As filed with the Securities and Exchange Commission on November 17, 1999
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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 2,170,000 $1.751 $3,799,670 $1,056.31
================== =============== ================= =================== =================
<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 November
11, 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>
PROSPECTUS
2,170,000 SHARES
IAT RESOURCES CORPORATION
COMMON STOCK
The parties listed in this prospectus under the caption "Selling Security
Holders" may from time to time offer and sell up to 2,170,000 shares of our
common stock. Certain parties will acquire the shares upon conversion of
convertible preferred stock, upon conversion of convertible debentures,
and/or upon the exercise of warrants, all of which was issued in connection
with a private placement of our securities. Additionally, one of our consultants
may from time to time offer and sell up to 270,000 shares of our common stock,
200,000 of which underlie options.
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 November 16, 1999, the closing bid price for the common stock
on the Nasdaq SmallCap Market was $1.875.
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 5 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 NOVEMBER ___, 1999
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<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, 1999;
(2) Our Quarterly Report on Form 10-QSB, as amended, for
the quarter ended September 30, 1999;
(3) Our Preliminary Proxy Statement filed on November 3,
1999;
(4) The description of our common stock contained in our
Registration Statement on Form 8-A filed on September
9, 1996; and
(5) 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 September 23, 1999, we announced that we had signed a definitive
agreement to merge with Infolocity, Inc., a privately held internet company
engaged in the operation of InvestorFacts, a business-to-business internet
service. Through its proprietary search technology, Infolocity assists publicly
traded companies in minimizing the impact of negative or false information
posted on the internet. Upon completion of the merger, Infolocity will become
our wholly owned subsidiary, and Infolocity's stockholders will receive
approximately 7.25 million shares of our common stock. Additionally, upon
completion of the merger, Infolocity's current President Victor Holtorf will
become our Executive Vice President and Chief Operating Officer, and
Infolocity's current Chief Executive Officer James J. Cerna, Jr. will become our
Executive Vice President, Strategic Planning. Messrs. Holtorf and Cerna will
also be appointed to our Board of Directors. Completion of the merger depends
upon, among other customary closing conditions, the approval of our stockholders
and Infolocity's 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.
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<PAGE>
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 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 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 attract key personnel knowledgeable in the internet markets, 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 AND ONLINE COMMERCE
FIELDS SINCE WE HISTORICALLY NEVER HAVE OPERATED IN THESE BUSINESSES. OPERATING
IN THESE BUSINESSES WILL ALSO REQUIRE SUBSTANTIAL WORKING CAPITAL.
The internet and online commerce industries are completely new business
ventures for us, and are businesses in which we have never operated. 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 and online 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 and online commerce industries. We cannot assure
you that we will be successful in any of these areas.
WE RECENTLY ANNOUNCED THAT WE SIGNED A DEFINITIVE AGREEMENT TO MERGE WITH
INFOLOCITY. IF WE FAIL TO CONSUMMATE THE MERGER WITH INFOLOCITY OR IF WE CANNOT
SUCCESSFULLY INTEGRATE INFOLOCITY'S BUSINESS INTO OURS, OUR BUSINESS AND
FINANCIAL CONDITION COULD SUFFER.
In September 1999, we announced that we had entered into a definitive
agreement 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 the internet industry and
provide us with further opportunities to promote synergistic business
relationships among other internet companies.
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<PAGE>
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 location of adequate sources of additional funding.
Full integration of these businesses will require considerable effort
on the part of our management, who 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.
Completion of the merger depends upon a number of conditions. These
conditions include approval of the merger by our shareholders. The conditions
also include our receipt of non-competition agreements from Infolocity's
principal shareholders and non-disclosure agreements from the employees of
Infolocity. Each of the principal shareholders of Infolocity is required prior
to closing, to sign a lock-up agreement preventing the principal shareholders
from selling or transferring shares of our Common Stock received as
consideration in the merger for a specified period of time. As part of the
merger, we will enter into employment agreements with key employees of
Infolocity. Another condition to the merger is that at the time of closing we
continue to maintain our current compliance with the published net tangible
assets requirement of the Nasdaq Small Cap Market.
OUR GROWTH AND OPERATING RESULTS COULD BE IMPAIRED IF WE ARE UNABLE TO MEET OUR
CURRENT LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS.
In the event that the merger with Infolocity is completed, we estimate
that, as of September 30, 1999, our cash commitments for the next twelve months
will aggregate approximately $12,500,000 a significant portion of which are
requirements associated with the business of Infolocity. In the event that the
merger with Infolocity is not completed, we estimate that, as of September 30,
1999, our cash commitments for the next twelve months will aggregate
approximately $1,800,000.
We incur expenses associated with base compensation of key officers,
independent contractors and consultants as well as expenses related to our
office lease. We incur other general and administrative costs such as:
o staff salaries;
o employee benefits;
o employer taxes;
o premiums on insurance policies;
o marketing costs;
o office expenses;
o professional fees;
o consulting fees; and
o other expenses.
For the three months ended September 30, 1999, total cash general and
administrative expenses for all categories aggregated approximately $1,000,000.
In addition to general and administrative expenses, the required dividends on
the shares of Series A Preferred Stock are $425,000 annually. The dividends on
the Series A Preferred Stock and the Series E Preferred Stock may be paid either
in shares of our common stock or in cash.
In the event we close the acquisition of Infolocity, we believe the
cash generated from operations will be sufficient to fund the combined business
for the next twelve months. If the acquisition of Infolocity does not close, we
believe that we will require additional funding in order to continue our
operations and to establish other related businesses to our core businesses. 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 and
online commerce sectors.
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WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
For the fiscal years ended June 30, 1997, 1998 and 1999, and the three
months ended September 30, 1999, we generated revenues of $5,521,441,
$22,369,511, $2,936,718 and $120,251, respectively, and incurred net losses of
$4,592,145, $1,411,916, $2,665,052 and $919,551, respectively (without giving
effect to the payment in 1997, 1998 and 1999 of dividends of $425,000 annually,
on the Series A Preferred Stock and payment in 1999 of dividends of $66,250 on
the Series E Preferred Stock). As of September 30, 1999, we had an accumulated
deficit of ($24,356,205). 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 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.
BECAUSE OF THE LIMITED BARRIERS TO ENTRY IN THE INTERNET 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 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 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.
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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.
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.
In addition, we have received information from our key vendors and
customers with respect to their significant Year 2000 exposures which would have
a material effect on us. The financial impact on us of such third parties not
achieving high levels of year 2000 readiness cannot be estimated with any degree
of accuracy. In the area of business continuity, technological operations
dependent in some way on one or more third parties, the situation is much less
in our ability to predict or control. In some cases, third party dependence is
on vendors who are themselves working towards solutions to year 2000 problems.
