As filed with the Securities and Exchange Commission on August 31, 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
IAT RESOURCES CORPORATION
(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
IAT RESOURCES CORPORATION
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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 3,755,303 $1.0625 $3,990,009.40 $1,109.22
===================================================================================================================
<FN>
(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 August 27,
1999.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE HAVE
FILED A REGISTRATION STATEMENT RELATING TO THESE SECURITIES WITH THE SECURITIES
AND EXCHANGE COMMISSION. WE MAY NOT SELL OR ACCEPT OFFERS TO BUY THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 31, 1999
PROSPECTUS
3,755,303 SHARES
IAT RESOURCES CORPORATION
COMMON STOCK
The companies listed in this prospectus under the caption "Selling Security
Holders" may from time to time offer and sell up to 3,755,303 shares of our
common stock. The selling security holders will acquire these shares upon
conversion of convertible preferred stock.
The selling security holders may offer their shares through public or
private transactions, on or off the Nasdaq SmallCap Market, at prevailing market
prices or at privately negotiated prices. We will not receive any proceeds from
this offering.
Our common stock is publicly traded on the Nasdaq SmallCap Market under the
symbol "IATR." On August 27, 1999, the closing bid price for the common stock
on the Nasdaq SmallCap Market was $1.09.
AN INVESTMENT IN THESE SECURITIES IS RISKY. YOU SHOULD ONLY PURCHASE THESE
SHARES IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER
BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD WITH THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
SEC is effective. This prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
THIS PROSPECTUS IS DATED AUGUST ___, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-3 with respect
to this offering of our common stock. This prospectus only constitutes part of
the Registration Statement and does not contain all of the information set forth
in the Registration Statement, its exhibits and its schedules.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at HTTP://WWW.SEC.GOV. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for additional information on the public reference rooms. We are also listed on
the Nasdaq SmallCap Market. Our periodic reports, proxy statements and other
information can be inspected at the offices of Nasdaq at 1735 K Street, NW,
Washington, DC, 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them. This prospectus incorporates important business and financial information
about us which is not included in or delivered with this prospectus. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the SEC will automatically update and
supersede this information.
We incorporate by reference:
(1) Our Annual Report on Form 10-KSB for the fiscal year ended June
30, 1998;
(2) Our Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998, as amended;
(3) Our Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1998, as amended;
(4) Our Quarterly Report on Form 10-QSB for the quarter ended March
31, 1999, as amended;
(5) Our Report on Form 8-K filed on July 31, 1998;
(6) Our Report on Form 8-K filed on September 29, 1998;
(7) Our Report on Form 8-K filed on May 3, 1999;
(8) The description of our common stock contained in our Registration
Statement on Form 8-A filed on September 9, 1996; and
(9) Future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act until all of the
shares offered by the selling security holders have been sold.
You may obtain a copy of these filings without charge by writing or calling
us at:
IAT Resources Corporation
5757 Wilshire Boulevard, Penthouse One
Los Angeles, California 90036
Attention: Arthur Bernstein, Executive Vice President
(323) 634-8634
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer to sell these securities
or soliciting an offer to buy these securities in any state where the offer or
sale is not permitted. You should not assume that the information in this
prospectus or the documents we have incorporated by reference are accurate as of
any date other than the date on the front of those documents.
Page 1
<PAGE>
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that address:
o trends affecting our financial condition or results of
operations;
o the impact competition has on our business;
o our strategies concerning the expansion of our operations; and
o our plans to enter new industries including internet technology
development, integration and online commerce.
These forward-looking statements may be found in "Prospectus Summary," "Risk
Factors," "Use of Proceeds" and elsewhere in this prospectus. In some cases you
can identify forward-looking statements by terminology including "believes,"
"anticipates," "expects," "estimates," "may," "will," "should," "could,"
"plans," "predicts," "potential," "continue," or similar terms.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. The forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results to be materially different from any future results expressed or implied
by the forward-looking statements. These factors include those listed under
"Risk Factors" and elsewhere in this prospectus. We undertake no duty to update
any of the forward-looking statements after the date of this prospectus, even if
new information becomes available or other events occur in the future. All
forward-looking statements contained in this prospectus are expressly qualified
in their entirety by this cautionary notice.
Page 2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS CONTAINED IN THE
DOCUMENTS WE HAVE INCORPORATED BY REFERENCE.
OUR COMPANY
We are a diversified company focusing on enabling innovations in the
converging telecommunications, entertainment and technology industries. We are
currently developing programs to integrate and deliver internet services and
online content in the healthcare, education and entertainment segments.
Currently, we are in discussions to provide internet access and portal
development for a state university medical system and an educational content
provider to U.S. public schools. We are also looking to acquire software and
hardware companies that provide competitive advantages in the delivery of online
services and content to enterprise systems within these markets.
As part of our expansion into internet technology development and
integration, we have identified and made small investments in early and
expansion stage companies which we believe have unique internet-based hardware
and/or software applications and which show promise as catalysts in the internet
and online commerce industries. For example, we recently purchased approximately
150,000 shares of common stock of flowersandgifts.com, and 100,000 shares of
common stock of Pacific Softworks, Inc., a licensor of internet-related software
and related software development tools, which recently completed an initial
public offering. We also have warrants to purchase up to an additional 100,000
shares of Pacific Softworks' common stock.
For approximately eight years, we operated under the name The Producers
Entertainment Group Ltd. Historically, we acquired, developed, produced and
distributed dramatic, comedy, documentary and instructional television series
and movies and theatrical motion pictures. We distributed our projects in the
United States and in international markets for exhibition on standard broadcast
television (network and syndication), basic cable and pay cable and for video
distribution. We also provided producer and executive producer services in
exchange for fees and participations in future profits from these projects.
Although we continue to engage in certain entertainment related production and
distribution activities, during the past eight months we have reduced our
network and cable television activities and begun to redirect our core business
toward the internet and technology industry.
While operating as The Producers Entertainment Group, in July 1998, we
acquired MWI Distribution, Inc., which does business under the name MediaWorks
International. MediaWorks International continues to distribute television and
video programming in the international market, concentrating on children's and
family programming and animation. MediaWorks also co-produces and co-finances
animated and live action programming ventures and sells direct-to-video series
and specials.
