INTELEFILM CORP, S-4/A, 2000-08-11

INTELEFILM CORP
S-4/A, 2000-08-11
MOTION PICTURE & VIDEO TAPE PRODUCTION

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 2000

REGISTRATION NO. 333-38474

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
iNTELEFILM CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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MINNESOTA 41-1663712
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
(612) 925-8840

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF

REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHRISTOPHER T. DAHL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5501 EXCELSIOR BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
(612) 925-8840

(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE

NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPIES TO:

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AVRON L. GORDON, ESQ. JILL J. THEIS, ESQ.
CHRISTOPHER C. CLEVELAND, ESQ. GENERAL COUNSEL AND SECRETARY
BRETT D. ANDERSON, ESQ. INTELEFILM CORPORATION
JAMES R. SANKOVITZ, ESQ. 5501 EXCELSIOR BOULEVARD
BRIGGS AND MORGAN, PROFESSIONAL ASSOCIATION MINNEAPOLIS, MINNESOTA 55416
2400 IDS CENTER, 80 SOUTH EIGHTH STREET (612) 925-8894 (PHONE)
MINNEAPOLIS, MINNESOTA 55402 (612) 925-8840 (FAX)
(612) 334-8400 (PHONE)
(612) 334-8650 (FAX)
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT

If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
INTELEFILM CORPORATION MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED AUGUST 11, 2000

iNTELEFILM CORPORATION

OFFER TO EXCHANGE ONE SHARE OF COMMON STOCK
OF

iNTELEFILM CORPORATION

FOR
EVERY 13.75 OUTSTANDING SHARES OF COMMON STOCK
OF
HARMONY HOLDINGS, INC.

iNTELEFILM Corporation offers, upon the terms and subject to the conditions
set forth herein and in the related letter of transmittal, to exchange one share
of its common stock for every 13.75 outstanding shares of common stock of
Harmony Holdings, Inc.

The purpose of this offer is to enable iNTELEFILM to acquire 100% of the
outstanding common stock of Harmony. iNTELEFILM currently owns 55% of Harmony's
outstanding common stock. iNTELEFILM intends, promptly after consummation of the
offer, to seek to have Harmony consummate a merger with iNTELEFILM, or a wholly-
owned subsidiary of iNTELEFILM, in which each outstanding share of Harmony
common stock not already owned by iNTELEFILM would be converted into the same
number of iNTELEFILM shares as is paid in the offer.

The offer and withdrawal rights will expire at 12:00 midnight, Minneapolis
time, on , 2000, unless extended. Shares tendered pursuant to this
offer may be withdrawn at any time prior to the expiration of the offer, but not
during any subsequent offering period.

iNTELEFILM's common stock is quoted on the Nasdaq National Market and
trades under the ticker symbol "FILM." Harmony's common stock is quoted on the
OTC Bulletin Board and trades under the ticker symbol "HAHO." On August 2, 2000,
the closing price of one share of iNTELEFILM common stock on the Nasdaq National
Market was $2.0625 and the closing price of one share of Harmony common stock on
the OTC Bulletin Board was $0.11.

SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is , 2000.
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TABLE OF CONTENTS

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QUESTIONS AND ANSWERS ABOUT THE OFFER....................... 1
WHAT IS iNTELEFILM PROPOSING?............................. 1
WHAT WILL I RECEIVE IN EXCHANGE FOR MY SHARES OF HARMONY
COMMON STOCK?.......................................... 1
WHY SHOULD I TENDER MY SHARES OF HARMONY COMMON STOCK?.... 1
HOW DO I PARTICIPATE IN iNTELEFILM'S OFFER?............... 2
HOW LONG WILL IT TAKE iNTELEFILM TO COMPLETE THE OFFER?... 2
WHEN AND HOW CAN I WITHDRAW TENDERED SHARES?.............. 2
MAY iNTELEFILM ELECT, OR BE REQUIRED, TO EXTEND THE
DURATION OF THE OFFER?................................. 2
HOW WOULD iNTELEFILM COMPLETE ITS PROPOSED ACQUISITION OF
HARMONY?............................................... 3
WHAT ARE THE CONDITIONS TO iNTELEFILM'S OFFER?............ 3
WHAT WILL iNTELEFILM DO IF IT DOES NOT ACQUIRE AT LEAST
90% OF HARMONY'S OUTSTANDING COMMON STOCK IN THIS
OFFER?................................................. 3
FOLLOWING THIS OFFER, IF iNTELEFILM IS UNABLE TO PERFORM A
SHORT-FORM MERGER AND ELECTS NOT TO PERFORM A STATUTORY
MERGER, WHAT WOULD HAPPEN TO THE TRADING MARKET FOR
HARMONY SHARES NOT TENDERED IN THIS OFFER?............. 4
HAS HARMONY'S BOARD OF DIRECTORS RECOMMENDED THAT
HARMONY'S STOCKHOLDERS ACCEPT iNTELEFILM'S OFFER?...... 4
WILL MY RECEIPT OF iNTELEFILM SHARES BE A TAXABLE
TRANSACTION?........................................... 4
AM I ENTITLED TO DISSENTERS' RIGHTS OR RIGHTS OF
APPRAISALS IN CONNECTION WITH THE OFFER?............... 4
WHERE CAN I FIND MORE INFORMATION ABOUT iNTELEFILM AND
HARMONY?............................................... 5
WHO CAN I CALL WITH QUESTIONS ABOUT THE OFFER?............ 5
WHERE YOU CAN FIND MORE INFORMATION......................... 6
INCORPORATION OF DOCUMENTS BY REFERENCE..................... 6
SUMMARY..................................................... 8
THE iNTELEFILM OFFER...................................... 8
INFORMATION ABOUT iNTELEFILM AND HARMONY.................. 8
BENEFITS TO HARMONY STOCKHOLDERS.......................... 9
COMPARATIVE MARKET PRICE INFORMATION...................... 10
COMPARISON OF SECURITY HOLDER RIGHTS...................... 10
ACCOUNTING TREATMENT...................................... 12
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................. 12
iNTELEFILM CORPORATION SELECTED HISTORICAL FINANCIAL
INFORMATION............................................... 13
HARMONY HOLDINGS, INC. SELECTED HISTORICAL FINANCIAL
INFORMATION............................................... 15
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PAGE
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SELECTED PRO FORMA FINANCIAL DATA........................... 17
COMPARATIVE PER SHARE DATA.................................. 19
RISK FACTORS................................................ 20
iNTELEFILM'S COMMERCIAL PRODUCTION BUSINESS MAY NOT PROVE
ADVANTAGEOUS OR PROFITABLE............................. 20
iNTELEFILM MAY BE UNABLE TO ACQUIRE ADDITIONAL COMMERCIAL
PRODUCTION COMPANIES OR PRODUCTION SERVICE COMPANIES
WITHOUT ADDITIONAL FINANCING, CAUSING iNTELEFILM TO BE
UNABLE TO EXECUTE ITS BUSINESS STRATEGY................ 20
COMMERCIAL DIRECTORS AND OTHER KEY PERSONNEL COULD LEAVE
iNTELEFILM, IMPAIRING iNTELEFILM'S GROWTH,
PROFITABILITY AND PROSPECTS............................ 20
iNTELEFILM HAS INCURRED OPERATING LOSSES AND EXPECTS TO
INCUR FUTURE OPERATING LOSSES. THIS MAY PREVENT
iNTELEFILM FROM RAISING CAPITAL AND CONTINUING
OPERATIONS............................................. 21
THE SCREEN ACTORS GUILD'S STRIKE AGAINST THE ADVERTISING
AGENCIES MAY HAVE AN EFFECT ON THE BUSINESS OF
iNTELEFILM............................................. 21
iNTELEFILM MAY NOT RECOVER ANY DAMAGES IN ITS LAWSUIT
AGAINST ABC/DISNEY DESPITE JURY FINDINGS THAT ABC RADIO
HAD BREACHED ITS CONTRACT WITH iNTELEFILM AND THAT
ABC/DISNEY HAD MISAPPROPRIATED iNTELEFILM'S TRADE
SECRET INFORMATION..................................... 21
WEBWEBADTV MAY BE UNABLE TO IMPLEMENT ITS BUSINESS PLAN,
IMPAIRING iNTELEFILM'S EFFORTS TO ENTER INTO E-COMMERCE
WITH ADVERTISING AGENCIES.............................. 22
iNTELEFILM'S STOCK PRICE HAS BEEN VOLATILE DUE TO, AMONG
OTHER THINGS, CONDITIONS IN THE COMMERCIAL PRODUCTION
INDUSTRY YOU MAY BE UNABLE TO RESELL SUCH STOCK AT OR
ABOVE THE PRICE YOU PAY FOR IT......................... 22
Resales of iNTELEFILM SHARES FOLLOWING THE OFFER MAY CAUSE
THE MARKET PRICE OF SUCH STOCK TO FALL, DECREASING THE
VALUE OF THE iNTELEFILM SHARES ISSUED IN THE OFFER..... 22
iNTELEFILM DEPENDS ON MANAGEMENT SERVICES RENDERED BY AN
ENTITY WHICH MAY FAVOR ITS OWN INTERESTS OVER
iNTELEFILM'S INTERESTS................................. 23
iNTELEFILM'S MANAGEMENT HAS THE ABILITY TO SIGNIFICANTLY
AFFECT THE OUTCOME OF SHAREHOLDER VOTING, INCLUDING
POSSIBLY TAKING ACTIONS CONTRARY TO THE PREFERENCES OF
SHAREHOLDERS AT LARGE.................................. 23
iNTELEFILM'S SEVERANCE PLAN, RIGHTS PLAN, ABILITY TO ISSUE
"BLANK CHECK" PREFERRED STOCK AND APPLICABLE PROVISIONS
OF MINNESOTA LAW MAY PREVENT A CHANGE IN CONTROL,
DENYING SHAREHOLDERS THE RECEIPT OF A PREMIUM ON THEIR
COMMON STOCK........................................... 23
THE iNTELEFILM OFFER........................................ 24
OVERVIEW.................................................. 24
REASONS FOR THE iNTELEFILM OFFER.......................... 25
BACKGROUND OF THE OFFER................................... 27
TIMING OF THE OFFER....................................... 28
EXTENSION, TERMINATION AND AMENDMENT...................... 28
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PAGE
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EXCHANGE OF HARMONY SHARES; DELIVERY OF iNTELEFILM
SHARES................................................ 30
CASH INSTEAD OF FRACTIONAL SHARES...................... 30
WITHDRAWAL RIGHTS...................................... 31
PROCEDURE FOR TENDERING................................ 31
GUARANTEED DELIVERY.................................... 33
MATERIAL FEDERAL INCOME TAX CONSEQUENCES............... 34
EFFECT OF THE OFFER ON HARMONY REGISTRATION UNDER THE
EXCHANGE ACT.......................................... 35
PURPOSE OF THE OFFER; THE iNTELEFILM-HARMONY MERGER;
APPRAISAL RIGHTS...................................... 35
CONDITIONS OF THE OFFER................................ 36
RELATIONSHIPS WITH HARMONY............................. 38
FEES AND EXPENSES...................................... 38
ACCOUNTING TREATMENT................................... 38
NASDAQ NATIONAL MARKET LISTING......................... 39
MATERIAL CONTACTS BETWEEN INTELEFILM AND HARMONY............ 40
DESCRIPTION OF INTELEFILM CAPITAL STOCK..................... 42
Common Stock........................................... 42
Non-Voting Common Stock................................ 43
Preferred Stock........................................ 43
Shareholder rights plan................................ 43
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 46
iNTELEFILM............................................. 46
Harmony................................................ 47
Dividend policy of iNTELEFILM and Harmony.............. 47
COMPARISON OF SECURITY HOLDER RIGHTS........................ 47
NUMBER OF DIRECTORS....................................... 48
ELECTION OF DIRECTORS..................................... 48
REMOVAL OF DIRECTORS...................................... 48
VACANCIES ON THE BOARD OF DIRECTORS....................... 49
SHAREHOLDER ACTION BY WRITTEN CONSENT..................... 49
AMENDMENT TO INCORPORATING INSTRUMENTS.................... 50
AMENDMENT TO BYLAWS....................................... 50
CALLING OF SPECIAL MEETING OF SECURITY HOLDERS............ 50
ANTI-TAKEOVER MEASURES.................................... 51
Security holder rights plans........................... 51
Control share acquisitions............................. 51
Business combinations.................................. 52
Other anti-takeover provisions......................... 53
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PAGE
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INDEMNIFICATION........................................... 53
DISSENTERS' RIGHTS AND APPRAISAL RIGHTS IN CONNECTION WITH
CORPORATE REORGANIZATIONS AND OTHER ACTIONS............ 54
LEGAL MATTERS............................................... 55
EXPERTS..................................................... 55
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS........... 55
EXCHANGE AGENT.............................................. 60
INFORMATION AGENT........................................... 60
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QUESTIONS AND ANSWERS ABOUT THE OFFER