In other cases, third party dependence is on suppliers of products and services
that are themselves computer-intensive. We are in various stages of attempting
to ascertain the state of year 2000 readiness of significant third parties. We
are taking steps to attempt to ensure that the third parties on which we are
heavily reliant are year 2000 ready, but cannot predict the likelihood of such
compliance nor the direct and indirect costs of non-readiness by those third
parties or of securing such services from alternate third parties. We are not
yet aware of any year 2000 issues relating to third parties with which we have a
material relationship. If such critical third party providers experience
difficulties resulting in disruption of service to us, a shutdown of our
operations at individual facilities could occur for the duration of the
disruption.
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.
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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 September 30, 1999, we have granted options and warrants to
purchase a total of 7,432,310 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.
THE CONVERSION OF OUR CONVERTIBLE PREFERRED STOCK MAY DILUTE OUR STOCKHOLDERS'
INTERESTS AND COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.
As of September 30, 1999, we have issued and outstanding 1,000,000
shares of our Series A Preferred Stock, 2,500,000 shares of our Series C
Preferred Stock, 225,000 shares of our Series F Preferred Stock and 1,050 shares
of our Series G Preferred Stock. At our option, we can pay the dividends on our
Series A Preferred Stock in cash or in shares of common stock. No dividends are
currently due on the Series C Preferred Stock. We are not required to pay
dividends on the Series F Preferred Stock; however, we are required to pay
dividends on our Series G Preferred 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. 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 and online commerce,
the trading price of our common stock could become more 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.
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<PAGE>
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 and outstanding 1,000,000 shares of Series A
Preferred Stock, 2,500,000 shares of Series C Preferred Stock, 225,000 shares of
Series F Preferred Stock and 1,050 shares of Series G 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.
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 have net income in excess of $1,000,000 in the applicable fiscal year. We
pay these dividends quarterly, in cash or in shares of our common stock.
Beginning January 1, 2000, holders of our Series G Preferred Stock will be
entitled to dividends of $60 per year per share of Series G Preferred Stock,
payable quarterly. 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 Preferred Stock, Series C Preferred Stock and Series G
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, the market price of our common stock could fall. As of November
12, 1999, we had outstanding approximately 13,117,737 shares of our common
stock. The 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, as of September 30, 1999 holders of options and warrants
may acquire approximately 7,432,310 shares of Common Stock and holders of shares
of our Series A Preferred Stock, Series C Preferred Stock, Series F Preferred
Stock and Series G Preferred Stock may acquire shares of Common Stock at various
conversion rates.
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:
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<PAGE>
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 November 15, 1999 was 1.875 and our net
tangible assets at November 15, 1999 was $2,613,124. 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.
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. See
"Selling Security Holders."
SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Security
Holders and 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.
We initially issued convertible debentures to each of the Selling
Security Holders listed below other than to Continental Capital & Equity
Corporation which received shares of our Common Stock and options to purchase
Common Stock. In September 1999, we authorized the exchange of all of the
convertible debentures for shares of our Series G Convertible Preferred Stock.
In September 1999, holders of an aggregate of $1,050,000 of our convertible
debentures elected to convert their debentures into Series G Convertible
Preferred Stock.
<TABLE>
<CAPTION>
Number of Shares of
Number of Shares Common Number of Number of
of of Series Stock Shares of Shares of Percentage
Shares of G Underlying Common Common Common of
Common Preferred Series G Stock Stock Stock Outstanding
Name of Selling Stock Stock Preferred Underlying Underlying Offered Common
Security Holders Owned Owned Stock(1) Debentures(2) Warrants Hereby Stock (19)
- ---------------------- ---------- ---------- ---------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Britannica Associates 0 575 460,000 20,000 90,000 570,000(3) 4.35%
Limited
c/o Wickhams Cay #2,
3rd Floor
Omar Hodge Bldg.,
Road Town
Tortola, B.V.I.
IIG Equity Fund, N.V. 0 0 0 0 15,000 15,000(4) (*)
c/o The International
Group
17 Shale Street. 18th
Fl.
New York, NY 10004
Page 11
<PAGE>
Spiga Limited 0 375 300,000 36,000 48,000 384,000(5) 2.93%
c/o Europa
Management Limited
Skelton Bldg.,
Road Town
Tortola, B.V.I.
Venezuela Recovery 0 100 80,000 0 15,000 95,000(6) (*)
Fund N.V.
c/o Citco Fund
Services
Kaya Flamboyan #9
Curacao, Netherland
Antilles
Lina Abballe 0 0 0 240,000 45,000 285,000(7) 2.17%
Apt. #7, Via
Mecenate, 77
Rome, Italy 00184
Allan Rothstein 0 0 0 80,000 15,000 95,000(8) (*)
1233 Beech St. #56
Atlantic Beach, NY
11509
Albertus Vanleiden 0 0 0 48,000 9,000 57,000(9) (*)
13 Duitslandweg
2410 AC
Bodegraven,
Netherlands
Amar Rai 0 0 0 32,000 6,000 38,000(10) (*)
1000 Imperial Woods
Drive
Vestal, NY 13850
Anthony Intrieri 0 0 0 40,000 7,500 47,500(11) (*)
60 Schofeild St.
City Island, NY 10461
Gary Kaplowitz 0 0 0 80,000 15,000 95,000(12) (*)
1233 Beech St. #3
Atlantic Beach, NY
15509
Maria Calma 0 0 0 40,000 7,500 47,500(13) (*)
246 West End Ave.
Apt. 5C
New York, NY 10023
Sarah Tawaststjerna 0 0 0 16,000 3,000 19,000(14) (*)
59 St. Ives Cr.
Toronto, ON, Canada
MYN 3B5
William Duncan 0 0 0 32,000 6,000 38,000(15) (*)
12085 Valley Heart
Drive
Studio City, CA 91604
Gabriel Cerrone 0 0 0 80,000 15,000 95,000(16) (*)
33 Phaeton Drive
West Hills, NY 11747
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<PAGE>
Joseph Schottland 0 0 0 16,000 3,000 19,000(17) (*)
40 23rd Avenue
Venice, CA 90291
Continental Capital 70,000 0 0 0 200,000 270,000(18) 2.06%
& Equity
Corporation
195 Wekiva Springs
Road, Suite 200
Longwood, FL 32779
(*) Less than one percent.
<FN>
(1) The number of shares of common stock underlying the preferred stock
identified in the table assumes conversion into common stock at a rate of
$1.25 per $1,000 per share of preferred stock. The conversion rate and
the number of shares of common stock issuable upon conversion of the
preferred stock is subject to further adjustment under certain
circumstances. Accordingly, the number of shares of common stock issuable
upon conversion of the preferred stock may increase or decrease from time
to time. See "Plan of Distribution."