RECENT DEVELOPMENTS
On August 18, 1999, we announced that we had entered into a letter of
intent to merge with Infolocity, Inc., a privately held internet company.
Through its proprietary search technology, Infolocity assists publicly traded
companies in minimizing the impact of negative or false information posted on
the internet. The terms of the merger currently contemplate a tax-free exchange
of our common stock for 100% of the issued and outstanding stock of Infolocity.
Completion of the merger depends upon, among other customary closing conditions,
our arrangement of a $2 million loan to Infolocity and the approval of our
stockholders.
OUR STRATEGY
We have recently begun to change our core business from entertainment
production and distribution to internet technology development and integration.
We are currently negotiating with independent third parties to join with us in
the process of developing technology environments and browser portal shells
capable of providing internet services and e-commerce opportunities. These
services and opportunities are being designed for delivery to the latest
communication appliances and portable devices for convenient data and
information access anytime and anywhere. We intend to develop a core business
around this integration and service strategy while promoting opportunities for
synergistic business relationships among other internet companies. We maintain
an active website at WWW.IATRESOURCES.COM which includes a public bulletin
board, roundtable discussion opportunities and a bi-monthly newsletter, IAT
REPORTS, focusing on convergence and enabling technology.
CORPORATE INFORMATION
Our executive offices are located at 5757 Wilshire Boulevard, Penthouse
One, Los Angeles, California 90036. Our telephone number is (323) 634-8634.
Information on our web site does not constitute part of this prospectus.
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<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. AS A RESULT,
THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR
PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
RISKS RELATED TO OUR BUSINESS
ALTHOUGH WE CONTINUE TO OPERATE IN THE ENTERTAINMENT BUSINESS ON A REDUCED
SCALE, OUR PROSPECTS IN THE INTERNET SECTOR ARE DIFFICULT TO FORECAST BECAUSE WE
HAVE ONLY BEEN TRANSITIONING TO THE INTERNET TECHNOLOGY DEVELOPMENT AND ONLINE
COMMERCE INDUSTRIES SINCE FEBRUARY 1999.
We announced our intention to expand our business in the internet and
electronic commerce industries in February 1999 and we are gradually changing
our core television broadcast and cable production business to internet
technology services and integration. These industries are new, highly
speculative and involve a substantial degree of risk. Since we are in an early
stage of development in these rapidly evolving industries, our prospects are
difficult to predict and could change rapidly and without warning. You must
consider our prospects in light of the risks, expenses and difficulties
frequently encountered by companies in the early stages of developing and
expanding their business, particularly companies in the new and rapidly evolving
internet technology and online commerce markets. These risks include, but are
not limited to, the inability to respond promptly to changes in a rapidly
evolving and unpredictable business environment and the inability to manage
potential growth. To address these risks, we must, among other things:
o successfully implement new business and marketing strategies;
o respond to competitive developments;
o expand our funding of early and expansion-stage companies; and
o attract and retain qualified personnel.
WE MAY NOT BE SUCCESSFUL IN ENTERING INTO THE INTERNET TECHNOLOGY DEVELOPMENT,
DISTRIBUTION AND ONLINE COMMERCE FIELDS SINCE WE HAVE NEVER HISTORICALLY
OPERATED IN THESE BUSINESSES. OPERATING IN THESE BUSINESSES WILL ALSO REQUIRE
SUBSTANTIAL WORKING CAPITAL.
The internet technology development, distribution and online commerce
industries are completely new business ventures for us, and are businesses in
which we have never operated. With the exception of Dr. Barry Sandrew, our Chief
Technology Officer, none of our current executives has experience operating
internet-related companies. Although we believe that our experience in the
entertainment business lends itself well to these industries, we may not be able
to operate successfully in them.
We retained the services of Strategic Capital Consultants to assist us in
investing in or acquiring interests in internet technology, development and
electronic commerce companies. However, if we fail to complete the acquisition
of these types of companies, or if we cannot successfully integrate their
businesses into ours, our business and financial condition could suffer.
In addition, our new business strategy, investment and acquisition
activities will require substantial working capital. We have spent and will
continue to spend substantial funds to locate appropriate acquisition
candidates, to market our efforts and to establish an effective management team
with experience in the internet technology development, distribution and
electronic commerce industries. We cannot assure you that we will be successful
in any of these areas.
WE RECENTLY ANNOUNCED OUR INTENT TO MERGE WITH INFOLOCITY. IF WE FAIL TO MERGE
WITH INFOLOCITY OR IF WE CANNOT SUCCESSFULLY INTEGRATE INFOLOCITY'S BUSINESS
INTO OURS, OUR BUSINESS AND FINANCIAL CONDITION COULD SUFFER.
In August 1999, we announced that we had entered into a letter of intent to
merge with Infolocity, a privately held internet company which, through its
proprietary search technology, helps publicly traded companies minimize the
impact of negative information posted on the internet. We are seeking to merge
with Infolocity with the expectation that the merger will help us execute our
plan to expand our core business into internet-related
Page 4
<PAGE>
companies and provide us with further opportunities to promote synergistic
business relationships among otherinternet companies. In order to achieve these
anticipated benefits, we must efficiently, effectively and timely integrate
Infolocity's operations into ours. The combination of these businesses requires,
among other things:
o integration of management staffs;
o coordination of operations and marketing efforts; and
o integration and elimination of redundant overhead.
Full integration of these businesses will require considerable effort on
the part of our management. During the integration period, we anticipate that
our accounting staff, operations personnel and other staff will need to dedicate
considerable time toward integrating the financial and information systems,
management staffs and organizational cultures of the separate businesses. We
could experience problems associated with the integration, and the integration
itself may not proceed efficiently or be successful. Furthermore, even if we
successfully integrate Infolocity's operations into ours, the combination may
adversely affect our business and results of operations.
OUR GROWTH AND OPERATING RESULTS COULD BE IMPAIRED IF WE ARE UNABLE TO MEET OUR
CURRENT LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS.
