED SUBSIDIARIES.
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER
"RISK FACTORS" BEFORE PURCHASING SUCH SECURITIES.
THE COMPANY
The Producers Entertainment Group Ltd. (the "Company") is engaged in the
acquisition, development, production and distribution of dramatic, comedy,
documentary and instructional television series, movies and theatrical motion
pictures ("projects"). The Company's projects are distributed in the United
States and in international markets for exhibition on standard broadcast
television (network and syndication), basic cable and pay cable, video and
theatrical release.
To produce a project, the Company first acquires the rights to a story,
book or script ("property"). The Company then typically secures a financing or
production commitment for the project from third parties, such as broadcast and
cable networks, studios, distributors, and independent investors, prior to
expending substantial funds in the development process. However, the Company
does advance its own funds to meet the interim costs of development and
production, which amounts are generally repaid to the Company pursuant to the
production contracts.
The Company then "packages" the property, assembling the screenplay,
teleplay or outline of the program with the director and actors. Upon approval
of the third party that is financing or purchasing the project, the Company
commences pre-production, selecting locations, securing agreements with
performers, director and production staff, and procuring necessary sets, props
and other equipment. During the principal photography phase, the project is
produced on tape or film pursuant to a predetermined schedule and budget. The
film or tape is then transformed into a completed project during the
post-production phase, through editing, the addition of sound effects, musical
scoring and other technical processes.
Completed projects not purchased outright are distributed by independent
third parties who have the distribution rights in certain territories for a
specific period of time. The Company typically retains certain distribution
rights after such period expires. The Company may obtain advances against
domestic and international distribution revenues in order to finance development
and production. The Company intends to establish a separate international
distribution division for the distribution of its own and other producers'
projects.
On October 20, 1997, the Company acquired 100% of the outstanding capital
stock of the three entities which comprise the New York, Los Angeles and Toronto
based Grosso-Jacobson Companies. The acquired companies are: the Grosso-Jacobson
Entertainment Corporation, the Grosso-Jacobson Productions, Inc., and
Grosso-Jacobson Music Company, Inc. (the "Grosso-Jacobson Companies").
Management of the Company has combined the Grosso-Jacobson Companies' business
of producing primarily television series with the Company's business of
producing theatrical feature and television movies in order for the Company to
enlarge its operations in the entertainment industry. The Grosso-Jacobson
Companies operate as wholly owned subsidiaries of the Company and produce
television series and other entertainment products. The Grosso-Jacobson
Companies are known for their wide variety of prime time series and
made-for-television movies. The Grosso-Jacobson Companies are located in a
70,000 square foot production facility and office complex in Toronto, Canada.
Included in the Toronto facility is a wardrobe business containing approximately
37,000 costumes and an extensive prop inventory.
On July 15, 1998, the Company acquired 100% of the capital stock of MWI
Distribution, Inc., a California corporation (doing business as MediaWorks
International). MediaWorks International operates as a wholly owned subsidiary
of the Company and provides international television and video distribution,
specializing in the licensing of children's and family programming and
animation. MediaWorks International is also an active co-production and
co-financing partner in various animated and live-action programming ventures
and engages in worldwide sales of direct- to-video series and specials. The
acquisition of MediaWorks International expands the Company's distribution
business to include the international market and provides increased
opportunities for the management of the Company to expand MediaWorks
International's international co-production activities.
The Company's offices are located at 5757 Wilshire Boulevard, Penthouse
One, Los Angeles, California 90036. Its telephone number is (323) 634-8634.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER, ALONG WITH
THE OTHER MATTERS DISCUSSED IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS
INHERENT IN, AND AFFECTING THE BUSINESS OF, THE COMPANY BEFORE MAKING AN
INVESTMENT DECISION.
FACTORS AFFECTING THE COMPANY'S LIQUIDITY AND CAPITAL RESOURCES
The Company's cash commitments for the forthcoming 12 months include
aggregate minimum base compensation of approximately $2,387,000 to its existing
officers and key independent contractors and minimum office rent of
approximately $379,000. The Company also incurs overhead and other costs such as
salaries, related benefits, office expenses, professional fees and similar
expenses. For the Company's fiscal year ended June 30, 1997, general and
administrative expenses, which included compensation and rent, aggregated
$4,151,252. The Company also advances considerable funds on the production and
development of projects. Dividends on the Company's outstanding Series A
Preferred Stock aggregate $425,000 annually and dividends on the Company's
outstanding Series D Preferred Stock aggregate $30,000 annually and, at the
Company's option, dividends on both series of Preferred Stock may be paid in
shares of Common Stock or in cash.