Q: WHAT IS iNTELEFILM PROPOSING?

A: iNTELEFILM proposes to acquire the outstanding common stock of Harmony that
it does not already own by offering to exchange iNTELEFILM shares for
Harmony shares. iNTELEFILM currently owns approximately 55% of Harmony's
outstanding common stock. iNTELEFILM intends to cause Harmony to be merged
with iNTELEFILM or a wholly owned subsidiary of iNTELEFILM after completion
of the offer. The merger would result in each share of Harmony common stock
not exchanged or accepted for exchange in the offer being converted into the
same number of iNTELEFILM shares that would have been issued to a Harmony
stockholder pursuant to the offer.

Q: WHAT WILL I RECEIVE IN EXCHANGE FOR MY SHARES OF HARMONY COMMON STOCK?

A: iNTELEFILM is offering one share of its common stock for every 13.75 shares
of Harmony common stock validly tendered and not properly withdrawn. You
will not receive any fractional iNTELEFILM shares. Instead, you will receive
cash in an amount equal to the closing sales price of any fractional
iNTELEFILM share you would otherwise have been entitled to receive.

Q: WHY SHOULD I TENDER MY SHARES OF HARMONY COMMON STOCK?

A: iNTELEFILM believes its acquisition of the outstanding common stock of
Harmony will enhance value for Harmony stockholders by, among other things:

- offering a significant premium over the price of Harmony's stock at the
time the offer was announced on March 22, 2000;

- establishing a more diversified company capable of offering numerous
lines of business, including those managed by iNTELEFILM, webADTV and
Harmony, with a greater level of resources;

- giving you ownership of a solvent company and, by virtue of iNTELEFILM's
greater financial strength, avoiding the potential sale of Harmony and/or
the cessation of its operations if it continues to lose money from
operations and incur expenses as a separate public company;

- achieving better long-term growth prospects;

- eliminating Harmony's substantial indebtedness to iNTELEFILM;

- reducing costs of operations over the long-term; and

- providing you with increased investment liquidity as a shareholder of a
company the stock of which is traded in the Nasdaq National Market.
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Q: HOW DO I PARTICIPATE IN iNTELEFILM'S OFFER?

A: To tender your shares, you should do the following:

- If you hold shares in your own name, complete and sign the enclosed
letter of transmittal and return it with your Harmony share certificates
to Wells Fargo Bank Minnesota, N.A., the exchange agent for the offer, at
the appropriate address specified on the back cover page of this document
before the expiration date of the offer.

- If you hold your shares in "street name" through a broker, instruct your
broker to tender your shares before the expiration date of the offer.

Q: HOW LONG WILL IT TAKE iNTELEFILM TO COMPLETE THE OFFER?

A: The offer will remain open until 30 days following commencement of the
offer, unless iNTELEFILM determines to provide a subsequent offering period
or is required to extend the offer due to a material change in the
information presented in this document.

Q: WHEN AND HOW CAN I WITHDRAW TENDERED SHARES?

A: Harmony shares tendered in the offer may be withdrawn by you at any time
prior to , 2000, the expiration date of the offer, and, unless
iNTELEFILM has accepted them pursuant to the offer, may also be withdrawn at
any time after , 2000 [60 DAYS AFTER COMMENCEMENT OF THE OFFER].
Your withdrawal will only be effective if the exchange agent receives a
written notice of withdrawal at the appropriate address specified on the
back cover page of this document, or by facsimile at (651) 450-4033. The
written notice must contain your name, address, social security number,
number of Harmony shares to be withdrawn, the certificate number or numbers
for such shares and the name of the registered holder of the shares, if
different from the person who tendered the shares. All signatures on the
notice of withdrawal must be guaranteed by a financial institution in
accordance with the procedures set forth in this document under "The
iNTELEFILM offer -- Withdrawal rights."

Q: MAY iNTELEFILM ELECT, OR BE REQUIRED, TO EXTEND THE DURATION OF THE OFFER?

A: Yes. iNTELEFILM may provide, at its election, a subsequent offering period
of 3 to 20 business days following completion of the initial offering period
during which Harmony stockholders can tender Harmony shares into the offer
without withdrawal rights. If used, the subsequent offering period would be
designed (a) to assist iNTELEFILM in reaching the statutory minimum
necessary to perform a short-form merger and (b) to provide Harmony
stockholders one last opportunity to tender into an offer that is otherwise
complete, thereby avoiding the delay and illiquid market that can result
after a tender offer and before the related merger. During a subsequent
offering period, iNTELEFILM would accept and promptly pay for Harmony shares
as they are tendered, providing Harmony stockholders with the same form and
amount of consideration as paid in the offer. Independent of whether
iNTELEFILM provides a subsequent offering period, it may be required to
extend the initial offering period if there is a material change in the
information contained in this document. In either event, iNTELEFILM would
amend the offer and disseminate new information to

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Harmony stockholders in a manner reasonably calculated to inform them of
such change pursuant to Rule 14d-6 under the Exchange Act.

Q: HOW WOULD iNTELEFILM COMPLETE ITS PROPOSED ACQUISITION OF HARMONY?

A: iNTELEFILM intends to complete its acquisition of Harmony by undergoing a
short-form merger pursuant to Delaware law, which allows a parent
corporation owning at least 90% of the outstanding shares of each class of a
subsidiary corporation to merge the subsidiary corporation into itself
without the approval of the stockholders of the parent corporation or of the
board of directors or stockholders of the subsidiary corporation. Assuming
that Harmony stockholders tender at least 35% of Harmony's outstanding
common stock and iNTELEFILM accepts such shares for tender, iNTELEFILM would
have sufficient voting power to effect the iNTELEFILM-Harmony merger without
the vote of any other Harmony stockholder.

Q: WHAT ARE THE CONDITIONS TO iNTELEFILM'S OFFER?

A: The offer is subject to several conditions, including:

- authorization for listing on the Nasdaq National Market of iNTELEFILM
common stock to be issued to Harmony stockholders;

- effectiveness of the registration statement covering the iNTELEFILM
common stock to be issued to Harmony stockholders, the absence of any
stop order suspending such effectiveness and receipt of all necessary
state securities law or "blue sky" authorizations;

- the absence of any temporary restraining order, preliminary or permanent
injunction or other court or government agency order or decree preventing
consummation of the offer and the absence of any statute, rule,
regulation or other similar decree prohibiting or restricting the offer
in effect at the time of the offer;

- the absence of any pending suit, action or proceeding by any governmental
entity which would be reasonably likely to have a material adverse effect
on iNTELEFILM, Harmony or the offer; and

- the absence of any other agreement or transaction involving Harmony which
would have the effect of impairing iNTELEFILM's ability to acquire
Harmony or otherwise diminish the expected economic value to iNTELEFILM
of the offer.

Q: WHAT WILL iNTELEFILM DO IF IT DOES NOT ACQUIRE AT LEAST 90% OF HARMONY'S
OUTSTANDING COMMON STOCK IN THIS OFFER?

A: iNTELEFILM needs 90% of Harmony's outstanding common stock to complete a
short-form merger. If iNTELEFILM does not acquire at least 90% in this
tender offer, it may seek to acquire additional Harmony shares, no earlier
than ten business days after the offer has terminated, through one or more
of the following actions:

- open market purchases;

- privately negotiated transactions with stockholders who have not tendered
pursuant to this offer;

- purchasing Harmony shares for cash or other forms of consideration
directly from Harmony;

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- negotiating payment of notes payable to cure the outstanding demand on
such indebtedness; or

- converting all or a portion of Harmony's indebtedness to iNTELEFILM into
Harmony shares.