Our cash commitments for the next 12 months include paying aggregate
minimum base compensation of approximately $822,000 to our officers and key
independent contractors and minimum office rent of approximately $150,000. We
also incur overhead and other costs such as employee salaries, related benefits,
office expenses, professional fees and similar expenses. For our fiscal year
ended June 30, 1998, our general and administrative expenses, which included
compensation and rent, totaled $4,151,252. Dividends on our outstanding Series A
Preferred Stock aggregate $425,000 annually, which we have paid in stock during
the past three years. We also pay dividends of 6% per annum on our outstanding
Series E Preferred Stock. At our option, we may pay dividends on all series of
preferred stock in shares of common stock or in cash. As a result of all of
these expenses, we had an accumulated deficit of ($22,500,800) at March 31,
1999. As of that date, we also had cash and cash equivalents of ($49,101),
accounts and contracts receivable of $2,222,319 and accounts payable and accrued
expenses of $2,554,644.
We may need to raise additional funds in order to meet these expenses, fund
our transition into the internet technology development and integration and
online commerce industries and to respond to competitive pressures. If we raise
additional funds by issuing equity or convertible debt securities, the
percentage ownership of our stockholders will be diluted. Any new securities
could have rights, preferences and privileges senior to those of our common
stock. Furthermore, we cannot be certain that additional financing will be
available when and to the extent required or that, if available, it will be on
acceptable terms. If adequate funds are not available on acceptable terms, we
may not be able to fund our expansion of our business into the internet
technology development and integration and online commerce sectors.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
For the fiscal years ended June 30, 1996, 1997 and 1998, we generated
revenues of $5,367,498, $5,521,441 and $22,369,511, respectively, and incurred
net losses of $1,447,666, $4,592,145 and $1,411,916, respectively (without
giving effect to the payment in 1996, 1997 and 1998 of dividends of $425,000
annually, on the Series A Preferred Stock which we paid by issuing shares of
common stock). As of March 31, 1999, we had an accumulated deficit of
($22,500,800). If the cash we generate from our operations cannot sufficiently
fund possible future operating losses, we may need to raise additional funds.
Additional financing may not be available in amounts or on terms acceptable to
us, if at all.
OUR FUTURE OPERATING RESULTS MAY FLUCTUATE AND ARE UNPREDICTABLE. IF WE FAIL TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE
OF OUR COMMON STOCK MAY DECLINE SIGNIFICANTLY.
Our limited operating history in the internet technology development,
integration and online commerce industries makes it difficult to forecast
accurately our revenues, operating expenses and operating results. As a result,
we may be unable to adjust our spending in these areas in a timely manner to
compensate for any unexpected revenue shortfall.
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BECAUSE OF THE LIMITED BARRIERS TO ENTRY IN THE INTERNET, TECHNOLOGY AND ONLINE
COMMERCE BUSINESSES, COMPETITION IN THESE MARKETS IS INTENSE. IF WE ARE UNABLE
TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE COMPETITORS THAT ENTER THESE
MARKETS, OUR REVENUES AND OPERATING RESULTS COULD BE IMPAIRED.
The internet, technology and online commerce markets are new, rapidly
evolving and intensely competitive, and we expect that competition could further
intensify in the future. Barriers to entry are limited, and current and new
competitors can launch web sites and other similar businesses at a relatively
low cost. Many of our current and potential competitors have longer operating
histories and significantly greater financial, marketing and other resources
than us. Increased competition may result in reduced operating margins and loss
of market share.
We have not yet determined whether we will be able to compete successfully
against our current and future competitors. Further, as a strategic response to
changes in the competitive environment, we may from time to time make marketing
decisions or acquisitions that could adversely affect our business, prospects,
financial condition and results of operations.
OUR GROWTH AND OPERATING RESULTS WILL BE IMPAIRED IF THE INTERNET TECHNOLOGY AND
ONLINE COMMERCE INDUSTRIES DO NOT CONTINUE TO GROW.
Our growth and operating results depend in part on widespread acceptance
and use of the internet as a point of convergence in the telecommunications,
entertainment and technology industries, as well as on continued consumer
acceptance and use of the internet as a way to buy products. These practices are
at an early stage of development, and demand and market acceptance are
uncertain.
The internet may not become a viable medium for telecommunications,
entertainment and technology convergence or a healthy commercial marketplace due
to inadequate development of network infrastructure and enabling technologies
that address the public's concerns about:
o network performance;
o reliability;
o speed of access;
o ease of use; and
o bandwidth availability.
In addition, the internet's overall viability could be adversely affected
by increased government regulation. Changes in or insufficient availability of
telecommunications or other services to support the internet could also result
in slower response times and adversely affect general usage of the internet.
Also, negative publicity and consumer concern about the security of transactions
conducted on the internet and the privacy of users may also inhibit the growth
of commerce on the internet.
BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR OUR
RESULTS OF OPERATIONS.
It is possible that a number of laws and regulations may be adopted
concerning the internet, relating to, among other things:
o user privacy;
o content;
o copyrights;
o distribution;
o telecommunications; and
o characteristics and quality of products and services.
The adoption of any additional laws or regulations may decrease the
popularity or expansion of the internet. A decline in the growth of the internet
could decrease demand for our services and increase our cost of doing business.
The application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the internet and other online services could also harm our
business.
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IF THE SOFTWARE, HARDWARE, COMPUTER TECHNOLOGY AND OTHER SYSTEMS AND SERVICES
THAT WE USE ARE NOT YEAR 2000 COMPLIANT, OUR OPERATING RESULTS COULD BE
IMPAIRED.
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among others, a temporary inability to
process transactions, send invoices or engage in similar normal business
activities.
We use hardware and software systems, which are comprised only of an
internal personal computer network and commercially available software products.
We have assessed these systems and we believe that our systems correctly define
the year 2000. We have also assessed the embedded system contained in our leased
equipment, which we believe to be Year 2000 compliant. After we complete all of
our Year 2000 assessments, we intend to develop contingency plans to reduce our
Year 2000 exposure.
In addition, we have contacted our key vendors and customers and have
determined that they do not have any significant Year 2000 exposures which would
have an adverse effect on us and our business. However, we cannot assure you
that these parties will not experience Year 2000 problems in the near future. If
they do encounter such problems, they may not be able to solve them in a timely
manner, which could adversely affect our financial condition.