At March 31, 1998, the Company had cash and cash equivalents of $933,555
and accounts and contracts receivable of $2,373,039 (aggregating approximately
$3,306,594). At March 31, 1998, the Company also had accounts payable and
accrued expenses aggregating approximately $674,624. As of the date hereof, the
Company has no arrangements for external sources of financing such as bank lines
of credit.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY;
ACCUMULATED DEFICIT
For the fiscal years ended June 30, 1995,1996 and 1997, the Company had
revenues of $5,290,745, $5,367,498 and $782,181, respectively, and incurred net
losses of $3,593,252, $1,447,666 and $4,642,043, respectively (without giving
effect to the payment in 1995, 1996 and 1997 of dividends of $232,600, $425,000
and $425,000, respectively with respect to the Series A Preferred Stock which
(except for $126,350 paid in cash in 1995) were paid by the Company by issuing
shares of Common Stock). However for the nine month period ending March 31, 1998
the Company had revenues of $18,276,403 and net income of $800,834. There can be
no assurance that the Company will continue to remain profitable in future
fiscal periods. As of March 31, 1998 the Company had an accumulated deficit of
$17,166,302.
TELEVISION AND FEATURE FILM INDUSTRY; INTENSE COMPETITION
The television industry is highly competitive and involves a substantial
degree of risk. The Company competes with many other television and motion
picture producers which are significantly larger and have financial resources
which are far greater than those available to the Company now or in the
foreseeable future. The television industry is subject to technological
developments, the effects of which management is unable to predict. The Company
also expects to derive revenues from the feature film industry. The feature film
industry is also highly competitive and involves a substantial degree of risk.
The Company competes with major film studios and other independent producers,
most of which are significantly larger and have financial resources which are
far greater than those available to the Company now or in the foreseeable
future. The Company's success depends upon its ability to produce programming
for television and theatrical release which will appeal to markets characterized
by changing popular tastes. There is no assurance that the Company will continue
to acquire and develop products which can be made into made-for-television
movies, television series or theatrical releases which will result in profits to
the Company in light of the competition confronting the Company.
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RECENT ACQUISITIONS
On October 20, 1997, the Company acquired 100% of the outstanding capital
stock of the three entities that comprise the New York, Los Angeles and Toronto
based Grosso-Jacobson Companies. The Grosso-Jacobson Companies are known for
their wide variety of prime time series and made-for-television movies. The
Grosso-Jacobson Companies operate as wholly owned subsidiaries of the Company
engaged in the business of producing television series and other entertainment
products. Management of the Company has combined the Grosso-Jacobson Companies'
business of producing primarily television series with the Company's business of
producing theatrical feature and television movies in order for the Company to
enlarge its operations in the entertainment industry.
On July 15, 1998 the Company acquired 100% of the outstanding capital
stock of MWI Distribution, Inc., a California corporation (doing business as
MediaWorks International). MediaWorks International operates as a wholly owned
subsidiary of the Company and provides international television and video
distribution, specializing in the licensing of children's and family programming
and animation. MediaWorks International is also an active co-production and
co-financing partner in various animated and live-action programming ventures
and engages in worldwide sales of direct-to-video series and specials. The
Company intends to expand upon MediaWorks International's current international
activities and provide increased international opportunities for all areas of
the Company's business.
Successful implementation of the Company's business strategy depends in
part on the efficient , effective and timely integration of the operations of
the Grosso-Jacobson Companies and MediaWorks International with those of the
Company. The combination of these businesses requires, among other things,
integration of the companies' management staffs, coordination of the companies'
sales and marketing efforts, integration and coordination of the companies'
purchasing departments and identification and elimination of redundant overhead.
Full integration of these business will require considerable effort on the
part of the Company's management. During the integration period, it is
anticipated the Company's staff will dedicate considerable time toward
integrating the financial and information systems, management staffs and
organizational cultures of the organizations. There can be no assurance that the
Company will not experience difficulties associated with the integration or the
integration will proceed efficiently or successfully. Furthermore, even if the
operations of the organizations are ultimately successfully integrated there can
be no assurance the Company will be able to operate profitably.
SEASONALITY
All of the Company's televison and theatrical programming revenues are
recognized when the program is available for broadcast or other distribution.
For this reason, significant fluctuations in the Company's total revenues and
net income can occur from period to period depending upon availability dates of
programs. In the international television market, a significant portion of
revenues are recognized in connection with sales at the international sales
trade shows. Due in part to these seasonality factors, the results of any one
quarter are not necessarily indicative of results for future periods, and cash
flows may not correlate with revenue recognition.