If iNTELEFILM does not acquire additional Harmony shares by any of the
above methods, it may determine to continue its investment in Harmony as a
majority-owned subsidiary or complete a statutory merger.

Q: FOLLOWING THIS OFFER, IF INTELEFILM IS UNABLE TO PERFORM A SHORT-FORM MERGER
AND ELECTS NOT TO PERFORM A STATUTORY MERGER, WHAT WOULD HAPPEN TO THE
TRADING MARKET FOR HARMONY SHARES NOT TENDERED IN THIS OFFER?

If iNTELEFILM elects to continue its investment in Harmony as a
majority-owned subsidiary following this offer, the trading market for
Harmony shares not tendered in the offer would become highly illiquid.

Q: HAS HARMONY'S BOARD OF DIRECTORS RECOMMENDED THAT HARMONY'S STOCKHOLDERS
ACCEPT iNTELEFILM'S OFFER?

A: No. To iNTELEFILM's knowledge, Harmony's directors have taken no action
concerning a recommendation to its stockholders. Harmony's board consists of
five persons, three whom are directors of iNTELEFILM. INTELEFILM expects
Harmony's board to take action with respect to the offer within ten days of
its commencement.

Q: WILL MY RECEIPT OF iNTELEFILM SHARES BE A TAXABLE TRANSACTION?

A: Yes. The tender of Harmony shares by Harmony stockholders pursuant to the
offer will be taxable as capital gain or loss or as long-term gain or loss
for federal income tax purposes and may also be a taxable transaction under
applicable state, local and foreign income tax laws. See "The iNTELEFILM
offer -- Federal income tax consequences."

Q: AM I ENTITLED TO DISSENTERS' RIGHTS OR RIGHTS OF APPRAISALS IN CONNECTION
WITH THE OFFER?

A: No. Neither Minnesota nor Delaware provide dissenters' rights or rights of
appraisal in connection with the offer. Harmony stockholders who do not wish
to tender shares in the offer, however, will have the right under Delaware
law to dissent and demand appraisal of their Harmony shares in connection
with any merger which follows the offer. This would entitle such
stockholders to receive a judicial determination of, and receive payment
for, the fair value of their Harmony shares.

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Q: WHERE CAN I FIND MORE INFORMATION ABOUT INTELEFILM AND HARMONY?

A: You can find more information about iNTELEFILM and Harmony from various
sources described under "Where You Can Find More Information."

Q: WHO CAN I CALL WITH QUESTIONS ABOUT THE OFFER?

A: You can contact iNTELEFILM's information agent, Georgeson Shareholder
Communications, Inc., at (800) 223-2064.

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WHERE YOU CAN FIND MORE INFORMATION

iNTELEFILM and Harmony file annual, quarterly and special reports, proxy
statements and other information with the SEC under the Securities Exchange Act
of 1934. You may read and copy this information at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an internet site that contains reports,
proxy statements and other information about issuers, like iNTELEFILM and
Harmony, who file electronically with the SEC. The address of that site is
http://www.sec.gov.

iNTELEFILM filed a registration statement on Form S-4 to register with the
SEC the shares to be issued pursuant to the offer. This prospectus is a part of
that registration statement. As allowed by SEC rules, this prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. In addition, on the day that iNTELEFILM
commences the offer, it will file with the SEC a statement on Schedule TO
pursuant to Rule 14d-3 under the Exchange Act to furnish information about its
offer. You may obtain copies of the Form S-4 or, once filed, the Schedule TO,
and any amendments to those documents, in the manner described above.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows iNTELEFILM and Harmony to "incorporate by reference"
information they file with the SEC, which means that iNTELEFILM and Harmony can
disclose important information to you by referring you to documents they file
with the SEC. The information incorporated by reference is considered to be part
of this registration statement. Information that iNTELEFILM and Harmony later
file with the SEC will automatically update and supersede this information. This
information is available at the internet site the SEC maintains at
http://www.sec.gov, as well as from other sources. See "Where You Can Find More
Information."

iNTELEFILM incorporates by reference the documents listed below and any
future filings it will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until all of the shares covered by this registration
statement have been sold or the offer terminates:

- Annual Report on Form 10-KSB for the year ended December 31, 1999.

- Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000.

- Current Reports on Form 8-K filed on July 10, 2000, June 22, 2000, April
27, 2000, April 26, 2000, March 23, 2000, March 3, 2000, February 29,
2000, and January 19, 2000.

- Definitive Schedule 14A filed on April 28, 2000.

- Registration Statement on Form 8-A filed on June 23, 2000.

iNTELEFILM incorporates by reference the documents filed by Harmony listed
below, and any future filings it will make with the SEC under Sections 13(a),
13(c), 14
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or 15(d) of the Exchange Act until all of the shares covered by this
registration statement have been sold or the offer terminates:

- Annual Report on Form 10-K for the year ended June 30, 1999.

- Quarterly Reports on Form 10-Q for the quarters ended September 30, 1999,
December 31, 1999 and March 31, 2000.

- Current Report on Form 8-K filed on June 29, 2000, and August 6, 1999.

We have enclosed with this document one copy of iNTELEFILM's latest Annual
Report on Form 10-KSB, iNTELEFILM's latest Quarterly Report on Form 10-QSB,
Harmony's latest Annual Report on Form 10-K and Harmony's latest Quarterly
Report on Form 10-Q. You also may request additional copies or copies of the
other documents listed above from iNTELEFILM, without charge, upon written or
oral request to iNTELEFILM's information agent, Georgeson Shareholder
Communications, Inc., at (800) 223-2064. In order to receive timely delivery of
the documents, you must make your requests no later than , 2000.

7
<PAGE> 14

SUMMARY

This summary does not contain all of the information that should be
important to you. You should carefully read this entire document and the other
documents to which this document refers you to fully understand the offer.

THE iNTELEFILM OFFER (See page 24)

iNTELEFILM is offering to exchange one share of its common stock for every
13.75 shares of Harmony common stock. iNTELEFILM will accept all shares validly
tendered and not properly withdrawn. There is no minimum percentage or number of
shares that must be tendered. The consideration iNTELEFILM is offering has a
value of $0.15 per Harmony share, based on the closing price of iNTELEFILM
common stock on the Nasdaq National Market on August 2, 2000. On August 2, 2000,
the closing sales price of one share of Harmony common stock on the OTC Bulletin
Board was $0.11.

The offer expires at 12:00 midnight, Minneapolis time, on , 2000,
unless iNTELEFILM extends or is required to extend the period of time for which
the offer is open, in which case the offer will expire at a later designated
time and date.

If iNTELEFILM increases its ownership of Harmony common stock to at least
90% of Harmony's outstanding shares, it intends, promptly after completion of
the offer, to cause a merger of Harmony with iNTELEFILM or a wholly owned
subsidiary of iNTELEFILM. If the merger occurs, each share of Harmony common
stock which has not been exchanged or accepted for exchange in the offer would
be converted into the same number of iNTELEFILM shares that would have been
issued to a holder of Harmony common stock pursuant to the offer.

INFORMATION ABOUT INTELEFILM AND HARMONY

iNTELEFILM CORPORATION
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
(612) 925-8840

iNTELEFILM believes it is a leading source of services for the television
commercial production industry, offering extensive production capability and the
exclusive services of established industry talent. In addition, iNTELEFILM's
majority-owned subsidiary, webADTV.com, Inc., develops web-based applications
intended to increase productivity and communications between advertising
agencies, clients, production companies and media channels. Prior to 1999,
iNTELEFILM, operating under the name Children's Broadcasting Corporation,
created and marketed a children's entertainment format primary through a radio
network of owned, operated and affiliated radio stations. iNTELEFILM's total
revenues from production contracts and broadcast related activities in 1999 were
$67,342,653, including $39,491,545 attributable to Harmony. iNTELEFILM's
operating loss in 1999 was $6,417,487, including $2,929,033 attributable to
Harmony. INTELEFILM's total revenues from production contracts and related
activities for the three months ended March 31, 2000 were $21,739,591, including
$9,722,266 attributable to Harmony. INTELEFILM's operating loss for the three
months ended March 31, 2000 was $1,577,608, including $782,126 attributable to
Harmony. The financial statements of Harmony are consolidated with those of
iNTELEFILM. iNTELEFILM owned approximately 55% of Harmony's outstanding common
stock as of the date of this document.

8
<PAGE> 15

HARMONY HOLDINGS, INC.
5501 Excelsior Boulevard
Minneapolis, Minnesota 55416
(612) 925-8840

Harmony's primary business has been the production of television
commercials and music videos. Harmony's customers are typically advertising
agencies acting on behalf of television advertisers. Harmony's principal
operating company is The End, Inc., a wholly-owned subsidiary. Harmony also owns
a 49% equity ownership interest in Curious Pictures Corporation, all remaining
interest in which is owned by iNTELEFILM. For its fiscal year ended June 30,
1999, Harmony had total revenue from production contracts of $66,340,255. For
the nine months ended March 31, 2000, Harmony's consolidated revenues from
production contracts totaled $29,532,540. Harmony operating loss for its fiscal
year ended June 30, 1999 was $ and was $ for the nine months
ended March 31, 2000.

BENEFITS TO HARMONY STOCKHOLDERS (See page 25)

iNTELEFILM believes that its acquisition of all of the outstanding common
stock of Harmony represents an opportunity to enhance value for Harmony
stockholders. Among the benefits that iNTELEFILM believes Harmony stockholders
would obtain from the combination of iNTELEFILM and Harmony are the following:

- Significant premium. Based on March 22, 2000, closing prices, the offer
represents a premium of approximately 50%.

- Ownership of a stronger combined company. Combining iNTELEFILM and
Harmony will establish a more diversified company capable of providing a
greater level of resources.

- Ownership of a solvent company. Harmony's independent certified public
accountants have raised substantial doubt as to Harmony's ability to
continue as a going concern. Completion of the offer will provide Harmony
stockholders with ownership of a solvent company, and avoid the potential
sale of Harmony or the cessation of Harmony's operations.

- Better long-term growth prospects. Combining iNTELEFILM and Harmony
would yield better long-term growth prospects than operating the
companies separately, potentially resulting in increased shareholder
value over the long-term.

- Elimination of Harmony's indebtedness to iNTELEFILM. Combining
iNTELEFILM and Harmony will result in the elimination of approximately
$3.2 million payable by Harmony to iNTELEFILM pursuant to outstanding
promissory notes.