The Year 2000 issue also presents numerous other risks that could hurt our
business, such as disruptions of service from third parties who provide us with
electricity, water or telephone service. If these critical third party providers
experience difficulties that result in disruptions of services to us, a shutdown
of our operations at individual facilities could occur. Also, general
uncertainty exists regarding the Year 2000 problem and its potential effect on
the overall business environment and economies of the United States and other
nations. As a result, we cannot determine at this time whether the Year 2000
problem will materially impact our operations or financial condition as a result
of significant disruption to these economies and/or business environments.
THE INDUSTRY IN WHICH MEDIAWORKS COMPETES IS INTENSELY COMPETITIVE. IF
MEDIAWORKS IS UNABLE TO COMPETE SUCCESSFULLY AGAINST ITS CURRENT AND FUTURE
COMPETITORS, ITS REVENUES AND OPERATING RESULTS COULD BE IMPAIRED AND OUR
BUSINESS COULD SUFFER AS A RESULT.
The television industry is highly competitive and involves a substantial
degree of risk. MediaWorks directly competes with many other television
distributors which are significantly larger than it. These distributors
typically have financial and other resources which are far greater than those
available to MediaWorks now or in the foreseeable future. New technologies and
the expansion of existing technologies in the television industry may further
increase the competitive pressures on MediaWorks. We cannot assure you that
MediaWorks will be successful in competing in the television field.
MediaWorks' success depends upon its ability to distribute programming for
television which will appeal to markets characterized by changing popular
tastes. In light of the intense competition in the television industry,
MediaWorks may not be able to continuously acquire and develop products which
can be made into profitable television series.
OUR OUTSTANDING OPTIONS AND WARRANTS MAY DILUTE OUR STOCKHOLDERS' INTERESTS AND
COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.
As of the date of this prospectus, we have granted options and warrants to
purchase a total of 6,120,988 shares of common stock that have not been
exercised. To the extent that these outstanding options and warrants are
exercised, our stockholders' interests will be diluted. Also, we may not be able
to obtain additional equity capital on terms we like, since the holders of the
outstanding options and warrants will likely exercise them at a time when we may
be able to obtain such capital on better terms than those in the options and
warrants.
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THE CONVERSION OF OUR CONVERTIBLE PREFERRED STOCK MAY DILUTE OUR STOCKHOLDERS'
INTERESTS AND COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.
As of the date of this prospectus, we have issued 1,000,000 shares of our
Series A Preferred Stock, 3,000,000 shares of our Series C Preferred Stock,
50,000 shares of our Series D Preferred Stock, 150,000 shares of our Series E
Preferred Stock and 225,000 shares of our Series F Preferred Stock. At our
option, we can pay the dividends on all series of our preferred stock in cash or
in shares of common stock.
Holders of our convertible preferred stock could convert their shares into
common stock at any time in the future. To the extent all of the shares of our
outstanding convertible preferred stock are converted into common stock, our
common stockholders' interests will be diluted. Since these shares of common
stock will be registered for sale in the marketplace, future offers to sell such
shares could potentially depress the price of our common stock. In the future,
this could make it difficult for us or our stockholders to sell the common
stock. As of the date of this prospectus, all 50,000 shares of our Series D
Preferred Stock have been converted and sold and 25,000 shares of our Series E
Preferred Stock has been converted and sold. Also, we may have problems
obtaining additional equity capital on terms we like, since we can expect the
holders of our convertible preferred stock to convert their shares into common
stock at a time when we would be able to obtain any needed capital on more
favorable terms than those of the convertible preferred stock.
STOCK PRICES OF INTERNET-RELATED COMPANIES HAVE FLUCTUATED WIDELY IN RECENT
MONTHS AND THE TRADING PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE, WHICH
COULD RESULT IN SUBSTANTIAL LOSSES TO INVESTORS.
As a result of our recent expansion into internet technology development,
integration and online commerce, the trading price of our common stock could
become volatile and could fluctuate widely in response to factors including the
following, some of which are beyond our control:
o variations in our operating results;
o announcements of technological innovations or new services by us
or our competitors;
o changes in expectations of our future financial performance,
including financial estimates by securities analysts and
investors;
o changes in operating and stock price performance of other
internet-related companies similar to us;
o conditions or trends in the internet and technology industries;
o additions or departures of key personnel; and
o future sales of our common stock.
Domestic and international stock markets often experience significant price
and volume fluctuations. These fluctuations, as well as general economic and
political conditions unrelated to our performance may adversely affect the price
of our common stock.
TAKEOVER EFFORTS COULD BE DETERRED AS A RESULT OF OUR RIGHT TO ISSUE PREFERRED
STOCK IN THE FUTURE AND CERTAIN PROVISIONS IN OUR CERTIFICATE OF INCORPORATION.
Our Certificate of Incorporation permits our Board of Directors to issue up
to 20,000,000 shares of "blank check" Preferred Stock. Our Board of Directors
also has the authority to determine the price, rights, preferences, privileges
and restrictions of those shares without any further vote or action by our
stockholders. We have issued 1,000,000 shares of Series A Preferred Stock,
3,000,000 shares of Series C Preferred Stock, 50,000 shares of Series D
Preferred Stock, 150,000 shares of Series E Preferred Stock and 225,000 shares
of our Series F Preferred Stock. We have reserved for issuance an additional
300,000 shares of Series A Preferred Stock, 350,000 shares of Series E Preferred
Stock, and 325,000 shares of Series F Preferred Stock. If we issue additional
preferred stock with voting and conversion rights, the rights of our common
stockholders could be adversely affected by, among other things, the loss of
their voting control to others. Any additional issuances could also delay, defer
or prevent a change in our control, even if these actions would benefit our
stockholders.
Additionally, provisions of Delaware law and our Certificate of
Incorporation could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders. See "Description of Capital
Stock - Anti-Takeover Effects."
Page 8
<PAGE>
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK. WE PAY ANNUAL CASH OR STOCK
DIVIDENDS ON SOME OF OUR PREFERRED STOCK.