INTERNATIONAL SALES
As part of its business strategy, facilitated by the acquisition of MWI
Distribution, Inc., the Company intends to expand its international program
production and distribution. The Company is subject to certain risks inherent in
international business activities, including (i) general, economic, social and
political conditions in each country, (ii) currency fluctuations, (iii) double
taxation, (iv) unexpected changes in applicable regulatory requirements and (v)
compliance with a variety of international laws and regulations. The operations
of the Company's international activities may be measured in part in local
currencies. As a result, the Company may record foreign exchange losses and
gains in the future. There can be no assurance the Company will be successful in
its international business activities.
LABOR RELATIONS
Many individuals associated with the Company's productions, including
actors, writers and directors, are members of guilds or unions which bargain
collectively with producers on an industry-wide basis from time to time. The
Company's operations are dependent on its compliance with the provisions of
collective bargaining agreements governing relationships with these guilds and
unions. Strikes or other work stoppages by members of these unions could delay
or disrupt the Company's activities but the extent to which the existence of
collective bargaining agreements may affect the Company in the future is not
currently determinable.
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RELIANCE ON KEY PERSONNEL
The Company is dependent upon the skills and efforts of its management
team, the loss of whose services could have a material adverse effect on the
Company and its operations. The Company does not maintain "key-person" life
insurance. The Company has entered into employment agreements with certain of
its executive officers and production agreements with certain of their
respective affiliates. As the Company continues to grow, it will continue to
hire, appoint or otherwise change members of senior management. There can be no
assurance that the Company will be able to retain its executive officers and key
personnel or attract additional qualified members to management in the future.
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE STOCK
As of the date of this Prospectus, approximately 24,331,666 shares of
Common Stock would be outstanding after consummation of the offering and
assuming the exercise of all outstanding options and warrants and conversion of
the Series A Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
and Series F Preferred Stock. Although some of these options and warrants and
shares of convertible stock are exercisable or convertible at prices which may
exceed the currently prevailing market prices of the Company's Common Stock,
their existence could potentially limit the scope of increases in the market
value of the Company's Common Stock which might otherwise be realized. The terms
on which the Company may obtain additional financing during the respective terms
of these outstanding stock options, warrants and convertible stock may be
adversely affected by their existence. The holders of such stock options,
warrants and convertible stock may exercise or convert such securities, as the
case may be, at times when the Company might be able to obtain additional
capital through one or more new offerings of securities or other forms of
financing on terms more favorable than those provided by such stock options,
warrants and convertible stock.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AND DELAWARE LAW
The Company's Certificate of Incorporation authorizes the issuance of up
to 20,000,000 shares of "blank check" Preferred Stock. The Company has 1,000,000
shares of Series A Preferred Stock issued and outstanding and an additional
300,000 shares of Series A Preferred Stock reserved for issuance. The Company
has 1,375,662 shares of Series B Preferred Stock issued and outstanding. The
Company has 50,000 shares of Series D Preferred Stock issued and outstanding.
The Company has 25,000 shares of Series E Preferred Stock issued and outstanding
and 475,000 shares of Series E Preferred Stock reserved for issuance. The
Company has 75,000 shares of Series F Preferred Stock outstanding and an
additional 475,000 shares of Series F Preferred reserved for issuance. The
balance of 16,174,338 authorized shares of Preferred Stock are available for
issuance. The Board of Directors has the authority to issue the Preferred Stock
in one or more series and to fix the relative rights, preferences and privileges
and restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series of such Preferred
Stock or the designation of such series. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders of the Company. The issuance
of Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of the Common Stock, including the loss of voting
control to others.
The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by such entity or person. The foregoing
provisions could have the effect of discouraging others from making tender
offers for the Company's shares of Common Stock and, as a consequence, they also
may inhibit fluctuations in the market price of the Company's shares that could
result from actual or rumored takeover attempts. Such provisions also may have
the effect of preventing changes in the management of the Company.
ABSENCE OF DIVIDENDS; ANNUAL CASH DIVIDENDS ON SERIES A PREFERRED STOCK,
SERIES D PREFERRED STOCK AND SERIES E PREFERRED STOCK
The Company has never paid cash dividends on its Common Stock and no cash
dividends are expected to be paid on the Common Stock in the foreseeable future.
Holders of the Company's Series A Preferred Stock are entitled to annual
dividends of 8 1/2% (aggregating $425,000 annually assuming no conversion),
holders of Series D Preferred Stock are entitled to annual dividends of 6%
(aggregating $30,000 annually assuming no conversion) and holders of the
Company's Series E Preferred Stock are entitled to annual dividends of 6%
(aggregating $15,000 annually assuming no conversion), all of which are payable
quarterly in cash or, at the Company's option, in shares of Common Stock. The
Company anticipates that for the foreseeable future all of its cash resources
and earnings, if any, will be retained for the
7
<PAGE> 9
operation and expansion of the Company's business, except to the extent required
to satisfy its obligations under the terms of the Series A Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock.