- Savings on operations. Combining iNTELEFILM and Harmony will result in
lower costs of operations over the long-term through the consolidation of
SEC and audit fees.

- Increased investment liquidity. iNTELEFILM shares are traded on the
Nasdaq National Market and consequently may be more easily traded than
Harmony shares, which are traded on the OTC Bulletin Board.
9
<PAGE> 16

COMPARATIVE MARKET PRICE INFORMATION (See page 46)

iNTELEFILM's common stock trades on the Nasdaq National Market under the
symbol "FILM" and Harmony's common stock trades on the OTC Bulletin Board under
the symbol "HAHO." The following table lists closing prices of iNTELEFILM common
stock and Harmony common stock and the value of the iNTELEFILM offer per share
of Harmony common stock on March 22, 2000, the last trading day before
iNTELEFILM announced its proposed offer, and on August 2, 2000, a trading day
just prior to the date of this document. The value of the offer per share of
Harmony common stock at the specified dates represents the closing price of one
share of iNTELEFILM common stock on that date multiplied by the exchange ratio
of one share of iNTELEFILM common stock for every 13.75 outstanding Harmony
shares.

<TABLE>
<CAPTION>
VALUE OF
INTELEFILM HARMONY INTELEFILM
COMMON STOCK COMMON STOCK OFFER
------------ ------------ ----------
<S> <C> <C> <C>
March 22, 2000.................... $3.9375 $0.1875 $0.2864
August 2, 2000.................... $2.0625 $0.1100 $0.1500
</TABLE>

The value of the offer will fluctuate because market prices of iNTELEFILM
common stock and Harmony common stock will change prior to consummation of the
offer, while the exchange ratio is fixed. You should obtain current stock price
quotations for iNTELEFILM common stock and Harmony common stock. You can get
these quotations from a newspaper, on the internet or by calling your broker.

COMPARISON OF SECURITY HOLDER RIGHTS (See page 47)

Upon an exchange of shares by tendering Harmony stockholders, or upon a
subsequent short-form merger of Harmony with iNTELEFILM, Harmony stockholders
whose rights are currently governed by Delaware law will become iNTELEFILM
shareholders, and their rights as such will be governed by Minnesota law and the
instruments governing iNTELEFILM. The following summarizes how Harmony
stockholder's rights will change if and when they become holders of iNTELEFILM
common stock:

- Number, election and removal of directors. Harmony currently has five
directors on its board, while iNTELEFILM has four directors. Harmony's
certificate of incorporation provides for cumulative voting in the
election of directors. INTELEFILM's articles of incorporation
specifically eliminate cumulative voting. Directors for both Harmony and
iNTELEFILM may be elected or removed with or without cause by the
affirmative vote of a majority of shares present and entitled to vote at
a regular meeting of security holders, except that if less than the
entire Harmony board is to be removed, no Harmony director may be removed
if the votes cast against such director's removal would be sufficient to
elect the director if then cumulatively voted at an election of the
entire board of directors. Vacancies on the boards of both Harmony and
iNTELEFILM may be filled by either a majority of remaining directors or
the security holders entitled to vote on the matter.

- Shareholder action by written consent. Harmony stockholders currently
may take any action required or permitted to be taken at a security
holder meeting without a meeting through a written consent signed by
holders of the minimum number of votes required to authorize the action
at a properly called meeting. iNTELEFILM

10
<PAGE> 17

shareholders may take action in writing only if signed by all the
shareholders entitled to vote on the action at a properly called meeting.

- Amendments to incorporating instruments. Harmony's certificate of
incorporation may be changed upon the board's recommendation and the
affirmative vote of a majority of the stock entitled to vote.
iNTELEFILM's articles of incorporation may be changed by the affirmative
vote of a majority of shares entitled to vote, except that an amendment
eliminating Minnesota's control share acquisition statute may also be
adopted by a special committee of the board.

- Amendments to bylaws. Harmony's bylaws may be amended or repealed by the
board or a majority of Harmony stock entitled to vote. iNTELEFILM's
bylaws may be amended or repealed by the board or shareholders, except
that certain amendments affecting the board of directors, or fixing a
quorum for shareholder meetings, may only be made by a majority vote of
shareholders. An amendment to iNTELEFILM's bylaws eliminating Minnesota's
control share acquisition statute also may be adopted by a special
committee of the board.

- Calling of special meeting of security holders. A special meeting of the
Harmony stockholders may be called by the board, the chairman of the
board, the chief executive officer, or the holders of not less than 10
percent of outstanding stock entitled to vote. A special meeting of
iNTELEFILM shareholders may be called by the chief executive officer, the
chief financial officer, two or more directors, the president, the
treasurer, or a shareholder or shareholders holding 10 percent or more of
shares entitled to vote, except that any special meeting to consider any
action to facilitate a business combination must be called by 25 percent
or more of shares entitled to vote.

- Anti-takeover measures. Both Delaware and Minnesota law have provisions
protecting security holders from potential unwanted takeovers of a
corporation that apply when such takeovers involve "interested
shareholders." Minnesota law utilizes a lower beneficial ownership
threshold to define an interested shareholder and has a shorter waiting
period restricting interested shareholders from engaging in prohibited
business combinations as compared to Delaware law. Minnesota also has a
potentially broader definition of a business combination encompassing a
larger variety of transactions. In addition, iNTELEFILM has adopted a
shareholder rights plan which may have the effect of discouraging
unsolicited mergers or acquisitions of iNTELEFILM common stock. Harmony
has not adopted a stockholder rights plan. Minnesota law includes a
control share acquisition act establishing various disclosure and
shareholder approval requirements in connection with takeovers. Delaware
law has no comparable statute. Both Minnesota and Delaware have business
combination statutes intended to deter highly leveraged takeover bids.
Further, Minnesota law contains the following provisions that Delaware
law does not contain: (a) a statute prohibiting iNTELEFILM from entering
into or amending agreements that increase compensation of offers or
directors during potential tender offers; (b) provisions prohibiting
iNTELEFILM's purchase of shares from an iNTELEFILM shareholder owning
more than five percent of the iNTELEFILM voting power; and (c) statutes
permitting the board of directors to consider the interests of employees,
customers, suppliers, creditors, the community and the economy in the
event of a proposed acquisition of an interest in iNTELEFILM.

11
<PAGE> 18

- Indemnification. Delaware law permits Harmony to indemnify officers,
directors, employees or agents against liability for proceedings against
them involving their actions when acting on behalf of the corporation.
Harmony's bylaws require that it indemnify such persons to the full
extent provided by law. Minnesota law requires iNTELEFILM indemnify
officers, directors, employees or agents against liability for
proceedings against them involving their actions when acting on behalf of
the corporation. Harmony has very similar indemnification as iNTELEFILM.

- Dissenters' rights and appraisal rights. Delaware law allows for rights
of appraisal only in select mergers or consolidations. Harmony
stockholders will be entitled to rights of appraisal in a short-form
merger which follows the offer. Minnesota law, in general, affords
dissenters' rights upon amendments to the articles of incorporation that
materially and adversely affect the rights or preferences of the shares
of the dissenting shareholder, upon the sale of substantially all
corporate assets, and upon merger or exchange by a corporation,
regardless of whether the shares of the corporation are listed on a
national securities exchange or widely held. Harmony stockholders who
become holders of iNTELEFILM common stock will have expanded dissenters'
rights.

ACCOUNTING TREATMENT (See page 38)

Shares acquired by iNTELEFILM pursuant to the offer will be accounted for
as a "purchase," as such term is used under GAAP, for accounting and financial
reporting purposes.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES (See page 34)

The tender of Harmony shares by Harmony stockholders pursuant to the offer
will constitute a taxable transaction for federal income tax purposes and may
also be a taxable transaction under applicable state, local and foreign income
tax laws. In general, a stockholder will recognize gain or loss equal to the
difference between the tax basis of his or her shares and the fair market value
of the iNTELEFILM shares received on the date of the exchange, plus the amount,
if any, of cash received as a payment for a fractional share. For federal income
tax purposes, such gain or loss will be capital gain or loss if the shares are
capital assets in the hands of the stockholder at the effective date of the
tender. The capital gain or loss will be long-term capital gain or loss with
respect to Harmony shares held for more than 12 months at that time. The capital
gain or loss will be short-term capital gain or loss with respect to Harmony
shares held for less than 12 months at that time.

12
<PAGE> 19

INTELEFILM CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION

The following is a summary of selected consolidated financial data of
iNTELEFILM for each of the years in the five-year period ended December 31,
1999, and the three months ended March 31, 1999 and 2000. Results from the
interim periods do not necessarily indicate results that may be expected from
any other annual or interim periods. This information is derived from historical
financial statements previously filed by iNTELEFILM with the SEC. See "Where You
Can Find More Information" on page 5. You should read this summary together with
these financial statements and their accompanying notes and management's
discussion and analysis. In the opinion of iNTELEFILM's management, the interim
financial information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information.

iNTELEFILM transitioned its focus from its children's entertainment format
to commercial production services within the media and entertainment industry.
This transition was effectively completed with the closing of the sales of
iNTELEFILM's radio station distribution channel in January 1999 and its
acquisition of a majority interest in Harmony and Curious Pictures, and a 100%
interest in Chelsea in March and April 1999. As a result of acquiring a majority
interest in Harmony and Curious Pictures, iNTELEFILM began consolidating these
companies in April 1999. Previous records are accounted for under the equity
method.