(2) The number of shares of common stock underlying the debentures assumes
conversion into common stock at a conversion rate of 1.25. The conversion
rate and the number of shares of common stock issuable upon conversion of
the debentures is subject to further adjustment under certain
circumstances. Accordingly, the number of shares of common stock issuable
upon conversion of the debentures may increase or decrease from time
to time. See "Plan of Distribution."
(3) On August 27, 1999, we issued and sold to Brittanica a convertible
debenture in the principal amount of $375,000. On that date, we also
granted Brittanica warrants to acquire an aggregate of 56,250 shares of
common stock. Subsequent thereto, we exchanged this debenture for 375
shares of Series G Preferred Stock. This registration statement includes
300,000 shares of common stock to be issued upon conversion of this
preferred stock. On September 24, 1999, we issued and sold to Brittanica a
convertible debenture in the principal amount of $200,000. On that date, we
also granted Brittanica warrants to acquire an aggregate of 30,000 shares
of common stock. Subsequent thereto, we exchanged this debenture for 200
shares of Series G Preferred Stock. This registration statement includes
160,000 shares of common stock to be issued upon conversion of this
preferred stock. On October 20, 1999, we issued and sold to Brittanica a
convertible debenture in the principal amount of $25,000. On that date, we
also granted Brittanica warrants to acquire an aggregate of 3,750 shares of
common stock. This registration statement includes 20,000 shares of common
stock to be issued upon conversion of this debenture.
(4) On September 2, 1999, we issued and sold to IIG a convertible debenture in
the principal amount of $100,000. On that date, we also granted IIG
warrants to acquire an aggregate of 15,000 shares of common stock.
Subsequently, IIG assigned its debenture to Spiga Limited.
(5) On September 7, 1999, we issued and sold to Spiga a convertible debenture
in the principal amount of $275,000. On that date, we also granted Spiga
warrants to acquire an aggregate of 41,250 shares of common stock.
Subsequent thereto, we exchanged this debenture for 275 shares of Series G
Preferred Stock. This registration statement includes 220,000 shares of
common stock to be issued upon conversion of this preferred stock.
Subsequently, IIG Equity Fund assigned to Spiga a convertible debenture in
the principal amount of $100,000. Subsequent thereto, we exchanged this
debenture for 100 shares of Series G Preferred Stock. This registration
statement includes 80,000 shares of common stock to be issued upon
conversion of this preferred stock. On October 20, 1999, we issued and sold
to Spiga a convertible debenture in the principal amount of $25,000. On
that date, we also granted Spiga warrants to acquire an aggregate of 3,750
shares of common stock. This registration statement includes 20,000 shares
of common stock to be issued upon conversion of this debenture. On October
27, 1999, we issued and sold to Spiga a convertible debenture in the
principal amount of $20,000. On that date, we also granted Spiga warrants
to acquire an aggregate of 3,000 shares of common stock. This registration
statement includes 16,000 shares of common stock to be issued upon
conversion of this debenture.
(6) On September 24, 1999, we issued and sold to Venezuela a convertible
debenture in the principal amount of $100,000. On that date, we also
granted Venezuela warrants to acquire an aggregate of 15,000 shares of
common stock. Subsequent thereto, we exchanged this debenture for 100
shares of Series G Preferred Stock. This registration statement includes
80,000 shares of common stock to be issued upon conversion of this
preferred stock.
(7) On September 24, 1999, we issued and sold to Lina Abballe a convertible
debenture in the principal amount of $300,000. On that date, we also
granted Ms. Abballe warrants to acquire an aggregate of 45,000 shares of
common stock. This registration statement includes 240,000 shares of common
stock to be issued upon conversion of this debenture.
(8) On October 20, 1999, we issued and sold to Allan Rothstein a convertible
debenture in the principal amount of $100,000. On that date, we also
granted Mr. Rothstein warrants to acquire an aggregate of 15,000 shares of
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<PAGE>
common stock. This registration statement includes 80,000 shares of common
stock to be issued upon conversion of this debenture.
(9) On October 20, 1999, we issued and sold to Albertus Vanleiden a
convertible debenture in the principal amount of $60,000. On that date, we
also granted Mr. Vanleiden warrants to acquire an aggregate of 9,000 shares
of common stock. This registration statement includes 48,000 shares of
common stock to be issued upon conversion of this debenture.
(10) On October 20, 1999, we issued and sold to Amar Rai a convertible
debenture in the principal amount of $40,000. On that date, we also granted
Mr. Rai warrants to acquire an aggregate of 6,000 shares of common stock.
This registration statement includes 32,000 shares of common stock to be
issued upon conversion of this preferred stock.
(11) On October 20, 1999, we issued and sold to Anthony Intieri a convertible
debenture in the principal amount of $50,000. On that date, we also granted
Mr. Intieri warrants to acquire an aggregate of 7,500 shares of common
stock. This registration statement includes 40,000 shares of common stock
to be issued upon conversion of this debenture.
(12) On October 20, 1999, we issued and sold to Gary Kaplowitz a convertible
debenture in the principal amount of $100,000. On that date, we also
granted Mr. Kaplowitz warrants to acquire an aggregate of 15,000 shares of
common stock. This registration statement includes 80,000 shares of common
stock to be issued upon conversion of this debentue
(13) On October 20, 1999, we issued and sold to Maria Calma a convertible
debenture in the principal amount of $50,000. On that date, we also granted
Ms. Calma warrants to acquire an aggregate of 7,500 shares of common stock.
This registration statement includes 40,000 shares of common stock to be
issued upon conversion of this debenture.
(14) On October 20, 1999, we issued and sold to Sarah Tawaststjerna a
convertible debenture in the principal amount of $20,000. On that date, we
also granted Ms. Tawaststjerna warrants to acquire an aggregate of 3,000
shares of common stock. This registration statement includes 16,000 shares
of common stock to be issued upon conversion of this debenture.
(15) On October 22, 1999, we issued and sold to William Duncan a convertible
debenture in the principal amount of $40,000. On that date, we also granted
Mr. Duncan warrants to acquire an aggregate of 6,000 shares of common
stock. This registration statement includes 32,000 shares of common stock
to be issued upon conversion of this debenture.
(16) On October 22, 1999, we issued and sold to Gabriel Cerrone a convertible
debenture in the principal amount of $100,000. On that date, we also
granted Mr. Cerrone warrants to acquire an aggregate of 15,000 shares of
common stock. This registration statement includes 80,000 shares of common
stock to be issued upon conversion of this debenture.
(17) On October 22, 1999, we issued and sold to Joseph Schottland a convertible
debenture in the principal amount of $20,000. On that date, we also granted
Mr. Schottland warrants to acquire an aggregate of 3,000 shares of common
stock. This registration statement includes 16,000 shares of common stock
to be issued upon conversion of this debenture.