LIMITATION OF DIRECTOR LIABILITY
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty of care as a director, including
breaches which constitute gross negligence, subject to certain limitations
imposed by the Delaware General Corporation Law. Thus, under certain
circumstances, neither the Company nor the stockholders will be able to recover
damages even if directors take actions which harm the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 8,642,943 shares of Common Stock of the Company to be outstanding
upon completion of the offering, approximately 6,268,476 shares of Common Stock,
including 525,000 shares offered hereby issuable on conversion of Preferred
Stock, will be freely tradeable without restriction under the Securities Act
except for any shares of Common Stock purchased by an "affiliate" of the Company
(as that term is defined under the rules and regulations of the Securities Act),
which will be subject to the resale limitations of Rule 144 under the Securities
Act. Approximately 2,374,467 remaining outstanding shares of Common Stock are
"restricted" securities within the meaning of Rule 144 under the Securities Act
and only may be sold pursuant to the conditions of such rule, including
satisfaction of certain holding period requirements. The Company is unable to
predict the effect that sales made under Rule 144, or otherwise, may have on the
then prevailing market price of the Company's securities although any future
sales of substantial amounts of securities pursuant to Rule 144 could adversely
affect prevailing market prices. The holders of options and warrants to acquire
approximately 18,859,385 shares of Common Stock (including 8,150,662 shares of
Common Stock issuable upon conversion of shares of Series A Preferred Stock,
Series B Preferred Stock, Series D Preferred Stock , Series E Preferred Stock
and Series F Preferred Stock) have certain registration rights under the
Securities Act.
CHANGES IN CONTROL OF COMPANY
Prior to the consummation of the Grosso-Jacobson Mergers, effective
operational control of the Company was exercised by Messrs. Meyer and Bernstein,
who comprised 50% of the Board of Directors and were the principal executive
officers of the Company. As a result of (a) the Grosso-Jacobson Mergers and (b)
Messrs. Meyer, Bernstein, Grosso and Jacobson entering into a Stockholders
Voting Agreement, by application of the SEC rules defining "beneficial
ownership," control of the Company may now be deemed to be shared among Messrs.
Meyer, Bernstein, Grosso and Jacobson.
The Company's revenues and operating income for the nine month period
ending March 31, 1998 increased by $4,091,000 and 1,064,000 respectively,
attributable to the Grosso-Jacobson Companies, producing a net income of
$482,000. While management of the Company acknowledges that the acquisition of
the Grosso-Jacobson Companies has significantly increased its revenues and
enabled the Company to derive net income from its operations, there can be no
assurance that such positive revenue and earnings results will continue to be
achieved as a result of the Grosso-Jacobson Mergers.
CONTROL BY OFFICERS AND DIRECTORS.
The officers and directors of the Company and the entities affiliated with
them will, upon completion of the offering, in the aggregate, beneficially own
approximately 27.5% of the Company's outstanding Common Stock. These
stockholders, if acting together, may be able to elect a majority of the
Company's board of directors and may have the ability to control the Company and
influence its affairs and the conduct of its business. Such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company.
8
<PAGE> 10
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder and (i)
the number of shares of Series E Preferred Stock and Series F Preferred Stock
owned by the Selling Stockholder as of September 18, 1998, and (ii) the maximum
amount of Common Stock which may be offered for the account of the Selling
Stockholder under this Prospectus. The Selling Stockholder has not held any
position or office or had any other material relationship with the Company, its
predecessors or its affiliates within the past three years.
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of Percentage of
Series E Series F Common Outstanding
Preferred Preferred Stock Offered Common
Name of Selling Stockholder Stock Owned Stock Owned Hereby Stock (1)
- --------------------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
The Augustine Fund, L.P. 25,000 75,000(2) 525,000(1) 11.5
c/o Augustine Capital
Management, Inc.
141 West Jackson Blvd.,
Suite 2182
Chicago, IL 60604
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes conversion into Common Stock of the total number of shares of (a)
Series E Preferred Stock owned by the Augustine Fund, L.P. at a conversion
rate of 20 shares of Common Stock to every one share of Series E Preferred
Stock, based upon the minimum price per share of $0.625 specified in that
certain Securities Purchase Agreement described in "Plan of Distribution"
and (b) Series F Preferred Stock owned by the Augustine Fund, L.P. at a
conversion rate of one share of Common Stock to every one share of Series F
Preferred Stock. The conversion ratio and the number of shares of Common
Stock issuable upon conversion of the Series E Preferred Stock is subject
to adjustment under certain circumstances. See "Plan of Distribution."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Series E Preferred Stock may increase or decrease from time to time.
(2) Includes 50,000 shares of Series F Preferred Stock issued in July and
August 1998.