INTELEFILM CORPORATION
STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

13
<PAGE> 20

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
DECEMBER 31, (UNAUDITED)
------------------------------------------------ -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Gain (loss) on sale of
radio stations and
division................ (31) -- -- 26,375 16,384 16,546 --
Equity loss in Harmony.... -- -- (541) (4,058) (1,931) (1,931) --
Interest income (expense),
net..................... (1,209) (399) (2,611) (5,269) 406 (503) 63
------- ------- -------- ------- ------- ------- -------
Income (loss) before
taxes................... (6,108) (9,868) (14,559) 7,900 8,441 13,255 (1,514)
Income tax expense........ -- -- -- (330) (1,102) (3,100) (5)
------- ------- -------- ------- ------- ------- -------
Net income (loss)......... (6,108) (9,868) (14,559) 7,570 7,339 10,155 (1,519)
Accretion of preferred
stock................... -- -- -- (680) -- -- --
------- ------- -------- ------- ------- ------- -------
Net income (loss) to
common shareholders..... $(6,108) $(9,868) $(14,559) $ 6,890 $ 7,339 $10,155 $(1,519)
======= ======= ======== ======= ======= ======= =======
Basic net income (loss)
per share............... $ (2.22) $ (1.99) $ (2.33) $ 1.03 $ 1.16 $ 1.56 $ (0.24)
======= ======= ======== ======= ======= ======= =======
Diluted net income (loss)
per share............... $ (2.22) $ (1.99) $ (2.33) $ 1.03 $ 1.14 $ 1.56 $ (0.24)
======= ======= ======== ======= ======= ======= =======
Weighted average shares
outstanding............. 2,816 5,149 6,246 6,676 6,343 6,492 6,336
======= ======= ======== ======= ======= ======= =======
Weighted average shares
outstanding assuming
dilution................ 2,816 5,149 6,246 6,676 6,448 6,492 6,336
======= ======= ======== ======= ======= ======= =======
</TABLE>

INTELEFILM CORPORATION
BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------------------------- 2000
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash..................... $ 587 $ 3,370 $ 545 $ 254 $15,986 $12,935
Current assets........... 2,247 5,094 2,021 12,537 27,191 19,754
Goodwill/Broadcast
license, net........... 4,970 16,725 19,679 -- 6,730 6,475
Total assets............. 13,327 28,607 35,414 33,822 37,618 30,095
Current liabilities...... 6,668 10,583 27,727 18,045 17,328 10,948
Long-term liabilities.... 925 1,437 2,558 848 680 654
Total liabilities........ 7,593 12,020 30,285 18,893 18,008 11,602
Minority interest........ -- -- -- -- 139 248
Redeemable convertible
preferred stock........ 2,247 -- -- 2,448 -- --
Shareholders' equity..... $ 3,487 $16,587 $ 5,129 $12,481 $19,471 $18,244
</TABLE>

14
<PAGE> 21

HARMONY HOLDINGS, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION

The following is a summary of selected consolidated financial data of
Harmony for each of the years in the five-year period ended June 30, 1999, and
the nine months ended March 31, 1999 and 2000. Results from the interim periods
do not necessarily indicate results that may be expected from any other annual
or interim periods. This information is derived from historical financial
statements previously filed by Harmony with the SEC. See "Where You Can Find
More Information" on page 5. You should read this summary together with these
financial statements and their accompanying notes and management's discussion
and analysis. In the opinion of Harmony's management, the interim financial
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information.

Throughout the past five fiscal years, Harmony has operated through various
production divisions. During the fiscal years ending June 30, 1999 and 2000,
Harmony ceased operations of one of its production divisions, sold 90% of the
stock of another division and reduced its ownership of a third division to 49%
when iNTELEFILM purchased 51% of that division's outstanding common stock in
connection with the purchase of a stock option agreement from that division's
management. As of August 1, 1999, Harmony operates one division and accounts for
a second division as an equity investment.

HARMONY HOLDINGS, INC.
STATEMENT OF OPERATIONS DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31,
JUNE 30, (UNAUDITED)
----------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Contract revenue........ $61,227 $60,415 $64,831 $53,355 $66,340 $47,659 $29,533
Cost of production...... 50,920 51,041 52,174 43,617 56,347 40,718 26,500
General selling and
administrative
expenses (exclusive of
all items shown
below)................ 8,800 8,628 9,343 10,760 10,012 7,706 3,830
Subsidiary stock option
compensation.......... -- -- 75 391 2,234 326 --
Corporate charges....... 1,655 2,050 1,146 2,379 1,457 1,158 1,024
Depreciation and
amortization.......... 528 564 620 700 882 671 218
Restructuring costs and
impairment of
assets................ -- -- -- -- 3,357 3,357 --
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............ (676) (1,868) 1,473 (4,493) (7,949) (6,277) (2,039)
Gain on disposal of
production division... -- -- -- -- -- -- 120
</TABLE>

15
<PAGE> 22

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31,
JUNE 30, (UNAUDITED)
----------------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity gain in Curious
Pictures.............. -- -- -- -- -- -- 522
Interest income
(expense), net........ (9) (243) 40 25 (434) (266) (434)
------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes................. $ (685) $(2,111) $ 1,513 $(4,468) $(8,383) $(6,543) $(1,831)
Income tax expenses..... -- (20) (179) (22) (11) (10) --
------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ (685) $(2,131) $ 1,334 $(4,490) $(8,394) $(6,553) $(1,831)
======= ======= ======= ======= ======= ======= =======
Basic and diluted income
(loss) per share...... $ (0.12) $ (0.37) $ 0.20 $ (0.69) $ (1.13) $ (0.89) $ (0.24)
======= ======= ======= ======= ======= ======= =======
Basic and diluted
weighted average
shares outstanding.... 5,567 5,692 6,682 6,515 7,409 7,377 7,507
======= ======= ======= ======= ======= ======= =======
</TABLE>

HARMONY HOLDINGS, INC.
BALANCE SHEET DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
-------------------------------------------------- 2000
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------ ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash................. $ 230 $ 447 $ 2,355 $ 3,834 $ 2,911 $ --
Current assets....... 7,707 4,986 9,505 12,008 10,713 3,644
Goodwill, net........ 3,181 2,969 2,758 2,546 169 160
Total assets......... 12,955 9,687 14,505 16,927 14,121 6,317
Current liabilities.. 6,196 5,382 6,748 12,698 15,703 10,855
Long-term
liabilities........ 385 -- -- -- -- --
Total liabilities.... 6,581 5,382 6,748 12,698 15,703 10,855
Minority interest.... -- -- 75 466 2,700 --
Stockholders' equity
(deficit).......... $ 6,374 $4,304 $ 7,682 $ 3,763 $(4,281) $(4,538)
</TABLE>

16
<PAGE> 23

SELECTED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

iNTELEFILM CORPORATION

PRO FORMA STATEMENT OF OPERATIONS DATA

The following is a summary of the selected pro forma financial data
presented in full on pages 49-53.

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1999 MARCH 31, 2000
----------------- ------------------
<S> <C> <C>
Contract revenue........................... $83,617 $21,740
Cost of production......................... 70,378 18,497
Operating expenses......................... 21,675 4,862
------- -------
Loss from operations....................... (8,436) (1,619)
Gain on sale of radio stations and
division................................. 16,384 --
Interest income, net....................... 327 63
Income tax expense......................... (1,102) (5)
------- -------
Net income (loss).......................... $ 7,173 $(1,561)
======= =======
Basic net income (loss) per share.......... $ 1.09 $ (0.24)
Diluted net income (loss) per share........ $ 1.07 $ (0.24)
Weighted average shares outstanding........ 6,588 6,581
Weighted average shares outstanding --
assuming dilution........................ 6,693 6,581
</TABLE>

17
<PAGE> 24

iNTELEFILM CORPORATION

PRO FORMA BALANCE SHEET DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 2000
--------------
<S> <C>
Current assets.............................................. $19,554
Property and equipment, net................................. 3,026
Goodwill, net............................................... 7,639
Total assets................................................ 31,060
Current liabilities......................................... 10,948
Long-term debt.............................................. 654
Total liabilities........................................... 11,602
Minority interest........................................... 248
Shareholders' equity........................................ 19,209
</TABLE>

18
<PAGE> 25

COMPARATIVE PER SHARE DATA

The following table sets forth historical per share data of iNTELEFILM and
Harmony and consolidated per share data on an unaudited pro forma combined basis
after giving effect to the offer under the purchase method of accounting. The
following data should be read in conjunction with the Pro Forma Condensed
Combined Financial Statements and the separate Selected Historical Financial
Information of iNTELEFILM and Harmony. The unaudited pro forma consolidated per
common share data is provided for illustrative purposes only and is not
necessarily indicative of the consolidated financial position or consolidated
results of operations that would have been reported had the offer occurred at
the beginning of the earliest period presented or as of the dates for which such
unaudited pro forma information is presented, nor does it represent a forecast
of the consolidated financial position as of any future date or results of
operations for any future period. No pro forma adjustments have been included
herein which reflect potential effects of the efficiencies which may be obtained
by consolidating the operations of iNTELEFILM and Harmony.

<TABLE>
<CAPTION>
AS OF AND FOR THE
AS OF AND FOR THE THREE MONTHS ENDED
YEAR ENDED MARCH 31, 2000
DECEMBER 31, 1999 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
Net income (loss) per share -- basic
Historical -- iNTELEFILM................... $ 1.16 $(0.24)
Pro Forma Consolidated..................... 1.09 (0.24)
-- Historical -- Harmony................... (0.56) (0.09)
-- Equivalent Pro Forma Consolidated per
Harmony share(1)........................ 0.08 (0.02)
Net income (loss) per share -- diluted
Historical -- iNTELEFILM................... 1.14 (0.24)
Pro Forma Consolidated..................... 1.07 (0.24)
Historical -- Harmony...................... (0.56) (0.09)
Equivalent Pro Forma Consolidated per
Harmony share(1)........................ 0.08 (0.02)
Book value per common share(2)
Historical -- iNTELEFILM................... 3.10 2.84
Pro Forma Consolidated..................... 3.13 2.88
Historical -- Harmony...................... (0.51) (0.60)
Equivalent Pro Forma Consolidated per

Harmony share(1)........................ 0.23 0.21
</TABLE>

Neither iNTELEFILM nor Harmony has paid cash dividends in the past and
iNTELEFILM intends to retain future earnings, if any, to fund the development
and growth of its business. Accordingly, subsequent to the completion of this
transaction, iNTELEFILM does not anticipate paying cash dividends on its common
stock in the foreseeable future.

-------------------

(1) Each equivalent pro forma consolidated per Harmony share amount is
calculated by dividing the related pro forma consolidated per share amount
by the assumed exchange ratio of 13.75 Harmony shares for one iNTELEFILM
share.

(2) The historical book value per common share is computed by dividing total
shareholders' equity by the number of shares of common stock outstanding at
the end of the period. The pro forma consolidated book value per share is
computed by dividing pro forma shareholders' equity by the pro forma number
of shares of common stock outstanding at the end of the respective period.

19
<PAGE> 26

RISK FACTORS

An investment in the shares offered by iNTELEFILM involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information set forth in this document, in
connection with an investment in the shares offered by iNTELEFILM.