We have never paid cash dividends on our common stock and we do not expect
to pay these dividends in the foreseeable future. Holders of our Series A
Preferred Stock are entitled to annual dividends of 8 1/2% (aggregating $425,000
annually, in cash or stock at our option, assuming no conversion). Holders of
our Series C Preferred Stock are entitled to dividends of 8% annually, so long
as we earn over $1,000,000 in any fiscal year. Also, holders of our Series E
Preferred Stock are entitled to annual dividends of 6%. We pay these dividends
quarterly, in cash or in shares of our common stock. For the foreseeable future,
we anticipate that we will retain all of our cash resources and earnings, if
any, for the operation and expansion of our business, except to the extent
required to satisfy our obligations under the terms of the Series A and Series E
Preferred Stock.
SALES OF ADDITIONAL SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET MAY CAUSE
OUR STOCK PRICE TO FALL.
If we or our stockholders sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options and warrants
or upon the conversion of shares of our convertible preferred stock) in the
public market following this offering, the market price of our common stock
could fall. Upon completion of this offering, based on 11,716,021 shares
outstanding as of August 27, 1999, we will have outstanding approximately
15,471,324 shares of our common stock. The remaining unregistered common stock
and the common stock held by our officers and directors are "restricted"
securities as that term is defined by Rule 144 under the Securities Act. In the
future, these restricted securities may be sold only in compliance with Rule 144
or if they are registered under the Securities Act or under an exemption.
Generally, under Rule 144, each person who holds 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 1% of our
then-outstanding shares of common stock, or the average weekly volume of trading
of our common stock as reported during the preceding four calendar weeks. A
person who has not been an affiliate of ours for at least the three months
immediately preceding the sale and who has beneficially owned shares of common
stock for at least two years can sell such shares under Rule 144 without regard
to any of the limitations described above. Sales of substantial amounts of
common stock in the public market, or the perception that such sales could
occur, may adversely affect the prevailing market price for our common stock and
could impair our ability to raise capital through a public offering of equity
securities.
In addition, holders of options and warrants may acquire approximately
6,120,988 shares of Common Stock and holders of shares of our Series A Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock may acquire shares of Common Stock at various
conversion rates. See "Description of Capital Stock -- Preferred Stock."
NASDAQ COULD DELIST OUR COMMON STOCK WHICH COULD MAKE IT MORE DIFFICULT FOR YOU
TO SELL OR OBTAIN QUOTATIONS AS TO THE PRICE OF OUR COMMON STOCK.
In order to continue to be listed on Nasdaq, we must meet the following
requirements:
o net tangible assets of at least $2,000,000, or a market
capitalization of $35,000,000 or $500,000 in net income for two
of the last three years;
o a minimum bid price of $1.00;
o two market makers;
o 300 stockholders;
o at least 500,000 shares in the public float o a minimum market
value for the public float of $1,000,000; and
o compliance with certain corporate governance standards.
Our minimum bid price at August 27, 1999 was $1.03125. If we cannot
satisfy Nasdaq's maintenance criteria in the future, Nasdaq could delist our
common stock. In the event of delisting, trading, if any, would be conducted
only in the over-the-counter market in the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board." As a result of any possible delisting, an investor
would likely find it more difficult to sell or obtain quotations as to the price
of our common stock.
Page 9
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Selling Security
Holders' shares in this offering. All proceeds from the sale of these shares
will be for the accounts of the Selling Security Holders described below. Upon
conversion by Strategic Capital Consultants of shares of Series C Preferred
Stock into the shares of common stock to be offered by them under this
prospectus, we will receive from Strategic Capital Consultants a total of
$250,000. See "Selling Security Holders" and "Description of Capital Stock -
Preferred Stock."
SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Security Holders
and (i) the number of shares of Series C Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock owned by the Selling Security Holders as of
August 27, 1999, and (ii) the maximum amount of Common Stock which may be
offered for the accounts of the Selling Security Holders under this prospectus.
The addresses of the Selling Security Holders are in our care unless identified
otherwise.
<TABLE>
<CAPTION>
Number of Number of Number of
Number of Shares of Shares of Shares of Percentage
Shares of Series C Series E Series F Common of
Common Preferred Preferred Preferred Stock Outstanding
Name of Selling Security Stock Stock Stock Stock Owned Offered Common
Holders Owned Owned (1) Owned (2) (3) Hereby Stock (4)
- --------------------------------- ----------- ------------ ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Strategic Capital Consultants 0 1,700,000 0 0 500,000 4.27%
The Augustine Fund, L.P. 0 0 125,000 225,000 3,255,303 27.79%
c/o Augustine Capital
Management, Inc.
141 West Jackson Blvd.,
Suite 2182
Chicago, IL 60604
<FN>
(1) On January 14, 1999, we sold an aggregate of 1,700,000 shares of Series C
Preferred Stock to Strategic Capital Consultants pursuant to a securities
purchase agreement.
(2) In September 1998, Augustine acquired 25,000 shares of Series E Preferred
Stock. The common stock underlying these shares was previously registered
under an S-3 Registration Statement filed in September 1998, and has been
sold. In August 1999, Augustine acquired an additional 125,000 shares of
Series E Preferred Stock. This Registration Statement includes 3,030,303
shares of common stock to be issued upon conversion of 125,000 shares of
Series E Preferred Stock. The number of shares of Common Stock assumes
conversion of Series E Preferred Stock based upon a conversion price per
share of $0.50.
(3) In July 1998 and August 1999, Augustine acquired an aggregate of 225,000
shares of Series F Preferred Stock. This registration statement includes
225,000 shares of common stock to be issued upon conversion of Series F
Preferred Stock, which converts into common stock on a one for one basis.
(4) Based on 11,716,021 shares outstanding as of August 27, 1999.
</FN>
</TABLE>
The Selling Security Holders may offer all or some portion of the common
stock that they have the right to acquire upon conversion of the Series C
Preferred Stock, 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 Security Holders upon termination of any such sales.
See "Plan of Distribution."
The term Selling Security Holders includes the holders listed in any
supplement to this prospectus and any beneficial owners of the common stock and
their transferees, pledgees, donees or other successors. Any supplement will
contain certain information about the Selling Security Holders and the number of
shares of common stock beneficially owned by the Selling Security Holders that
may be offered pursuant to this prospectus. Such information will be obtained
from the Selling Security Holders.