The Selling Stockholder may, pursuant to this Prospectus, offer all or
some portion of the Common Stock that it has the right to acquire upon
conversion of the Series E Preferred Stock or Series F Preferred Stock
Accordingly, no estimate can be given as to the amount of the Common Stock that
will be held by the Selling Stockholder upon termination of any such sales. In
addition, the Selling Stockholder may have sold, transferred or otherwise
disposed of all or a portion of their Series E Preferred Stock or Series F
Preferred Stock, since the date on which they provided the information regarding
the Series E Preferred Stock and Series F Preferred Stock in transactions exempt
from the registration requirements of the Securities Act. See "Plan of
Distribution."
The Selling Stockholder may from time to time offer and sell pursuant to
this Prospectus any or all of the Common Stock issuable upon conversion of the
Series E Preferred Stock or Series F Preferred Stock. The term Selling
Stockholder includes the holders listed in any Supplement hereto and the
beneficial owners of the Series E Preferred Stock, Series F Preferred Stock, and
their transferees, pledges, donees or other successors. Any such Supplement will
contain certain information with respect to the Selling Stockholder and the
respective number of shares of Common Stock beneficially owned by the Selling
Stockholder that may be offered pursuant to this Prospectus. Such information
will be obtained from the Selling Stockholder.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the shares of Common Stock of the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Stockholder will need
to comply with applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of Common Stock
by the Selling Stockholder. Regulation M contains certain limitations and
prohibitions intended to prevent issuers and
9
<PAGE> 11
selling security holders and other participants in a distribution of securities
from conditioning the market through manipulative or deceptive devices to
facilitate the distribution.
PLAN OF DISTRIBUTION
Pursuant to that certain Securities Purchase Agreement (the "Purchase
Agreement") dated July 31, 1998 between the Company and the Augustine Fund, L.P.
(the "Augustine Fund"), the Company completed the sale of an aggregate of 25,000
shares of Series E Preferred Stock to the Augustine Fund, and in connection with
the sale of the Series E Preferred Stock, issued an aggregate of 25,000 shares
of Series F Preferred Stock to the Augustine Fund. The Series E Preferred Stock,
the Series F Preferred Stock and Series D Preferred Stock are hereinafter
collectively referred to as the Preferred Stock. This transaction resulted in
gross proceeds of $250,000 and net proceeds of $231,250 to the Company.
Pursuant to the Purchase Agreement, until July 31, 2000, the Augustine
Fund agrees to purchase and the Company agrees to sell a minimum of 150,000
shares of Series E Preferred Stock, $0.001 par value per share ("Series E
Preferred Stock"), in each case in a series of tranches, each of which shall be
for the purchase and sale of a minimum of 10,000 shares of Series E Preferred
Stock and a maximum of 30,000 shares of Series E Preferred Stock in any given
tranche. Prior to the closing under any tranche and as a condition to such
closing, among other conditions, the Common Stock underlying the Series E
Preferred Stock must be freely tradeable.
Each share of Series E Preferred Stock has a stated value equal to $10.00
per share. Each share of Series E Preferred Stock cumulates dividends at the
rate $.60 per year per share (as a percentage of stated value per share equal to
6% per annum), payable quarterly in arrears in cash or shares of Common Stock at
the Company's option, at the Applicable Series E Conversion Rate (as defined
below) on the first day of April, July, October and January of each year
commencing January 1, 1999. If the Company in its discretion decides to pay said
dividends in shares of Common Stock, then all accumulated and unpaid dividends
shall be paid at the time of each conversion of the Series E Preferred Stock,
such that upon each conversion of the Series E Preferred Stock by the Augustine
Fund, the Company will pay all accumulated and unpaid dividends owed as of the
date of such conversion. The Series E Preferred Stock is convertible, at the
option of the Augustine Fund, immediately after issuance and on or before the
close of business on the second full business day preceding the date, if any,
fixed for the redemption of such shares (the "Series E Conversion Date") into
that number of shares of the Company's Common Stock as equals $10.00 per share
of Preferred Stock tendered for conversion, plus accumulated and unpaid
dividends thereon, divided by 82.5% of the average of the closing bid prices per
share of the Company's Common Stock on the Nasdaq Stock Market, any national
securities exchange, the OTC Bulletin Board or any other market on which the
Common Stock is listed or eligible for trading for the five trading days
preceding the Series E Conversion Date; PROVIDED, HOWEVER, that if the Company
determines to reprice the warrant to purchase 500,000 shares of Common Stock
issued in June 1996 to a party unaffiliated with the Selling Stockholders (the
"Third Party Warrant") to a price below the conversion price that otherwise
would be applicable to the Series E Preferred Stock, then the conversion price
of the Series E Preferred Stock shall be reduced to the exercise price of the
Third Party Warrant (the "Applicable Series E Conversion Rate").