(18) On September 3, 1999, we issued 70,000 shares of common stock to
Continental as compensation for consulting services. On that date, we also
granted Continental options to acquire an aggregate of 200,000 shares of
common stock, of which 50,000 are currently exercisable. Of the remaining
options, 50,000 vest on December 1, 1999, 50,000 vest on March 1, 2000 and
50,000 vest on June 1, 2000.
(19) Based on 13,117,737 shares outstanding as of November 12, 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
convertible debentures and the preferred stock and/or upon exercise of the
warrants. 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.
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<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 15
<PAGE>
PLAN OF DISTRIBUTION
In August, 1999, we authorized the issuance and sale of (i) up to
$4,000,000 principal amount of our 6% Convertible Subordinated Debentures Due
2001 (the "Debentures") convertible into shares of common stock; (ii) Series A
Stock Purchase Warrants (the "Series A Warrants") to purchase up to 400,000
shares of common stock at an exercise price of $1.25625 per share and (iii)
Series B Stock Purchase Warrants (the "Series B Warrants" and together with the
Series A Warrants, the "Warrants," and collectively with the the Debentures, the
"Securities") to purchase up to 300,000 shares of common stock at an exercise
price of $1.361 per share. We propose to issue and sell an aggregate of up to
$4,000,000 principal amount of the Debentures, 300,000 Series A Warrants and
300,000 Series B Warrants in units (the "Units") each consisting of $10,000
principal amount of Debentures, 750 Series A Warrants and 750 Series B Warrants.
We have agreed to issue and sell the Securities at a purchase price of $10,000
per Unit (the "Purchase Price") in a series of closings (the "Closings"). The
Debentures generally have equivalent rights, preferences, limitations and
privileges to the Series G Convertible Preferred Stock (the "Series G
Preferred") described below.
On August 27, 1999 we sold a 6% Convertible Subordinated Debenture in
the principal amount of $375,000 to Brittanica Associates Limited
("Brittanica"). We also granted Brittanica warrants to purchase an aggregate of
56,250 shares of common stock. On September 24, 1999, we sold a 6% Convertible
Subordinated Debenture in the principal amount of $200,000 to Brittanica. We
also granted Brittanica warrants to purchase an aggregate of 30,000 shares of
common stock. On October 20, 1999, we sold a 6% Convertible Subordinated
Debenture in the principal amount of $25,000 to Brittanica. We also granted
Brittanica warrants to purchase an aggregate of 3,750 shares of common stock.
On September 2, 1999, we sold a 6% Convertible Subordinated Debenture
in the principal amount of $100,000 to IIG Equity Fund, N.V. ("IIG"). We also
granted IIG warrants to purchase an aggregate of 15,000 shares of common
stock. Subsequent thereto, IIG assigned its debenture to Spiga Limited.
On September 7, 1999, we sold a 6% Convertible Subordinated Debenture
in the principal amount of $275,000 to Spiga Limited ("Spiga"). We also granted
Spiga warrants to purchase an aggregate of 41,250 shares of common stock. On
October 20, 1999, we sold a 6% Convertible Subordinated Debenture in the
principal amount of $25,000 to Spiga. We also granted Spiga warrants to purchase
an aggregate of 3,750 shares of common stock. On October 27, 1999, we sold a 6%
Convertible Subordinated Debenture in the principal amount of $20,000 to Spiga.
We also granted Spiga warrants to purchase an aggregate of 3,000 shares of
common stock.
On September 24, 1999, we sold a 6% Convertible Subordinated Debenture
in the principal amount of $100,000 to Venezuela Recovery Fund N.V.
("Venezuela"). We also granted Venezuela warrants to purchase an aggregate of
15,000 shares of common stock.
On September 24, 1999, we sold a 6% Convertible Subordinated Debenture
in the principal amount of $300,000 to Lina Abballe. We also granted Ms. Abballe
warrants to purchase an aggregate of 45,000 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $100,000 to Allan Rothstein. We also granted Mr.
Rothstein warrants to purchase an aggregate of 15,000 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $60,000 to Albertus Vanleiden. We also granted Mr.
Vanleiden warrants to purchase an aggregate of 9,000 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $40,000 to Amar Rai. We also granted Mr. Rai warrants to
purchase an aggregate of 6,000 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $50,000 to Anthony Intrieri. We also granted Mr.
Intrieri warrants to purchase an aggregate of 7,500 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $100,000 to Gary Kaplowitz. We also granted Mr.
Kaplowitz warrants to purchase an aggregate of 15,000 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $50,000 to Maria Calma. We also granted Ms. Calma
warrants to purchase an aggregate of 7,500 shares of common stock.
On October 20, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $20,000 to Sarah Tawaststjerna. We also granted Ms.
Tawaststjerna warrants to purchase an aggregate of 3,000 shares of common stock.
On October 22, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $40,000 to William Duncan. We also granted Mr. Duncan
warrants to purchase an aggregate of 6,000 shares of common stock.
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<PAGE>
On October 22, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $100,000 to Gabriel Cerrone. We also granted Mr. Cerrone
warrants to purchase an aggregate of 15,000 shares of common stock.
On October 22, 1999, we sold a 6% Convertible Subordinated Debenture in
the principal amount of $20,000 to Joseph Schottland. We also granted Mr.
Schottland warrants to purchase an aggregate of 3,000 shares of common stock.
In September, 1999, we authorized the exchange of all issued and
outstanding Debentures for up to 4,000 shares of Series G Preferred. We have
designated 4,000 shares of our preferred stock as Series G Preferred. The Series
G Preferred has a stated value of $1,000 per share and is entitled to cumulative
dividends of $60 per year per share, payable quarterly. With respect to rights
respecting dividends, the Series G Preferred (i) ranks senior to any class or
series of our outstanding capital stock thereafter created (unless otherwise
agreed to by a majority of the holders of our Series G Preferred Stock then
outstanding) (ii) ranks senior to the shares of Series B Convertible Preferred
Stock and the shares of Series F Convertible Preferred Stock and (iii) ranks
junior to all of our other preferred stock issued and outstanding. The Series G
Preferred is convertible into common stock. The number of shares issued upon
conversion of the Series G Preferred is that number of shares of common stock as
equals $1,000 per share of Series G Preferred, plus accumulated and unpaid
dividends thereon, divided by the lesser of (a) one dollar and twenty-five and
three-eighths cents ($1.25625) or (b) eighty-five percent (85%) of the Market
Price (as hereinafter defined) of a share of common stock on the date of
conversion. The Market Price shall mean the average of the two lowest closing
bid prices for a share of common stock in the principal market on which it
trades during the ten (10) trading days preceding, but not including, the date
as of which the Market Price is being determined.