When used below and elsewhere in this document, including documents
incorporated herein by reference, the words "believes," "anticipates" and
"intends" and similar expressions are intended to identify "forward-looking
statements." Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected. Potential
purchasers of iNTELEFILM's common stock are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the date of
this document.

iNTELEFILM'S COMMERCIAL PRODUCTION BUSINESS MAY NOT PROVE ADVANTAGEOUS OR
PROFITABLE.

iNTELEFILM has changed its business focus to servicing the commercial
production and related media business industry. Although iNTELEFILM believes
favorable opportunities exist in the television commercial production industry,
the industry is highly fragmented and iNTELEFILM cannot assure you that it will
be successful in completing its business plan, or if completed, that the
business plan will be advantageous or profitable. iNTELEFILM cannot assure you
that its competitors will not try to consolidate commercial production companies
and production service companies. iNTELEFILM cannot assure you that
consolidation, if it occurs, will be advantageous or profitable. iNTELEFILM does
not have any understandings, commitments or agreements with respect to any
material future acquisitions. iNTELEFILM cannot assure you that any
acquisitions, if consummated, will be advantageous or profitable.

iNTELEFILM MAY BE UNABLE TO ACQUIRE ADDITIONAL COMMERCIAL PRODUCTION COMPANIES
OR PRODUCTION SERVICE COMPANIES WITHOUT ADDITIONAL FINANCING, CAUSING INTELEFILM
TO BE UNABLE TO EXECUTE ITS BUSINESS STRATEGY.

In order to fully execute its business strategy, iNTELEFILM must acquire
additional commercial production or production service companies. The
availability of capital may limit iNTELEFILM's ability to complete future
acquisitions as it tries to consolidate commercial production companies and
production service companies. iNTELEFILM cannot assure you that it will obtain
such financing when required or, if available, that the amount or terms of such
financing would be acceptable or favorable. Additional financing could require
the sale of equity securities, which could result in significant dilution to
iNTELEFILM shareholders.

COMMERCIAL DIRECTORS AND OTHER KEY PERSONNEL COULD LEAVE iNTELEFILM, IMPAIRING
INTELEFILM'S GROWTH, PROFITABILITY AND PROSPECTS.

The television commercial production business is driven by its personnel
and creative talent. iNTELEFILM recognizes that a major part of its success in
this industry will depend upon the hiring and continued engagement or employment
of its directors and other key personnel. To this end, iNTELEFILM has entered
into various director and employment agreements which range from one to five
years in length. However, iNTELEFILM cannot assure you that it will be able to
retain such talent, that such directors and employees will fulfill their
obligations to iNTELEFILM, or that they will

20
<PAGE> 27

seek renewal at the end of their current agreements. In general, iNTELEFILM does
not maintain life insurance on its television commercial directors or other key
personnel.

iNTELEFILM HAS INCURRED OPERATING LOSSES AND EXPECTS TO INCUR FUTURE OPERATING
LOSSES. THIS MAY PREVENT INTELEFILM FROM RAISING CAPITAL AND CONTINUING
OPERATIONS.

In general, iNTELEFILM has experienced operating losses in each quarterly
and annual period since inception. iNTELEFILM incurred operating losses of
approximately $6.4 million for the fiscal year ended December 31, 1999,
approximately $9.1 million for the fiscal year ended December 31, 1998, and
approximately $1.6 million for the three months ended March 31, 2000. If
iNTELEFILM is successful in acquiring additional commercial production companies
or production service companies, iNTELEFILM's operating expenses may increase.
If revenues do not offset any increased expenses, iNTELEFILM will incur
operating losses for the foreseeable future. iNTELEFILM will need to generate
significant increases in its revenues and operating margins to achieve and
maintain profitability. If revenues or operating margins fail to grow or grow
more slowly than iNTELEFILM anticipates, iNTELEFILM's operating losses could
significantly increase, which would harm its business, operating results and
financial condition. In addition, iNTELEFILM's failure to become and remain
profitable may adversely affect the market price of its securities and its
ability to raise capital and continue operations.

The Screen Actors Guild's strike against the advertising agencies may have an
effect on the business of iNTELEFILM.

On May 1, 2000, members of the Screen Actors Guild began a strike against
the advertising agencies that represent iNTELEFILM's customer base. This
on-going strike has limited iNTELEFILM's ability to produce television
commercials domestically and in Canada. iNTELEFILM has made an effort to limit
the effect that the strike may have on its operations by utilizing non-union
talent and continuing to produce commercials off-shore wherever possible. To
date, iNTELEFILM has experienced some loss of business as a result of the
strike. iNTELEFILM can give no assurance that an extended strike will not have a
material adverse effect on its operations.

iNTELEFILM MAY NOT RECOVER ANY DAMAGES IN ITS LAWSUIT AGAINST ABC/DISNEY DESPITE
JURY FINDINGS THAT ABC RADIO HAD BREACHED ITS CONTRACT WITH INTELEFILM AND THAT
ABC/DISNEY HAD MISAPPROPRIATED INTELEFILM'S TRADE SECRET INFORMATION.

In September 1998, a jury ruled in iNTELEFILM's favor in connection with
litigation for breach of contract and misappropriation of trade secrets that
iNTELEFILM had commenced against ABC/Disney and awarded iNTELEFILM $20 million
for breach of contract against ABC Radio, $10 million for misappropriation of
trade secret by ABC Radio and $10 million for misappropriation of trade secret
against Disney. In January 1999, the court upheld the jury's findings that ABC
Radio had breached its contract with iNTELEFILM and that ABC/Disney
misappropriated iNTELEFILM's trade secret information; however, the court
disagreed with the jury's conclusion that the evidence showed that those actions
caused damages to iNTELEFILM or that the amount of damages awarded by the jury
was supported by the evidence, and set aside the jury's verdict. The court
further ruled that in the event that the decision is reversed or remanded on
appeal, that the defendants be granted a new trial on the issues of causation
and damages. iNTELEFILM filed a notice of appeal in February 1999. In February
2000, iNTELEFILM presented its oral argument to the 8th Circuit Court of
Appeals. As of the date of this document, the 8th Circuit Court of Appeals had
not ruled on the appeal.

21
<PAGE> 28

iNTELEFILM intends to pursue its appeal of the judgment and to this end,
personnel and financial resources will be used. iNTELEFILM cannot assure you
that it will be successful on its appeal.

webADTV MAY BE UNABLE TO IMPLEMENT ITS BUSINESS PLAN, IMPAIRING INTELEFILM'S
EFFORTS TO ENTER INTO E-COMMERCE WITH ADVERTISING AGENCIES.

In January 2000, iNTELEFILM announced the formation of webADTV, a
subsidiary which intends to combine the digital archiving and retrieval service,
inteleSource, with additional web enabled services, news, and information under
development, for global advertising industries and their clientele. webADTV
plans to seek financing in order to expand and brand its infrastructure. If
webADTV is unable to obtain such financing, iNTELEFILM's efforts to enter into
e-commerce with advertising agencies would be substantially impaired. On the
other hand, if webADTV obtains such financing, iNTELEFILM's equity ownership in
webADTV would be diluted. iNTELEFILM cannot assure you that webADTV will be
successful in obtaining such financing or that such financing, if obtained, will
be sufficient to implement its business plan. Further, iNTELEFILM cannot assure
you that webADTV's business plan will be completed or that the business plan, if
completed, will be successful.

iNTELEFILM'S STOCK PRICE HAS BEEN VOLATILE DUE TO, AMONG OTHER THINGS,
CONDITIONS IN THE COMMERCIAL PRODUCTION INDUSTRY. YOU MAY BE UNABLE TO RESELL
SUCH STOCK AT OR ABOVE THE PRICE YOU PAY FOR IT.

The market price of iNTELEFILM's common stock has been subject to
significant fluctuations in response to numerous factors, including variations
in annual or quarterly financial results, changes by financial research analysts
in their estimates of iNTELEFILM's earnings, conditions in the economy in
general or in the commercial production industry in particular, unfavorable
publicity or changes in applicable laws and regulations, or related judicial or
administrative interpretations, affecting iNTELEFILM or the commercial
production industry. During 1999, the closing price of iNTELEFILM common stock
ranged from a high of $5.25 on December 8, 1999, to a low of $1.50 on May 28,
1999. During the first seven months of 2000, the closing price of iNTELEFILM's
common stock ranged from a high of $5.125 on each of January 27, 2000, January
28, 2000 and January 31, 2000, to a low of $2.00 on each of July 28, 2000 and
July 31, 2000. iNTELEFILM cannot assure you that purchasers of its common stock
will be able to resell such stock at or above the prices at which it was
purchased.

Resales of iNTELEFILM shares following the offer may cause the market price of
such stock to fall, decreasing the value of the iNTELEFILM shares issued in the
offer.

iNTELEFILM had 6,511,366 shares of common stock outstanding as of August 2,
2000, and also had warrants and options outstanding to purchase an additional
3,529,903 shares of common stock. iNTELEFILM expects that it will issue
approximately 244,880 new shares in connection with this offer. The sale of such
shares and the sale of additional shares of iNTELEFILM common stock which may
become eligible for sale in the public market from time to time upon exercise of
warrants and options could have the effect of depressing the market price for
iNTELEFILM's common stock. This could negatively affect those who receive
iNTELEFILM shares in connection with the offer.

22
<PAGE> 29

iNTELEFILM DEPENDS ON MANAGEMENT SERVICES RENDERED BY AN ENTITY WHICH MAY FAVOR
ITS OWN INTERESTS OVER INTELEFILM'S INTERESTS.

iNTELEFILM shares with Harmony management services provided by MMLLC which
is owned by Christopher T. Dahl and Richard W. Perkins, each a director of
iNTELEFILM and a director of Harmony. The management services consist of
administrative, legal and accounting services. Such arrangements may present
conflicts of interest in connection with the pricing of services provided.
During their most recent fiscal years, iNTELEFILM and Harmony made payments in
the aggregate of approximately $1.6 million to MMLLC for such services. The
potential for conflicts of interest is exacerbated by the fact that Messrs. Dahl
and Perkins have fiduciary duties to iNTELEFILM's shareholders and Harmony's
stockholders as a matter of state corporate law. iNTELEFILM has not
independently priced the services provided by MMLLC. Therefore, iNTELEFILM
cannot represent that its transactions with MMLLC were on terms as fair as those
which could have been obtained from unrelated third parties through arms-length
negotiation.

iNTELEFILM'S MANAGEMENT HAS THE ABILITY TO SIGNIFICANTLY AFFECT THE OUTCOME OF
SHAREHOLDER VOTING, INCLUDING POSSIBLY TAKING ACTIONS CONTRARY TO THE
PREFERENCES OF SHAREHOLDERS AT LARGE.