At the option of the Company, if any shares of Series E Preferred Stock
remain outstanding on September 30, 2001, then all or any part of such Series E
Preferred Stock as the Company elects will be converted in accordance the
procedure described above as if the Augustine Fund had given the notice of
conversion effective as of that date, and the date of conversion had been fixed
as of September 30, 2001 for all purposes. The Series E Preferred Stock shall
not be redeemable at any time prior to September 30, 2000. Thereafter, the
Company, on the sole authority of its Board of Directors, may, at its option and
at any time prior to notice of conversion of the Series E Preferred Stock by the
Augustine Fund, redeem all or any part of the Series E Preferred Stock at the
time issued and outstanding for an amount in cash equal to $11.75 per share plus
any accumulated and unpaid dividends.
Pursuant to the Purchase Agreement and the certificates of designations
for the Series E Preferred Stock and the Series D Preferred Stock, at the option
of the Company, dividends on the Preferred Stock are payable by the issuance of
freely tradeable Common Stock. If the Company decides to pay dividends on the
Preferred Stock in freely tradeable Common Stock, then all accumulated and
unpaid dividends on the Preferred Stock shall be paid at the time of each
conversion of the Preferred Stock.
All shares of Series E Preferred Stock will (i) rank PARI PASSU with the
Series D Preferred Stock of the Company to be issued pursuant to the Purchase
Agreement, (ii) rank senior to any class or series of capital stock of the
Company hereafter created (unless otherwise agreed to by a majority of the
Selling Stockholders of the Series E Preferred Stock then outstanding), and
(iii) rank junior to all of the preferred stock of the Company issued and
outstanding as of the date of execution of the Purchase Agreement. Upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, resulting in any distribution of its assets to its stockholders,
the selling stockholder of the
10
<PAGE> 12
Series E Preferred Stock then issued and outstanding shall be entitled to
receive out of the assets of the Company available for distribution to its
stockholders, an amount equal to $10.00 per share of Series E Preferred Stock
plus any accumulated but unpaid dividends, and no more, before any payment or
distribution of the assets of the Company is made to or set apart for the
holders of any junior securities.
The Series F Preferred Stock is not entitled to dividends, has no stated
value and has a term of three years. The Series F Preferred Stock is immediately
convertible at the option of the Augustine Fund into one share of Common Stock
upon payment of an amount equal to 125% of the Fair Market Value of the Common
Stock, on the date of issuance of such share of Series F Preferred Stock. "Fair
Market Value" per share of Common Stock at any date will mean (i) if the Common
Stock is listed on an exchange or exchanges, or admitted for trading on any
national securities exchange, the OTC Bulletin Board or any other market, the
closing bid price of the Common Stock on the date of issuance of the shares of
Series F Preferred Stock, or (ii) if the Common Stock is not listed on an
exchange or quoted on the Nasdaq Stock Market, an amount determined in good
faith by the Board of Directors. All shares of Series F Preferred Stock that
have not been converted and are outstanding on the day after the date that is
three years from the date of issuance of such shares of Series F Preferred
Stock, will automatically be canceled and deemed redeemed back to the Company
and the holder of such shares will receive, from the Company, the total of the
par value price per share multiplied by the aggregate number of such shares.
Upon any liquidation, dissolution or winding-up of the Company, the Augustine
Fund will not be entitled to receive anything out of the assets of the Company
in respect of each share of Series F Preferred Stock.
Each share of Series D Preferred Stock has a stated value equal to
$10.00 per share. Each share of Series D Preferred Stock cumulates dividends at
the rate $.60 per year per share (as a percentage of stated value per share
equal to 6% per annum), payable quarterly in arrears in cash or shares of Common
Stock at the Company's option, at the applicable Conversion Rate (as defined
below) on the first day of April, July, October and January of each year
commencing October 1, 1998. If the Company in its discretion decides to pay the
dividends in shares of Common Stock, then all accumulated and unpaid dividends
shall be paid at the time of each conversion of the Series D Preferred Stock,
such that upon each conversion of the Series D Preferred Stock by the Augustine
Fund, the Company will pay all accumulated and unpaid dividends owed as of the
date of such conversion. The Series D Preferred Stock is convertible, at the
option of the Augustine Fund, at the earlier of (i) the date on which a
registration statement filed with the U.S. Securities and Exchange Commission
(the "Commission"), which registration statement covers the Common Stock into
which the Series D Preferred Stock is convertible, is declared effective by the
SEC, or (ii) the date which is 120 days from the date of issuance of the Series
D Preferred Stock being converted (the "Hold Period") and on or before the close
of business on the second full business day preceding the date, if any, fixed
for the redemption of such shares (the "Conversion Date"), into that number of
shares of the Company's Common Stock as equals $10.00 per share of Preferred
Stock tendered for conversion, plus accumulated and unpaid dividends thereon,
divided by the lesser of (A) 100% of the average of the closing bid prices per
share of the Company's Common Stock on the Nasdaq Stock Market, any national
securities exchange, the OTC Bulletin Board or any other market on which the
Common Stock is listed or eligible for trading (the "Closing Bid Prices") for
the five trading days preceding the date of purchase of the Series D Preferred
Stock by the Augustine Fund; or (B) 80% of the average of the Closing Bid Prices
for the five trading days preceding the date of conversion; PROVIDED, HOWEVER,
that if the Company determines to reprice the Third Party Warrant to a price
below the conversion price that otherwise would be applicable to the Series D
Preferred Stock, then the conversion price of the Series D Preferred Stock shall
be reduced to the exercise price of the Third Party Warrant (the "Applicable
Series D Conversion Rate").