Our gross proceeds from the offer and sale of Debentures in the
aggregate principal amount of $2,000,000 was $2,000,000 and our net proceeds
were approximately $1,975,000.
Additionally, on September 3, 1999, we entered into a Market Access
Program Agreement (the "Market Access Agreement") with Continental Capital &
Equity Corporation ("Continental"). Pursuant to the Market Access Agreement, we
issued to Continental 70,000 shares of our common stock as part of its
compensation for services rendered to us. We also granted to Continental options
to purchase an aggregate of 200,000 shares of our common stock, at exercise
prices ranging from $2.00 to $5.00 per share.
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
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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.
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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, 1999 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.
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YOU MAY RELY ONLY ON THE INFORMATION
CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE 2,170,000 SHARES
INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. IAT RESOURCES CORPORATION
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR SALE OF COMMON COMMON STOCK
STOCK MEANS THAT INFORMATION
CONTAINED IN IAT RESOURCES CORPORATION
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 PROSPECTUS
BY REFERENCE...........................1
CAUTIONARY NOTICE REGARDING FORWARD-
LOOKING STATEMENTS............................. 2
PROSPECTUS SUMMARY..............................3 NOVEMBER ___, 1999
RISK FACTORS....................................5
USE OF PROCEEDS................................11
SELLING SECURITY HOLDERS.......................11
PLAN OF DISTRIBUTION...........................16
DISCLOSURE OF COMMISSION POSITION FOR
INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES.......................19
LEGAL MATTERS..................................19
EXPERTS........................................19
Page 20
<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.
SEC registration fee........................... $ 1,056.31
Nasdaq filing fee.............................. 5,000.00
Legal fees and expenses........................ 3,500.00
Accounting fees and expenses.................. 2,500.00
Miscellaneous expenses......................... 2,000.00
--------------
Total............................... $ 14,056.31
--------------
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)
4.7 Certificate of Designations for Series C Preferred Stock,
dated March 26, 1999. (5)
4.8 Certificate of Designations for Series D Preferred Stock,
dated July 31, 1998.(1)
4.9 Certificate of Designations for Series E Preferred Stock,
dated July 31, 1998.(1)
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<PAGE>
4.10 Certificate of Designations for Series F Preferred Stock,
dated July 31, 1998.(1)
4.11 Certificate of Designations, Preferences, Limitations and
Relative Rights of Series G Convertible Preferred Stock.
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).
99.1 Termination Agreement dated as of November 15, 1999 between
the Company and Astor Capital, Inc.
- -----------------------------------
(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.
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<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 16th day of November 1999.
IAT RESOURCES CORPORATION
By /s/ IRWIN MEYER
----------------------------
Irwin Meyer
Chief Executive Officer
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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 November 16, 1999
Irwin Meyer (Principal Executive Officer)
/s/ ARTHUR BERNSTEIN
- ------------------------- Executive Vice President and Director November 16, 1999
Arthur Bernstein (Principal Financial and Accounting
Officer)
/s/ IVAN BERKOWITZ
- ------------------------- Director November 17, 1999
Ivan Berkowitz
/s/ MICHAEL ISCOVE
- ------------------------- Director November 16, 1999
Michael Iscove
/s/ THOMAS A. DANIELS
- ------------------------- Director November 16, 1999
Thomas A. Daniels
</TABLE>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS
OF SERIES G CONVERTIBLE PREFERRED STOCK
OF
IAT RESOURCES CORPORATION
IAT RESOURCES CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority
conferred upon the Board of Directors in the Restated Certificate of
Incorporation and pursuant to the provisions of Section 151 of the Delaware
General Corporation Law:
RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors, in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation, the Board of Directors hereby
creates out of the previously authorized preferred stock, $.001 par value per
share, of the Corporation a series of preferred stock to consist of 4,000
shares, and the Board of Directors hereby fixes the designation and the powers,
preferences and rights, and the qualifications, limitations or restrictions of
the shares of such series as follows:
1. DESIGNATION. This resolution shall provide for a single series of
convertible preferred stock, the designation of which shall be the Series G
Convertible Preferred Stock (hereinafter the "Series G Preferred Stock") and the
number of authorized shares constituting the Series G Preferred Stock is 4,000.
The stated value of each share of Series G Preferred Stock is One Thousand
Dollars ($1,000.00). The number of authorized shares of Series G Preferred Stock
may be reduced or increased by a further resolution duly adopted by the Board of
Directors of the Corporation and by the filing of an amendment to the
Corporation's Restated Certificate of Incorporation pursuant to the provisions
of the General Corporation Law of the State of Delaware stating that such
reduction or increase has been so authorized.
2. VOTING. Except as expressly required by the laws of the State of
Delaware or as set forth herein, the holders of the Series G Preferred Stock
shall have no voting rights. Any corporate action that may require a vote of the
holders of the Series G Preferred Stock as a class shall be deemed to have been
approved by that class upon the affirmative vote by the holders of a majority of
the issued and outstanding shares of Series G Preferred Stock unless a higher
voting requirement is imposed by the Delaware General Corporation Law. If any
corporate action shall require a vote of the holders of the Series G Preferred
Stock other than as a class, the Series G Preferred Stock shall vote with the
Corporation's common stock, $.001 par value per share (the "Common Stock"), with
each share of Series G Preferred Stock entitled to that number of votes equal to
the number of shares of Common Stock into which such share of Series G Preferred
Stock would have converted if such share had been converted on the record date
for such vote.
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<PAGE>
3. DIVIDENDS.
3.1 DIVIDEND RATE. Holders of Series G Preferred Stock shall be entitled
to receive, out of any funds of the Corporation legally available for that
purpose, cumulative dividends from the date of issuance at the rate of $60 per
year per each share of Series G Preferred Stock, payable quarterly (pro-rated
for partial quarters) in arrears in cash, on the last day of March, June,
September and December of each year commencing December 31, 1999 (each such date
being hereinafter individually referred to as the "Dividend Payment Date" and
collectively as the "Dividend Payment Dates.") Each such dividend shall be paid
to the holders of record of the shares of Series G Preferred Stock as they
appear on the books of the Corporation on the record date which shall be not
less than 10 or more than 30 days prior to the related Dividend Payment Date.
Dividends on the shares of Series G Preferred Stock shall be declared and paid
to the extent the Corporation is legally able to do so and shall be cumulative
to the extent not declared and paid. Holders of shares of Series G Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of full dividends as herein provided on the shares of Series
G Preferred Stock.
3.2 DIVIDENDS ON COMMON STOCK. No dividends (other than those payable
solely in Common Stock) shall be paid with respect to the Common Stock of the
Corporation unless all accumulated and unpaid dividends on the shares of Series
G Preferred Stock shall have been declared and either paid or a sum sufficient
for the payment thereof set apart for payment on the next Dividend Payment Date.