Page 10
<PAGE>
Under the Securities Exchange Act of 1934, as amended and its rules and
regulations, any person distributing the common stock offered by this prospectus
may not simultaneously engage in market making activities with respect to our
common stock during the applicable "cooling off" periods prior to beginning the
distribution. In addition, the Selling Security Holders will need to comply with
applicable provisions of the Exchange Act and its rules and regulations
including, without limitation, Regulation M, which may limit the timing of
purchases and sales of shares of common stock by the Selling Security Holders.
Regulation M contains certain limitations and prohibitions intended to prevent
issuers, selling security holders and other participants in a distribution of
securities from conditioning the market through manipulative or deceptive
devices to facilitate the distribution.
We will bear all costs, expenses and fees in connection with the
registration of the Selling Security Holders' shares. All brokerage commissions,
if any, attributable to the sale of the Selling Security Holders' shares will be
borne by them.
Page 11
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 50,000,000 shares of common stock, par value
$.001 per share and 20,000,000 shares of preferred stock, par value $.001 per
share. The following descriptions of capital stock are qualified in all respects
by reference to our Restated Certificate of Incorporation and Bylaws, each as
amended, which are incorporated by reference 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 August 27, 1999, 11,716,021 shares
of common stock were issued and outstanding. All shares of common stock
participate equally in dividends, when and as declared by the Board of
Directors, and in net assets on liquidation. The shares of common stock have no
preference, conversion, exchange, preemptive or cumulative voting rights.
PREFERRED STOCK
Our Certificate of Incorporation authorizes the issuance of 20,000,000
shares of preferred stock with designations, rights, preferences and rights
determined from time to time by our Board of Directors. Accordingly, our Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the rights of holders of our common stock.
We have designated 1,300,000 shares of our preferred stock as Series A
Convertible Preferred Stock ("Series A Preferred"). In December 1994, we issued
1,000,000 shares of the Series A Preferred. The Series A Preferred has a
liquidation preference of $5.00 per share and pays a dividend in cash or in
common stock of 8 1/2% per annum. The Series A Preferred is convertible into
common stock. The number of shares issued upon conversion is determined by
multiplying (i) the number of shares of Series A Preferred to be converted by,
(ii) the sum of (a) $5.00 plus (b) all accrued but unpaid dividends in such
shares being converted and dividing the result by (c) $1.00 (the "Series A
Conversion Rate").
We have designated 3,000,000 shares of our preferred stock as Series C
Convertible Preferred Stock ("Series C Preferred"). On January 14, 1999, we sold
to Strategic Capital Consultants 1,700,000 shares of the Series C Preferred and
also sold the remaining 1,300,000 shares of the Series C Preferred, all for
consideration equal to $.001 per share. Each share of Series C Preferred is
convertible at the option of its holders, into one share of common stock at a
price of $0.50 per share. The Series C Preferred is entitled to non-cumulative
dividends of 8% per annum, but only after we have earnings in any fiscal year
greater than $1.0 million.
We have designated 50,000 shares of our preferred stock as Series D
Convertible Preferred Stock ("Series D Preferred"). In July and August 1998, we
issued 50,000 shares of the Series D Preferred in exchange for consideration
equal to $10.00 per share, all of which has been converted and sold.
We have designated 500,000 shares of our preferred stock as Series E
Convertible Preferred Stock ("Series E Preferred"). In September 1998, we issued
25,000 shares of the Series E Preferred in exchange for consideration equal to
$10.00 per share. The common stock underlying the 25,000 shares of Series E
Preferred was previously registered and sold. In August 1999, we issued an
additional 125,000 shares of Series E Preferred. The Series E Preferred
has a liquidation preference of $10.00 per share and cumulates dividends at the
rate of 6% per annum, payable quarterly in arrears in cash or shares of common
stock at our option, at the conversion rate described below. If we in our
discretion decide 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 E Preferred, such that upon each conversion of the Series E Preferred
by its holders, we will pay all accumulated and unpaid dividends owed as of the
date of such conversion. The Series E Preferred is convertible, at the option of
its holders, 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 our 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 our 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 we determine to reprice the warrant to purchase
500,000 shares of common stock issued in June 1996 to a party unaffiliated with
the Augustine Fund, L.P. (the "Augustine Fund") (the "Third Party Warrant") to a
price below the conversion price that otherwise would be applicable to the
Series E Preferred, then the conversion price of the Series E Preferred shall be
reduced to the exercise price of the Third Party Warrant (the "Applicable Series
E Conversion Rate"). At our option, if any shares of Series E Preferred remain
outstanding on September 30, 2001, then all or any part of such Series E
Preferred as we elect will be converted in accordance with the procedure
described above as if its holders 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. We may not redeem the Series E Preferred prior to
September 30, 2000. Thereafter, on the sole authority of our Board of Directors,
we may, at our option and at any time prior to notice of conversion of the
Series E Preferred redeem all or any part of the Series E Preferred at the time
issued and outstanding for an amount in cash equal to $11.75 per share plus any
accumulated and unpaid dividends.
Page 12
<PAGE>
All shares of Series E Preferred will (i) rank PARI PASSU with our Series D
Preferred issued pursuant to a Securities Purchase Agreement (the "Securities
Purchase Agreement") dated as of July 31, 1998 with the Augustine Fund, L.P.,
(ii) rank senior to any class or series of our capital stock hereafter created
(unless otherwise agreed to by a majority of the Selling Security Holders of the
Series E Preferred then outstanding), and (iii) rank junior to all of our
preferred stock issued and outstanding as of the date of execution of the
Securities Purchase Agreement. Upon our liquidation, dissolution or winding up,
whether voluntary or involuntary, resulting in any distribution of our assets to
our stockholders, the security holder of the Series E Preferred then issued and
outstanding shall be entitled to receive out of our assets available for
distribution to our stockholders, an amount equal to $10.00 per share of Series
E Preferred plus any accumulated but unpaid dividends, and no more, before any
payment or distribution of our assets to us is made to or set apart for the
holders of any junior securities.