At the option of the Company, if any shares of Series D Preferred Stock
remain outstanding on June 30, 2000, then all or any part of such Series D
Preferred Stock as the Company elects will be converted in accordance the
procedure described above as if the Augustine Fund had given a notice of
conversion effective as of that date, and the date of conversion had been fixed
as of June 30, 2000 for all purposes. The Series D Preferred Stock shall not be
redeemable at any time prior to September 30, 1999. Thereafter, the Company, on
the sole authority of its Board of Directors, may, at its option and at any time
prior to notice of conversion of the Series D Preferred Stock by the Augustine
Fund, redeem all or any part of the Series D Preferred Stock at the time issued
and outstanding for an amount in cash equal to $12.00 per share plus any
accumulated and unpaid dividends.
The Common Stock offered hereby may be sold from time to time to
purchasers directly by the Selling Stockholder or by the pledgees, donees,
transferees or other successors in interest. Alternatively, the Selling
Stockholder may from time to time offer the shares of Common Stock to or through
underwriters, broker/dealers or agents, who may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling
Stockholder or the purchasers of shares of Common Stock for whom they may act as
agents. The Selling Stockholder and any underwriters, broker/dealers or agents
that participate in the distribution of shares of Common
11
<PAGE> 13
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act and any profit on the sale of the shares of Common Stock by them and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker/dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The shares of Common Stock offered hereby may be sold from time to time
in one or more transactions at fixed prices, at prevailing market prices at the
time of sale, any varying prices determined at the time of sale or at negotiated
prices. The sale of the shares of Common Stock may be effected in transactions
(which may involve crosses or block transactions) on any national or
international securities exchange or quotation services on which the shares of
Common Stock may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of the shares of Common Stock is made, a Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of shares of Common Stock being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Stockholder and any discounts, commissions or concessions
allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the shares of Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the shares of Common Stock may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Stockholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the shares of Common Stock by
the Selling Stockholders. The foregoing may affect the marketability of the
shares of Common Stock.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the shares will be paid by the Company, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Stockholder
will pay all underwriting discounts and selling commissions, if any. The Selling
Stockholder will be indemnified by the Company against certain civil
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and any of its other officers, employees and agents to
the fullest extent permitted by Delaware law. The Company is also empowered
under its Bylaws to enter into indemnification agreements with any such persons
and to purchase insurance on behalf of any person whom it is required or
permitted to indemnify.
The Company's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for breach
of the directors fiduciary duty of care to the Company and its stockholders.
Such provision does not eliminate the duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. Each director
continues to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions than are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under any
other law, such as the federal securities laws or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
12
<PAGE> 14
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Troop Steuber Pasich Reddick & Tobey, LLP.
EXPERTS
The financial statements included the Company's Annual Report on Form
10-KSB for its fiscal year ended June 30, 1997 and incorporated by reference in
this Prospectus and the Registration Statement of which this Prospectus is a
part have been audited by Kellog & Andelson, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
and giving said reports.
13
<PAGE> 15
No 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 representations must not be relied
upon as having been authorized by the Company. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any date
after the date hereof. This Prospectus does not relate to any securities other
than those described herein or constitute an offer to sell or a solicitation of
an offer to buy the securities offered hereby by any one 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 anyone whom it is
unlawful to make such offer or solicitation.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION......................................3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE...............................................3
PROSPECTUS SUMMARY.........................................5
THE COMPANY................................................5
RISK FACTORS...............................................6
SELLING STOCKHOLDER.......................................10
PLAN OF DISTRIBUTION......................................11
DISCLOSURE OF COMMISSION POSITION FOR
INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES...............................................13
LEGAL MATTERS.............................................14
EXPERTS...................................................14
THE
PRODUCERS ENTERTAINMENT
GROUP LTD.