No shares of common stock shall be purchased, redeemed or acquired by the
Corporation, and no funds shall be paid into or set aside or made available for
a sinking fund for the purchase, redemption or acquisition thereof except (A) in
transactions aggregating not more than $100,000 per year, or (B) in transactions
resulting from a legal obligation of the Corporation to redeem, purchase or
otherwise acquire its securities arising prior to the date hereof.
3.3 PRIORITIES ON DIVIDENDS. Notwithstanding anything herein to the
contrary, with respect to rights respecting dividends, all shares of Series G
Preferred Stock shall (i) rank senior to any class or series of capital stock of
the Corporation hereafter created (unless otherwise agreed to by a majority of
the holders of the Series C Preferred Stock then outstanding), (ii) rank senior
to the shares of Series B Convertible Preferred Stock and the shares of Series F
Convertible Preferred Stock and (iii) shall rank junior to all of the other
preferred stock of the Corporation issued and outstanding as of the date of
execution of this Certificate.
4. REDEMPTION. So long as the shares of Common Stock issuable upon
conversion of the shares of Series G Preferred Stock are at all times from the
Redemption Notice Date (as hereinafter defined) through the Redemption Date (as
hereinafter defined) registered under the United States Securities Act of 1933,
as amended ("Securities Act") for resale by the holder thereof and a prospectus
meeting the requirements of the Securities Act is at all such times available
for delivery by the holder, the Corporation shall have the right and option,
upon no less than twenty-two (22) days' written notice (the date on which such
notice is given being the "Redemption Notice Date") to the holder, to call and
thereafter to redeem the shares of Series G Preferred Stock to the extent they
remain outstanding and unconverted at the date fixed for such
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redemption (the "Redemption Date") in such redemption notice. The Redemption
Notice Date may not be earlier than the last date on which shares of Series G
Preferred Stock are issued, and the Redemption Date may not be later than the
ninetieth (90th) day following the last date on which shares of Series G
Preferred Stock are issued. The Secretary of the Corporation shall certify to
the holders of shares of Series G Preferred Stock the last date on which shares
of Series G Preferred Stock are issued.
On the Redemption Date, the Corporation shall pay to the holder an amount
in cash equal to $1,250.00 per share plus any accumulated and unpaid dividends;
provided, however, that the holder shall be entitled during the period between
the Redemption Notice Date and the close of business on the Redemption Date to
convert shares of Series G Preferred Stock in accordance with the provisions of
Section 5 hereof. Said notice of redemption shall require the holder to
surrender to the Corporation, on the Redemption Date, at the principal executive
offices of the Corporation, the certificate or certificates representing the
shares of Series G Preferred Stock to be redeemed. Notwithstanding the fact that
any shares of Series G Preferred Stock called for redemption have not been
surrendered for redemption and cancellation on the Redemption Date, after the
Redemption Date such shares of Series G Preferred Stock shall be deemed to be no
longer outstanding and all rights of the holders of such unsurrendered shares of
Series G Preferred Stock shall cease and terminate, other than the right to
receive the redemption price hereinbefore described, without dividends or
interest after the Redemption Date. The Corporation shall not call any shares of
Series G Preferred Stock unless the Corporation concurrently calls all shares of
Series G Preferred Stock.
5. CONVERSION.
5.1 CONVERSION RATE. Each holder of shares of Series G Preferred Stock
shall have the right, 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
as provided herein, to surrender the certificate or certificates evidencing such
shares and receive in lieu and in conversion thereof, and in lieu of accumulated
and unpaid dividends thereon, that number of shares of the Corporation's Common
Stock as equals $1,000.00 per share of Preferred Stock tendered for conversion,
plus accumulated and unpaid dividends thereon, divided by the lesser of (A) one
dollar and twenty-five and three-eights cents ($1.25625) or (B) eighty-five
percent (85%) of the Market Price (as hereinafter defined) of a share of Common
Stock on the Date of Conversion, as hereinafter defined. For purposes hereof,
"Market Price" shall mean the average of the two lowest closing bid prices for a
share of Common Stock in the principal market in which it then trades during the
ten (10) trading days preceding, but not including, the date as of which Market
Price is being determined, and the closing bid price for a share of Common Stock
in such principal market shall be such price as reported by Bloomberg, L.P.,
unless such report is demonstrably incorrect in which case it shall be the
closing bid price as reported by such other source as the Board of Directors of
the Corporation in good faith deems to be reliable. In no event, however, shall
the Conversion Price be less than the par value of Common Stock.
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<PAGE>
5.2 MECHANICS OF CONVERSION.
(a) HOLDER'S DELIVERY REQUIREMENTS. To convert Series G Preferred
Stock into full shares of Common Stock, the holder thereof shall (A) deliver or
transmit by facsimile, for receipt on or prior to 5:00 p.m., New York time (the
"Conversion Notice Deadline") on the Date of Conversion, a copy of the fully
executed notice of conversion ("Notice of Conversion") to the Corporation at the
office of the Corporation or its designated transfer agent (the "Transfer
Agent") with a copy also delivered to the Corporation, and (B) deliver or
surrender to a common carrier for delivery to the office of the Corporation or
the Transfer Agent, the original certificates representing the shares of Series
G Preferred Stock being converted (the "Preferred Stock Certificates"), duly
endorsed for cancellation. The holder of the shares of Series G Preferred Stock
shall have the right to convert fewer than the full number of shares of Series G
Preferred Stock held at any given time or represented by any certificate.
(b) CORPORATION'S RESPONSE. Upon receipt by the Corporation or the
Transfer Agent of the stock certificates respecting the shares of Series G
Preferred Stock to be converted pursuant to a Notice of Conversion (or an
indemnification undertaking reasonably satisfactory to the Corporation and the
posting of a bond if and as reasonably required by the Corporation's transfer
agent with respect to such shares in the case of their loss, theft or
destruction) together with the originally executed Notice of Conversion, the
Corporation shall, within two business days after the date of receipt (the
"Deadline"), instruct the Transfer Agent to issue and surrender to a common
carrier for either overnight or (if delivery is outside the United States) two
(2) day delivery to the address as specified in the Notice of Conversion, a
certificate for the number of shares of Common Stock to which the holder shall
be entitled as aforesaid, and the Corporation shall take all reasonable steps to
ensure that the Transfer Agent has complied with such instructions. In the case
of a dispute as to the calculation of the conversion rate, the Corporation shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed calculations to its outside accountant
via facsimile within one (1) day of receipt of such holder's Notice of
Conversion. The Corporation shall cause the accountant to perform the
calculations and notify the Corporation and the holder of the results no later
than twenty-four (24) hours from the time it receives the disputed calculations.