We have designated 550,000 shares of our preferred stock as Series F
Convertible Preferred Stock ("Series F Preferred"). In July 1998, we issued
50,000 shares of Series F Preferred as part of the consideration for the
purchase of the Series E Preferred. In August 1999, we issued an additional
175,000 shares of Series F Preferred as part of the consideration for the
purchase of the Series E Preferred. The Series F Preferred is not entitled to
dividends, has no stated value and has a term of three years. Each share of
Series F Preferred is convertible into one share of our common stock upon
payment of the Conversion Price. The Conversion Price is an amount equal to 125%
of the Fair Market Value of our common stock on the date of issuance of the
shares of Series F Preferred. Fair Market Value on any date shall mean (i) if
the common stock is listed on an exchange or exchanges, or admitted for trading
on the Nasdaq Stock Market, any national securities exchange, the OTC Bulletin
Board or any other market, the closing bid price of the common stock on the date
of issuance of the shares of Series F Preferred or (ii) if the common stock is
not listed on an exchange or quoted on the Nasdaq Stock Market, an amount
determined in good faith by our Board of Directors. On the date that is three
years from the date of issuance of the shares of Series F Preferred, all shares
of Series F Preferred that have not been converted and are outstanding shall
automatically be canceled and redeemed back to us, and the holder of such shares
of unconverted Series F Preferred shall receive from us the total of the par
value price per share ($.001) multiplied by the aggregate number of shares of
unconverted Series F Preferred. Upon our liquidation, dissolution or winding-up,
the holders of Series F Preferred will not be entitled to receive anything out
of our assets in respect of each share of Series F Preferred.
On May 26, 1999, at our annual meeting of stockholders, our stockholders
approved the issuance to the Augustine Fund of shares of our Series E Preferred
and Series F Preferred which, upon conversion, may convert into a number of
shares of common stock in excess of 20% of our total number of shares
outstanding at the date of our agreement with the Augustine Fund.
ANTI-TAKEOVER EFFECTS
Delaware law and our Certificate of Incorporation could make our
acquisition and the removal of our incumbent officers and directors by means of
a tender offer, a proxy contest or otherwise more difficult. These provisions,
summarized below, are expected to discourage coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
us to negotiate first with our management. We believe that the benefits of
increased protection of our potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging these proposals because negotiation of these
proposals could result in an improvement of their terms.
We are governed by Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless the "business combination" or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns or owned, within three prior years, 15% or
more of a corporation's voting stock. The existence of this provision would be
expected to have an anti-takeover effect with respect to transactions not
approved in advance by our Board of Directors, including discouraging attempts
that might result in a premium over the market price for the shares of common
stock held by our stockholders.
Also, the authorization of undesignated preferred stock makes it possible
for our Board of Directors to issue preferred stock with voting or other rights
or preferences that could impede the success of any attempt to change our
control. These and other provisions may have the effect of deterring hostile
takeovers or delaying changes in our control or management.
Page 13
<PAGE>
PLAN OF DISTRIBUTION
On January 14, 1999, we sold, pursuant to a Securities Purchase Agreement
(the "Purchase Agreement"), an aggregate of 1,700,000 shares of Series C
Preferred to Strategic Capital Consultants ("Strategic Capital"). Our
gross proceeds from this transaction were $1,700 and our net proceeds were
$1,700. Upon conversion of the 500,000 shares of Series C Preferred into
the shares of common stock offered under this prospectus, we will receive from
Strategic Capital a total of $250,000.
On August 2, 1999 we sold, pursuant to a Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of July 31, 1998 with the
Augustine Fund, L.P. (the "Augustine Fund"), an aggregate of 125,000 shares of
Series E Preferred to the Augustine Fund, and in connection with the sale of the
Series E Preferred, issued an aggregate of 175,000 shares of Series F Preferred
to the Augustine Fund. The Series E Preferred and the Series F Preferred are
hereinafter collectively referred to as the Preferred Stock. Our gross proceeds
from this transaction were $750,000 and our net proceeds were $694,458.
Pursuant to the Securities Purchase Agreement, until July 31, 2000, the
Augustine Fund agreed to purchase and we agreed to sell a minimum of 150,000
shares of Series E Preferred, in each case in a series of tranches, each of
which will be for the purchase and sale of a minimum of 10,000 shares of Series
E Preferred and a maximum of 30,000 shares of Series E Preferred in any given
tranche.
The Selling Security Holders have advised us that the sale or distribution
of the common stock may be effected directly to purchasers by the Selling
Security Holders as a principal 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 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 as determined by the
Selling Security Holders or by agreements between the Selling Security Holders
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 purchasers 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 each of the Selling Security Holders may 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 their
shares, the Selling Security Holders, any selling broker or dealer and any
"affiliated purchasers" may be subject to Regulation M under the Exchange Act
until its participation in the distribution is completed.
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 an exemption
from registration or qualification is available and is complied with. Upon
request of the Selling Security Holders, we will make all applicable filings
under state securities or blue sky laws.
The Selling Security Holders 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 Security Holders. The foregoing may affect the marketability of the
shares of common stock.
We will pay all expenses of the registration of the shares, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Security
Holders will pay all underwriting discounts and selling commissions, if any. We
will indemnify the Selling Security Holders against certain civil liabilities,
including certain liabilities under the Securities Act, or the Selling Security
Holders will be entitled to contribution from us relating to these liabilities.
Page 14
<PAGE>
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and executive
officers and any of our other officers, employees and agents to the fullest
extent permitted by Delaware law. Our Bylaws also empower us to enter into
indemnification agreements with any such persons and to purchase insurance on
behalf of any person whom we are required or permitted to indemnify.
Our Certificate of Incorporation provides that, pursuant to Delaware law,
our directors shall not be liable for monetary damages for breach of the
director's fiduciary duty of care to us and to our 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, 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 that 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 us pursuant to
the foregoing provisions, we have 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.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Troop Steuber Pasich Reddick & Tobey, LLP.
EXPERTS
The financial statements included in our Annual Report on Form 10-KSB for
our fiscal year ended June 30, 1998 and incorporated by reference in this
Prospectus and the Registration Statement of which this prospectus is a part
have been audited by Singer Lewak Greenbaum & Goldstein, LLP, 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.
Page 15
<PAGE>
3,755,303 SHARES
IAT RESOURCES CORPORATION
COMMON STOCK
PROSPECTUS
AUGUST __, 1999
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE
OFFER OR SOLICITATION IS UNLAWFUL.