PROSPECTUS
, 1998
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Preferred Stock being registered. All amounts are estimates
except the SEC registration fee.
SEC registration fee......................................... $ 125.84
Nasdaq filing fee............................................ 7,500.00
Printing costs............................................... 500.00
Legal fees and expenses...................................... 10,000.00
Miscellaneous expenses....................................... 2,000.00
----------
Total............................................. $20,125.84
----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VI of the Registrant's Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VII of the Registrant's Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of the
Registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
4.1 Securities Purchase Agreement, dated July 31, 1998 between the Company and the Augustine
Fund, L.P.(1)
4.2 Registration Rights Agreement, dated July 31, 1998 between the Company and the Augustine Fund,
L.P.(1)
4.3 Escrow Agreement dated as of July 31, 1998 among the Augustine Fund, L.P., the Company and
H. Glenn Bagwell, Jr., as Escrow Agent.(1)
4.4 Restated Certificate of Incorporation, dated June 24, 1993.(2)
4.5 Amendment to Certificate of Incorporation, dated April 28, 1998.(1)
4.6 Certificate of Designations for Series D Preferred Stock, dated July 31, 1998.(1)
4.7 Certificate of Designations for Series E Preferred Stock, dated July 31, 1998.(1)
4.8 Certificate of Designations for Series F Preferred Stock, dated July 31, 1998.(1)
5.1 Opinion of Troop Steuber Pasich Reddick & Tobey LLP.
23.1 Consent of Kellog & Andelson, Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
- -----------------------------------
(1) Incorporated by reference to Registrant's Registration Statement on Form S-3
filed September 1, 1998
(2) Incorporated by reference to the Registrant's Report on Form 8-K dated
June 18, 1996.
II-1
<PAGE> 17
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of the appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement to include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof;
(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; and
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering
thereof.
II-2
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on the 18th day of September 1998.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
By /s/ IRWIN MEYER
------------------------------------
Irwin Meyer
Chief Executive Officer
II-3
<PAGE> 19
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Irwin Meyer and Arthur Bernstein and each
of them, his attorneys-in-fact, each with the power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1993, as
amended, this 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/ IRWIN MEYER Chief Executive Officer and Director September 18, 1998
- ------------------------------------ (Principal Executive Officer)
Irwin Meyer
/s/ LAWRENCE S. JACOBSON President and Director September 18, 1998
- ------------------------------------
Lawrence S. Jacobson
/s/ ARTHUR BERNSTEIN Executive Vice President and Director September 18, 1998
- ------------------------------------ (Principal Financial Officer)
Arthur Bernstein
/s/ MICHAEL COLLYER Director September 18, 1998
- ------------------------------------
Michael Collyer
/s/ ALFRED HAFERKAMP Principal Accounting Officer September 18, 1998
- ------------------------------------
Alfred Haferkamp
/s/ MICHAEL ISCOVE Director September 18, 1998
- ------------------------------------
Michael Iscove
/s/ THOMAS A. DANIELS Director September 18, 1998
- ------------------------------------
Thomas A. Daniels
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5.1
TROOP
STEUBER
PASICH
REDDICK
& TOBEY, LLP
September 18, 1998
The Producers Entertainment Group Ltd.
5757 Wilshire Boulevard, Penthouse One
Los Angeles, California 90036
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-3 (the Registration Statement") to which this letter is attached as Exhibit
5.1 filed by The Producers Entertainment Group Ltd., a Delaware corporation (the
"Company"), in order to register under the Securities Act of 1933, as amended
(the "Act), (i) up to 525,000 shares of the Common Stock, par value $0.001 per
share (the "Shares"), of a certain selling stockholder (the "Selling
Stockholder") issuable pursuant to that certain securities purchase agreement
between the Company and the Selling Stockholder dated July 31, 1998 ( the
"Securities Purchase Agreement").
We are of the opinion that the Shares have been duly authorized and,
upon issuance and sale in conformity with and pursuant to the Securities
Purchase Agreement, will be legally and validly issued, fully paid and
non-assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters."
Respectfully submitted,
/s/ TROOP STEUBER PASICH
REDDICK & TOBEY, LLP
TROOP STEUBER PASICH
REDDICK & TOBEY, LLP
- -------------------------------------------------------------------------------
2029 Century Park East, 24th Floor, Los Angeles, California 90067-3010
<PAGE> 1
EXHIBIT 23.1
[KELLOGG & ANDELSON ACCOUNTANCY CORPORATION LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
The Producers Entertainment Group Ltd. on Form S-3 of our report dated
September 17, 1997 on our audits of the financial statements of The Producers
Entertainment Group Ltd. and Subsidiaries as of June 30, 1997.
/s/ Kellogg & Andelson
Kellogg & Andelson
Sherman Oaks, California
September 18, 1998