Such accountant's calculation shall be deemed conclusive absent manifest error.
Should the Notice of Conversion specify a smaller number of shares of Series G
Preferred Stock to be converted than are represented by the Preferred Stock
Certificate surrendered to the Corporation, then the Corporation shall
immediately issue a new Preferred Stock Certificate representing the number of
shares of Series G Preferred Stock not yet converted, and deliver the same to
the holder thereof along with the Common Stock as stated above.
(c) DATE OF CONVERSION. The date on which conversion occurs (the
"Date of Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (A) that the advance copy of the Notice of Conversion is
faxed to the Corporation before 5:00 p.m., New York time, on the Date of
Conversion, and (B) that the original Preferred Stock Certificates representing
the shares of Series G Preferred Stock to be converted, together with the
originally executed Notice of Conversion, are surrendered by delivery to the
Corporation or by depositing such certificates and Notice with a common carrier,
as provided above, and received by the Transfer Agent or the Corporation on or
prior to the third (3rd) business day following the date set forth in the Notice
of Conversion. In the event the Preferred Stock Certificates and the
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<PAGE>
originally executed Notice of Conversion are not received on or prior to
the third (3rd) business day after the date of the Notice of Conversion, the
Notice of Conversion shall be deemed null and void, and no conversion of shares
of Series G Preferred Stock shall be effected thereby. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated, as of the Date of Conversion, for all purposes as the record
holder or holders of such shares of Common Stock on the Date of Conversion.
(d) Notwithstanding anything contained herein to the contrary, if
any action is required herein to be taken by the Corporation or the Transfer
Agent on a day which is not a business day, then such action shall be deemed to
be timely if taken on the next following business day.
5.3 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If the
Common Stock issuable upon the conversion of Series G Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a reorganization, merger, consolidation or sale of assets provided for
below), then and in each such event, the holder of each share of Series G
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by holders of the
number of shares of Common Stock into which such shares of Series G Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
5.4 MERGER OR OTHER TRANSACTIONS. In the event the Corporation, at any
time while any shares of the Series G Preferred Stock are outstanding, shall be
consolidated with or merged into any other corporation or corporations or shall
sell or lease all or substantially all of its property and business as an
entirety, then lawful provisions shall be made as part of the terms of such
consolidation, merger, sale or lease so that the holder of any shares of Series
G Preferred Stock may thereafter receive in lieu of such Common Stock otherwise
issuable to him upon conversion of his shares of Series G Preferred Stock, the
same kind and amount of securities or assets as may be issuable, distributable
or payable upon such consolidation, merger, sale or lease with respect to Common
Stock of the Corporation equal to the number of shares of Common Stock into
which such shares of Series G Preferred Stock might have been converted
immediately prior to such consolidation, merger, sale or lease, all subject to
further adjustment as provided herein.
5.5 ANTI-DILUTION PROTECTION. In the event the Corporation distributes a
stock dividend on Common Stock in the form of additional shares of Common Stock
or in a stock split, reverse stock split or recapitalization divides or combines
shares of Common Stock into a greater or lesser number of shares, the number of
shares reserved for issuance upon conversion and the number of shares to be
issued upon conversion of shares of Series G Preferred Stock shall be
proportionately adjusted, as determined in good faith by the Board of Directors
of the Corporation.
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5.6 FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon conversion of Series G Preferred Stock.
If more than one certificate shall be surrendered for conversion at any one time
by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares so surrendered. In lieu of any fractional shares of Common Stock which
would otherwise be issuable upon conversion of any shares of Series G Preferred
Stock, cash in an amount equal to the product calculated by multiplying (i) such
fraction by (ii) the Market Price by (iii) one and seventeen hundred sixty-five
ten thousandths (1.1765) shall be paid by the Corporation to the holder entitled
thereto.
5.7 RESERVATION OF COMMON SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock the
number of shares of Common Stock deliverable upon conversion of all the issued
and outstanding shares of Series G Preferred Stock and shall take such action to
obtain such permits or orders as may be necessary to enable the Corporation
lawfully to issue such Common Stock upon the conversion of shares of Series G
Preferred Stock.
6. RIGHTS ON LIQUIDATION. In the event of the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, resulting in
any distribution of its assets to its shareholders, the holders of shares of the
Series G Preferred Stock then issued and outstanding shall be entitled to
receive out of the assets of the Corporation available for distribution to its
shareholders, an amount equal to the stated value of each share of Series G
Preferred Stock plus any accumulated and unpaid dividends, and no more, before
any payment or distribution of the assets of the Corporation is made to or set
apart for the holders of Common Stock. If the assets of the Corporation
distributable to the holders of shares of Series G Preferred Stock are
insufficient for the payment to them of the full preferential amount described
above, such assets shall be distributed ratably among the holders of shares of
the Series G Preferred Stock. The holders of the Common Stock shall be entitled
to the exclusion of the holders of shares of the Series G Preferred Stock to
share in all remaining assets of the Corporation in accordance with their
respective interests. For purposes of this paragraph, a consolidation or merger
of the Corporation with any other corporation or corporations shall not be
deemed to be a liquidation, dissolution or winding up of the Corporation.
Notwithstanding anything herein to the contrary, with respect to rights on a
liquidation, dissolution or winding up of the Corporation, all shares of Series
G Preferred Stock shall (i) rank senior to any class or series of capital stock
of the Corporation hereafter created (unless otherwise agreed to by a majority
of the holders of the Series C Preferred Stock then outstanding), (ii) rank
senior to the shares of Series B Convertible Preferred Stock and the shares of
Series F Convertible Preferred Stock and (iii) shall rank junior to all of the
other preferred stock of the Corporation issued and outstanding as of the date
of execution of this Certificate.
7. NOTICE. Any notice required to be given to the holders of shares of
Series G Preferred Stock or any securities issued upon conversion thereof shall
be deemed to have been given upon the earlier of personal delivery or five (5)
business days after deposit in the United States mails by registered or
certified mail, return receipt requested, with postage fully prepaid, and
addressed to each holder of record at his address as it appears on the stock
transfer records of
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the Corporation. Any notice other than a Notice of Conversion to the
Corporation shall be in writing and shall be deemed to have been given only upon
actual receipt thereof.
8. LEGEND. All certificates representing shares of Series G Preferred
Stock, all shares of Common Stock issued upon conversion thereof and any and all
securities issued in replacement thereof or in exchange therefore shall bear
such legends (or not) as shall be required by law or contract.
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<PAGE>
IN WITNESS WHEREOF, IAT RESOURCES CORPORATION has caused its corporate seal
to be affixed hereto and this certificate to be signed by its Vice President
this 15th day of November 1999.