As of August 2, 2000, approximately % of iNTELEFILM's outstanding
common stock was beneficially owned by iNTELEFILM's current executive officers
and directors. Accordingly, such persons may be able to significantly influence
iNTELEFILM's business and affairs. This concentration of ownership may have the
effect of delaying, deferring or preventing a change in control of iNTELEFILM.
This could deny shareholders the receipt of a premium on their common stock and
depress the market price of iNTELEFILM common stock.

iNTELEFILM'S SEVERANCE PLAN, RIGHTS PLAN, ABILITY TO ISSUE "BLANK CHECK'
PREFERRED STOCK AND APPLICABLE PROVISIONS OF MINNESOTA LAW MAY PREVENT A CHANGE
IN CONTROL, DENYING SHAREHOLDERS THE RECEIPT OF A PREMIUM ON THEIR COMMON STOCK.

iNTELEFILM has a severance plan which provides significant benefits to two
executive officers and one non-employee director following a change in control.
Christopher T. Dahl, iNTELEFILM's Chief Executive Officer, President and
Chairman of the Board, James G. Gilbertson, iNTELEFILM's Chief Operating
Officer, and Richard W. Perkins, one of iNTELEFILM's directors, are each
eligible to receive lump sum severance payments under the plan. Based upon 1999
annual gross base salaries, the plan participants would receive an aggregate of
approximately $2.1 million following a change in control. The plan also provides
for accelerated vesting of outstanding options and other benefits following a
change in control.

iNTELEFILM also has a rights plan pursuant to which existing shareholders
may purchase from iNTELEFILM, after the distribution date as defined in the
rights agreement, that number of iNTELEFILM shares having a market value of two
times the purchase price of the rights. The rights have anti-takeover effects.
The rights will cause substantial dilution to a person or group that attempts to
acquire iNTELEFILM without conditioning the offer on a substantial number of
rights being acquired or redeemed. iNTELEFILM's board of directors, without any
action by iNTELEFILM's shareholders, also has the authority to issue the
remaining undesignated and unissued authorized shares and to fix the powers,
preferences, rights and limitations of such shares or any class or

23
<PAGE> 30

series of such shares, without shareholder approval. Persons acquiring such
shares could have preferential rights with respect to voting, liquidation,
dissolution or dividends over existing shareholders. In addition, iNTELEFILM is
subject to provisions of Minnesota law which limit the voting rights of shares
acquired in "control share acquisitions" and restrict "business combinations."

The existence of iNTELEFILM's severance plan, rights plan, ability to issue
"blank check" preferred stock and provisions of Minnesota law could deter or
delay a takeover or other change in control. This could deny shareholders the
receipt of a premium on their common stock and depress the market price of
iNTELEFILM common stock.

THE iNTELEFILM OFFER

OVERVIEW

iNTELEFILM is making an offer to acquire directly from Harmony stockholders
all of the outstanding common stock of Harmony that it does not already own. The
consideration offered is one share of iNTELEFILM common stock for every 13.75
shares of Harmony common stock validly tendered and not properly withdrawn,
subject to the terms and conditions described in this document and the related
letter of transmittal. Based on the closing price of one share of iNTELEFILM
common stock on March 22, 2000, the day prior to the announcement of the
proposed offer, the offer had a value of $0.2864 per Harmony share. On August 2,
2000, the closing sales price of one share of iNTELEFILM common stock on the
Nasdaq National Market was $2.0625 and the closing sales price of one share of
Harmony common stock on the OTC Bulletin Board was $0.11.

If iNTELEFILM obtains all of the outstanding shares of Harmony common stock
pursuant to this offer, tendering Harmony stockholders would own approximately
4% of the outstanding iNTELEFILM shares. iNTELEFILM's obligation to exchange
shares of its common stock for Harmony shares pursuant to the offer is subject
to several conditions referred to below under "Conditions of the offer."
iNTELEFILM expects Harmony's board to take action with respect to the offer
within ten days of its commencement.

The offer will expire on the expiration date. The expiration date is 12:00
midnight, Minneapolis time, on , 2000, unless iNTELEFILM extends or is
required to extend the period of time for which this offer is open, in which
case the term expiration date will be the latest time and date on which the
offer, as so extended, expires.

The offer is the first step in the completion of iNTELEFILM's acquisition
of Harmony and is intended to facilitate the acquisition of all the shares of
Harmony common stock. If iNTELEFILM ownership of Harmony reaches 90% or greater
after consummation of the offer, iNTELEFILM plans to immediately initiate a
short-form merger of iNTELEFILM and Harmony. Any Harmony stockholders who did
not tender their shares in the offer will receive one share of iNTELEFILM common
stock for every 13.75 shares of Harmony common stock in the short-form merger.

If iNTELEFILM does not reach a 90% ownership level after consummation of
the offer, iNTELEFILM may take action necessary, no earlier than ten business
days after the

24
<PAGE> 31

offer has terminated, to reach this level of ownership. Such action may include
the following:

- iNTELEFILM may acquire additional Harmony shares through open market
purchases.

- iNTELEFILM may negotiate private transactions with stockholders who have
not tendered pursuant to this offer.

- iNTELEFILM may purchase Harmony shares for cash or other forms of
consideration directly from Harmony.

- iNTELEFILM may negotiate for the payment of notes payable due from
Harmony. These unsecured demand notes payable aggregate approximately
$3.2 million and were called on March 23, 2000. Harmony was not able to
repay the notes pursuant to the demand and iNTELEFILM has granted Harmony
a temporary default forbearance on collection of the debt.

- iNTELEFILM may convert all or a portion of Harmony's $3.2 million
indebtedness to iNTELEFILM into Harmony shares.

Upon reaching a 90% ownership level through any or a combination of these
actions, iNTELEFILM plans to initiate a short-form merger of iNTELEFILM and
Harmony as described above.

If iNTELEFILM does not acquire additional Harmony shares by any of the
above methods, it may determine to continue its investment in Harmony as a
majority-owned subsidiary or perform a statutory merger. Following this offer,
if iNTELEFILM is unable to perform a short-form merger and elects not to perform
a statutory merger, the trading market for Harmony shares not tendered in the
offer would become highly illiquid.

REASONS FOR THE iNTELEFILM OFFER

iNTELEFILM believes that its proposed acquisition of Harmony represents a
compelling opportunity to enhance value for Harmony stockholders. Specifically,
iNTELEFILM estimates that a complete combination of Harmony and iNTELEFILM would
result in a savings by Harmony of approximately $225,000 per year. As Harmony is
already consolidated for iNTELEFILM's financial reporting purposes, this saving
would be effected by further integration of operational and administrative
functions of the combined companies.

In addition, iNTELEFILM believes that the complete combination of Harmony
and iNTELEFILM will produce substantial benefits for Harmony stockholders,
including the following:

- Significant premium. Based on the closing prices of one Harmony share
and one iNTELEFILM share on March 22, 2000, the day prior to iNTELEFILM's
announcement of the proposed offer, iNTELEFILM's offer represents a
premium of approximately 50% over the closing price of Harmony common
stock. Harmony common stock, which has traded on the OTC Bulletin Board
at a 52-week historical range of $1.00 to $0.11, had a last sale price of
$0.19 on March 22, 2000, the last trading day before iNTELEFILM's
announcement of its proposed offer. On August 2, 2000, the closing sales
price of one share of iNTELEFILM common

25
<PAGE> 32

stock on the Nasdaq National Market was $2.0625 and the closing sales
price of one share of Harmony common stock on the OTC Bulletin Board was
$0.11.

- Ownership of a stronger combined company. By offering numerous lines of
business, including those managed by iNTELEFILM, webADTV and Harmony, the
consolidation of Harmony and iNTELEFILM will establish a more diversified
company capable of providing a greater level of services than either
company could provide on its own. The combined company will have
divisions which produce hip hop commercials and music videos,
storytelling commercials, animated commercials and half-hour animated
television series.

- Ownership of a solvent company. At March 31, 2000, Harmony had a working
capital deficit of $7,211,000 and stockholders' deficit of $4,538,000. As
a result, Harmony's independent certified public accountants have
modified their report on Harmony's fiscal 1999 financial statements and
have raised substantial doubt as to Harmony's ability to continue as a
going concern. iNTELEFILM, in comparison, had working capital of
$8,806,000 and shareholders' equity of $18,244,000. Consequently,
completion of the offer will provide Harmony stockholders with ownership
of a solvent company and avoid the potential sale or liquidation of
Harmony and/or the ultimate cessation of Harmony's operations which may
result if Harmony continues to lose money and incur expenses as a
separate public company.

- Better long-term growth prospects. iNTELEFILM believes that combining
iNTELEFILM and Harmony would yield better long-term growth prospects than
operating the companies separately, potentially resulting in increased
shareholder value over the long-term.

- Elimination of Harmony's indebtedness to iNTELEFILM. Harmony currently
operates at a cash flow deficit and has outstanding indebtedness to
iNTELEFILM of approximately $3.2 million pursuant to notes payable.
Completion of the offer will result in the elimination of all
indebtedness Harmony owes to iNTELEFILM through the combination of the
two entities and cancellation of any existing loans. iNTELEFILM has
granted Harmony temporary forbearance of a default under these notes
which occurred when Harmony did not repay the notes pursuant to
iNTELEFILM's demand. The merger would cure this default.

- Cost savings. The offer will result in an estimated annual consolidated
cost savings to Harmony of approximately $225,000. This estimate consists
primarily of the expenses associated with Harmony's annual audits and
compliance with the reporting requirements of the SEC, the IRS and
various state agencies.

- Increased liquidity. iNTELEFILM's common stock is traded on the Nasdaq
National Market. Harmony's common stock is currently traded on the OTC
Bulletin Board. Harmony was delisted from Nasdaq in February 1999 as a
result of not maintaining Nasdaq's tangible net worth requirement.
Further, for the year ended March 31, 2000, iNTELEFILM's average daily
volume was approximately 32,000 shares or 0.50% of its total shares
outstanding while Harmony's average daily volume was approximately 21,000
shares or 0.15% of its total shares outstanding.