TABLE OF CONTENTS
Page
WHERE YOU CAN FIND MORE INFORMATION..................................1
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE..................................................1
CAUTIONARY NOTICE REGARDING FORWARD-
LOOKING STATEMENTS...................................................2
PROSPECTUS SUMMARY...................................................3
RISK FACTORS.........................................................4
USE OF PROCEEDS.....................................................10
SELLING SECURITY HOLDERS............................................10
DESCRIPTION OF CAPITAL STOCK........................................12
PLAN OF DISTRIBUTION................................................14
DISCLOSURE OF COMMISSION POSITION FOR
INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES..................................................15
LEGAL MATTERS.......................................................15
EXPERTS.............................................................15
Page 16
<PAGE>
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 us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................. $ 1,109.22
Nasdaq filing fee................................................. 5,000.00
Legal fees and expenses........................................... 3,000.00
Accounting fees and expenses ..................................... 2,500.00
Miscellaneous expenses............................................ 2,000.00
------------------
Total................................................ $ 13,609.22
------------------
</TABLE>
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 our Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VII of our Bylaws provides for the indemnification of
officers, directors and third parties acting on our behalf if such person acted
in good faith and in a manner reasonably believed to be in and not opposed to
our best interests, and, with respect to any criminal action or proceeding, the
indemnified party had no reason to believe his or her conduct was unlawful.
We have entered into indemnification agreements with our directors
and executive officers, in addition to indemnification provided for in our
Bylaws, and we intend to enter into indemnification agreements with any new
directors and executive officers in the future.
ITEM 16. EXHIBITS
2.1 Agreement and Plan of Merger, dated September 15, 1997, by
and among The Producers Entertainment Group Ltd., TPEG
Acquisition I Corp., The Grosso-Jacobson Entertainment
Corporation, Salvatore Grosso and Lawrence S. Jacobson. (3)
2.2 Agreement and Plan of Merger, dated September 15, 1997, by
and among The Producers Entertainment Group Ltd., TPEG
Acquisition II Corp., The Grosso-Jacobson Productions,
Inc., Salvatore Grosso and Lawrence S. Jacobson. (3)
2.3 Agreement and Plan of Merger, dated September 15, 1997, by
and among The Producers Entertainment Group Ltd., TPEG
Acquisition III Corp., Grosso-Jacobson Music Company, Inc.,
Salvatore Grosso and Lawrence S. Jacobson. (3)
2.4 Agreement of Merger dated as of July 15, 1998, by and among
The Producers Entertainment Group Ltd., TPEG Merger
Company, MWI Distribution, Inc. and Tom Daniels and Craig
Sussman. (4)
3.1 Restated Certificate of Incorporation, dated June 24, 1993.
(2)
3.2 Amendment to Certificate of Incorporation, dated April 28,
1998. (1)
3.3 Amendment to Certificate of Incorporation, dated May 26,
1999.
3.4 Bylaws. (1)
3.5 Amendment No. 1 to Bylaws. (1)
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 Securities Purchase Agreement, dated January 14, 1999
between the Company and Strategic Capital Consultants. (5)
4.5 Securities Purchase Agreement, dated January 14, 1999
between the Company and Mountaingate Productions, LLC. (5)
4.6 Certificate of Designations for Series C Preferred Stock,
dated March 26, 1999. (5)
Page 17
<PAGE>
4.7 Certificate of Designations for Series D Preferred Stock,
dated July 31, 1998.(1)
4.8 Certificate of Designations for Series E Preferred Stock,
dated July 31, 1998.(1)
4.9 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 Singer Lewak Greenbaum & Goldstein, LLP,
Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
- -----------------------------------
(1) Incorporated by reference to our Registration Statement on Form S-3 filed
September 1, 1998
(2) Incorporated by reference to our Report on Form 8-K dated June 18, 1996.
(3) Incorporated by reference to our Report on Form 8-K filed November 4,
1997 (as amended on December 29, 1997).
(4) Incorporated by reference to our Report on Form 8-K filed July 31, 1998.
(5) Incorporated by reference to our Report on Form 10-QSB, as amended, filed
on June 10, 1999.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have 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 us of expenses incurred or
paid by any of our directors, officers or controlling persons 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, we
will, unless in the opinion of our 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 our 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.
Page 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 27th day of August 1999.
IAT RESOURCES CORPORATION
By /s/ IRWIN MEYER
------------------------------
Irwin Meyer
Chief Executive Officer
Page 19
<PAGE>
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 1933, 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 August 27, 1999
Irwin Meyer (Principal Executive Officer)
/s/ ARTHUR BERNSTEIN
- ----------------------------------------------- Executive Vice President and Director August 27, 1999
Arthur Bernstein (Principal Financial and Accounting
Officer)
/s/ IVAN BERKOWITZ
- ----------------------------------------------- Director August 27, 1999
Ivan Berkowitz
/s/ MICHAEL ISCOVE
- ----------------------------------------------- Director August 27, 1999
Michael Iscove
/s/ THOMAS A. DANIELS
- ----------------------------------------------- Director August 27, 1999
Thomas A. Daniels
</TABLE>
Page 19
[LETTERHEAD OF TROOP STEUBER PASICH REDDICK & TOBEY, LLP]
August 31, 1999
IAT Resources Corporation
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 IAT Resources Corporation, a Delaware corporation (the "Company"), in
order to register under the Securities Act of 1933, as amended (the "Act"), up
to 3,755,303 shares of the Common Stock, par value $0.001 per share (the
"Shares") issuable pursuant to (i) that certain securities purchase agreement
between the Company and Strategic Capital Consultants dated January 14, 1999 (
the "Strategic Agreement") and (ii) that certain Securities Purchase Agreement
dated as of July 31, 1998 between the Company and The Augustine Fund, L.P. (the
"Augustine 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 Strategic
Agreement and the Augustine 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
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
We hereby consent to the incorporation by reference in this Registration
Statemnt on Form S-3 of our report, dated October 5, 1998, which appears on the
Annual Report on Form 10-KSB of IAT Resources Corporation (formally The
Producers Entertainment Group Ltd.) and subsidiaries for the year ended June 30,
1998. We also consent to the reference to our Firm under the caption "Experts"
in the aforementioned Registration Statement.
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN, LLP
- --------------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN, LLP
Los Angeles, California
August 27, 1999