IAT RESOURCES CORPORATION
By: /s/ ARTHUR BERNSTEIN
-------------------------------
Name: Arthur Bernstein
Its: EVP
[LETTERHEAD OF TROOP STEUBER PASICH REDDICK & TOBEY, LLP]
November 17, 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 2,170,000 shares of the Common Stock, par value $0.001 per share (the
"Shares") issuable upon conversion or exercise, as applicable, of (i) up to
$950,000 principal amount of the Company's 6% Convertible Subordinated
Debentures Due 2001 (the "Debentures"); (ii) up to 1,050 shares of Series G
Convertible Preferred Stock; (iii) the Company's Series A Stock Purchase
Warrants (the "Series A Warrants") to purchase up to 150,000 shares of common
stock at an exercise price of $1.25625 per share; and (iv) the Company's Series
B Stock Purchase Warrants to purchase up to 150,000 shares of common stock at an
exercise price of $1.361 per share.
We are of the opinion that the Shares have been duly authorized and,
upon issuance and sale pursuant to the terms of the Debenture, Certificate of
Designations of the Series G Convertible Preferred Stock and the Warrants, as
applicable, 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 ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report, dated October 8, 1999, 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, 1999. 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
November 16, 1999
TERMINATION AGREEMENT
This Termination Agreement (this "AGREEMENT") dated the 15th day of
November, 1999 is entered into by and between IAT Resources Corporation, a
Delaware corporation, formally known as The Producers Entertainment Group Ltd.,
(the "COMPANY") and Astor Capital, Inc., a California corporation ("ASTOR").
W I T N E S S E T H:
WHEREAS, the Company and Astor are parties to that certain Placement
Agreement effective as of the 25th day of August, 1999 relating to placement of
up to $4,000,000 principal amount of 6% Convertible Subordinated Debentures Due
2001 and Common Stock Purchase Warrants to purchase up to 700,000 shares of
Common Stock of the Company (the "PLACEMENT AGREEMENT");
WHEREAS, as of the date hereof, pursuant to the terms of the Placement
Agreement, the Company has issued $2,350,000 aggregate principal amount 6%
Convertible Subordinated Debentures and warrants to purchase an aggregate of
411,250 shares of common stock of the Company;
WHEREAS, as of the date hereof, pursuant to the terms of the Placement
Agreement, the Company has paid to Astor $164,500 and has issued to Astor
warrants to purchase an aggregate of 58,750 shares of common stock of the
Company;
WHEREAS, a mutual mistake has existed regarding the Placement Agreement
and in an effort to resolve all issues relating thereto the Company and Astor
have agreed to enter into this Agreement and terminate the Placement Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. TERMINATION. The Placement Agreement is hereby terminated ab initio;
provided however, the obligations of the Company and its representations,
warranties and covenants under the Placement Agreement shall continue for the
benefit for those persons who are third party beneficiaries thereunder.
2. RETURN OF PAYMENTS. Within three business days of the date hereof, Astor
shall return to the Company the consideration it received under the Placement
Agreement which consists of $164,500 and warrants to purchase 58,750 shares of
the Company's common stock.
3. COMPLETE RELEASE. With regard to any claims which may exist or arise out
of the Placement Agreement (the "Disputes"), each party expressly waives all
claims against the other party, including, without limitation, any and all
rights under Section 1542 of the Civil Code of the State of California which
provides as follows:
<PAGE>
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor."
Each party waives and releases any right or benefit which he has or may have
under any similar law or rule of any other jurisdiction pertaining to the
Disputes. It is the intention of each party, through this Agreement, fully,
finally, and forever to settle and release all such matters and claims relative
thereto which have existed , do now exist or may exist between the parties
arising out of or related to the Disputes. In furtherance of such intention, the
release herein given shall be, and remain in effect as, a full and complete
release of such matters notwithstanding the discovery of the existence of any
additional claims or facts relating thereto.
4. OWNERSHIP OF CLAIMS. Each party represents and agrees that it has not
assigned or transferred, or attempted to assign or transfer, to any person or
entity, any of the claims it is releasing in this Agreement.
5. SERVICE AS A WITNESS. Astor acknowledges that during the term of the
Placement Agreement, it has had access to confidential and proprietary
information concerning the Company, including, without limitation, access to
various proprietary and confidential contracts and financial data. Astor agrees
that it shall not at any time either during or after the term of this Agreement
serve as an "expert witness" or in any similar capacity in any litigation or
other proceeding to which the Company or any of its affiliates or subsidiaries
is a party without the prior written consent of the Company, or such affiliate
or subsidiary, as the case may be.
6. MISCELLANEOUS.
6.1 APPLICABLE LAW AND VENUE. This Agreement is executed and intended to be
performed in the State of California and the laws of such State shall govern its
interpretation and effect, without regard to the principles of conflicts of laws
thereof. If suit is instituted by any party hereto or by any other party for any
cause or matter arising from or in connection with the respective rights or
obligations of the parties hereunder, the sole jurisdiction and venue for such
action shall be the Superior Court of the State of California.
6.2 HEIRS AND ASSIGNS. Subject to any restriction on assignment contained
herein, this Agreement shall be binding upon and shall inure to the benefit of
the respective party's heirs, successors and assigns.
6.3 SEVERABILITY. Any provision in this Agreement which is, by competent
judicial authority, declared illegal, invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such illegality, invalidity or unenforceability without invalidating the
remaining provisions hereof or affecting the legality, validity or
enforceability or such provision in any other jurisdiction. The parties hereto
agree to negotiate in good faith to replace any illegal, invalid or
unenforceable provision that, to the extent possible, will preserve the economic
bargain of this Agreement, or otherwise to amend this Agreement.
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6.4 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and the counterparts shall together
constitute one and the same agreement, notwithstanding that all of the parties
are not signatory to the original or the same counterpart.
6.5 CAPTIONS. The headings and captions herein are inserted solely for the
purpose of convenience of reference and are not intended to govern, limit, or
aid in the construction of any term or provision hereof.
6.6 EXECUTION. Each of the parties hereto shall execute, acknowledge and
deliver any instrument necessary to carry out the provisions of this Agreement.
6.7 CONSTRUCTION. This Agreement has been prepared by legal counsel for the
Company. Astor has been advised and by its execution hereof acknowledges, that
it has the right to and should have this Agreement reviewed by its own separate
legal counsel. This Agreement has been negotiated at arms' length with the
benefit of or opportunity to seek legal counsel and, accordingly, shall not be
construed against any of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
THE COMPANY:
IAT RESOURCES CORPORATION
a Delaware corporation
/s/ ARTHUR BERNSTEIN
- ------------------------------
By: Arthur Bernstein
Its: EVP
ASTOR CAPITAL, INC.
a California corporation
/s/ JACQUES TIZABI
- ------------------------------
By: Jacques Tizabi
Name: Jacques Tizabi