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<PAGE> 33

BACKGROUND OF THE OFFER

iNTELEFILM initially entered into commercial production as an extension of
its entertainment and media industry expertise and as a way to offset losses of
its children's entertainment format. As part of this strategic plan, iNTELEFILM
invested in Harmony. iNTELEFILM currently owns approximately 55% of Harmony's
outstanding common stock as of the date of this document. iNTELEFILM acquired
this ownership interest over a period of time as summarized in the following
table:

<TABLE>
<CAPTION>
HARMONY OPTIONS TO PURCHASE
COMMON STOCK HARMONY COMMON STOCK
-------------------------- --------------------------
NUMBER OF NUMBER OF
DATE SHARES CONSIDERATION SHARES CONSIDERATION
---- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
July 21, 1997................ 769,231 $2,000,000 -- $ --
July 22, 1997................ 600,000 1,747,500 550,000 260,000
September 25, 1997........... 819,500 2,401,650 200,000 330,000
--------- ---------- -------- ---------
Balance at December 31,
1997....................... 2,188,731 6,149,150 750,000 590,000
========= ========== ======== =========
June 30, 1998 (exercise of
options)................... 750,000 1,715,000 (750,000) (590,000)
July 2, 1998................. 250,000 432,500 -- --
November 4, 1998............. 494,231 968,750 -- --
--------- ---------- -------- ---------
Balance at December 31,
1998....................... 3,682,962 $9,265,400 -- $ --
========= ========== ======== =========
April 15, 1999............... 225,000 229,754 -- --
May 21, 1999................. 40,000 39,304 -- --
May 25, 1999................. 180,000 184,575 -- --
June 25, 1999................ 1,600 1,622 -- --
June 28, 1999................ 10,000 10,217 -- --
--------- ---------- -------- ---------
Balance at December 31,
1999....................... 4,139,562 $9,730,872 -- $ --
========= ========== ======== =========
</TABLE>

On July 21, 1997, iNTELEFILM and Unimedia S.A., a privately held societe
anonyme organized and existing under the laws of France, entered into an
agreement pursuant to which Unimedia agreed to sell 1,000,000 Harmony shares to
iNTELEFILM for $2,600,000 and Unimedia agreed to dismiss the litigation entitled
UNIMEDIA S.A. V. HARMONY HOLDINGS, INC. AND HARVEY BIBICOFF, case no. CV 96-7109
JGD (RNBx), pending in the United States District Court for the Central District
of California. iNTELEFILM assigned its right to purchase 230,769 of the shares
to Harmony. As a result, the number of issued and outstanding Harmony shares was
reduced and iNTELEFILM's purchase price became $2,000,000 in cash. Pursuant to
this transaction, iNTELEFILM was able to increase its equity position in
Harmony, avoid any dispute with Unimedia as a shareholder in Harmony and settle
a potential material liability of Harmony.

On July 22, 1997, iNTELEFILM acquired 600,000 Harmony shares and options to
purchase 550,000 additional Harmony shares from Harvey Bibicoff, Harmony's
former Chief Executive Officer, for $1,760,000 in cash and 60,000 iNTELEFILM
shares valued at $247,500. Prior to the date of this transaction, iNTELEFILM and
Harmony had no common directors or executive officers.

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<PAGE> 34

On September 25, 1997, iNTELEFILM purchased 420,000 Harmony shares from
Glenn B. Laken, a Harmony stockholder, at $3.15 per share, 399,500 Harmony
shares from a group which was acting together with Mr. Laken at $2.70 per share,
and options to purchase 200,000 Harmony shares from Mr. Laken at an exercise
price of $1.50 per share for $330,000. In April 1998, iNTELEFILM assigned to
Pyramid Partners, L.P.; Perkins & Partners, Inc., Profit Sharing Plan & Trust;
and Christopher T. Dahl and State Bank of New Prague Joint Account all of its
right to purchase 225,000 shares of common stock of Harmony at $2.50 per share
from Mr. Laken. Pyramid Partners, L.P. is an entity of which Perkins Capital
Management is the managing partner. Richard W. Perkins, a director of both
iNTELEFILM and Harmony, is President and Chief Executive Officer of Perkins
Capital Management. Mr. Perkins is also President of Perkins & Partners, Inc.
Christopher T. Dahl is President, Chief Executive Officer and Chairman of both
iNTELEFILM and Harmony. In November 1998, iNTELEFILM purchased 225,000 Harmony
shares at $2.75 per share from Pyramid Partners, L.P.; Perkins & Partners, Inc.,
Profit Sharing Plan & Trust; and Christopher T. Dahl and State of New Prague
Joint Account.

On June 30, 1998, iNTELEFILM exercised stock options to purchase 750,000
Harmony shares at $1.50 per share. Harmony received cash proceeds of $1,125,000
from this exercise. On July 2, 1998, iNTELEFILM purchased 250,000 Harmony shares
on the open market for $432,500 in cash. On November 4, 1998, iNTELEFILM
purchased 494,231 Harmony shares directly from Harmony for $968,750 in cash.

iNTELEFILM's 1999 purchases of Harmony common stock, aggregating 456,600
shares, were open market purchases for total consideration of $465,472 in cash.
Upon completing iNTELEFILM's April 15, 1999, purchase of 225,000 shares, its
ownership of Harmony exceeded 50% of Harmony's outstanding shares. iNTELEFILM
began consolidating Harmony for financial reporting purposes on April 1, 1999.

TIMING OF THE OFFER

iNTELEFILM's offer is scheduled to expire at 12:00 midnight, Minneapolis
time, on , 2000. For more information, you should read the
discussion under the caption "Extension, termination and amendment."

EXTENSION, TERMINATION AND AMENDMENT

iNTELEFILM expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which its offer
remains open. iNTELEFILM may extend the duration of its offer by giving oral or
written notice of such extension to the exchange agent. iNTELEFILM is not making
any assurance that it will exercise its right to extend its offer by providing a
subsequent offering period, although iNTELEFILM currently intends to do so until
all conditions have been satisfied or waived. You will not be allowed to
withdraw shares tendered during any subsequent offering period. You should read
the discussion under the caption "Withdrawal rights" for details regarding the
withdrawal of tendered Harmony shares.

Subject to the SEC's applicable rules and regulations, iNTELEFILM also
reserves the right, in its sole discretion, to do any of the following, at any
time or from time to time:

- to delay exchange of or acceptance for exchange of any Harmony shares
pursuant to the offer regardless of whether iNTELEFILM previously
accepted Harmony shares for exchange;

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<PAGE> 35

- to terminate the offer and not exchange or accept for exchange any
Harmony shares not previously exchanged, or accepted for exchange upon
the failure of any of the conditions of the offer to be satisfied; or

- to waive any condition, other than the conditions relating to the absence
of an injunction and the effectiveness of the registration statement for
the iNTELEFILM shares to be issued in the offer, or otherwise amend the
offer in any respect by giving oral or written notice of such extension,
termination or amendment to the exchange agent and by making a public
announcement.

iNTELEFILM will follow any extension, termination or amendment with a public
announcement as promptly as practicable. In the case of an extension, any such
announcement will be issued no later than 9:00 a.m., Minneapolis time, on the
next business day after the previously scheduled expiration date. Subject to
applicable law which requires that any material change in the information
published, sent or given to stockholders in connection with the offer be
promptly sent to stockholders in a manner reasonably designed to inform
stockholders of such change and without limiting the manner in which iNTELEFILM
may choose to make any public announcement, iNTELEFILM assumes no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to Business Wire.

If iNTELEFILM makes a material change in the terms of its offer or the
information concerning the offer, or if iNTELEFILM waives a material condition
of the offer, iNTELEFILM will extend the offer to the extent required under the
Exchange Act. If, prior to the expiration date, iNTELEFILM changes the
percentage of Harmony shares being sought or the consideration offered, that
change will apply to all holders whose Harmony shares are accepted for exchange
pursuant to the offer. If at the time notice of that change is first published,
sent or given to you, the offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that such notice is first so
published, sent or given, iNTELEFILM will extend the offer until the expiration
of that ten business day period. For purposes of iNTELEFILM's offer, a business
day means any day other than a Saturday, Sunday or federal holiday and consists
of the time period from 12:01 a.m. through 12:00 midnight, Minneapolis time.

iNTELEFILM may, although it does not currently intend to, elect to provide
a subsequent offering period of 3 to 20 business days following completion of
the initial offering period during which Harmony stockholders can tender Harmony
shares into the offer without withdrawal rights. If used, the subsequent
offering period would be designed (a) to assist iNTELEFILM in reaching the
statutory minimum necessary to perform a short-form merger and (b) to provide
Harmony stockholders one last opportunity to tender into an offer that is
otherwise complete, thereby avoiding the delay and illiquid market that can
result after a tender offer and before the related merger. During a subsequent
offering period, iNTELEFILM would accept and promptly exchange Harmony shares as
they are tendered, providing Harmony stockholders with the same form and amount
of consideration as paid in the offer. Independent of whether iNTELEFILM
provides a subsequent offering period, it may be required to extend the initial
offering period if there is a material change in the information contained in
this document. In either event, iNTELEFILM would amend the offer and disseminate
new information to Harmony stockholders in a manner reasonably calculated to
inform them of such change pursuant to Rule 14d-6 under the Exchange Act.

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<PAGE> 36

EXCHANGE OF HARMONY SHARES; DELIVERY OF iNTELEFILM SHARES

Upon the terms and subject to the conditions of the offer, iNTELEFILM will
accept for exchange, and will exchange, Harmony shares validly tendered and not
withdrawn as promptly as practicable after the expiration date. In addition,
subject to applicable rules of the SEC, iNTELEFILM expressly reserves the right
to delay exchange or acceptance for exchange of Harmony shares in order to
comply with any applicable law. In all cases, exchange of Harmony shares
tendered and accepted for exchange pursuant to the offer will be made only after
timely receipt by the exchange agent of all of the following:

- certificates for those Harmony shares or a confirmation of a book-entry
transfer of those Harmony shares in the exchange agent's account at DTC;

- a properly completed and duly executed letter of transmittal or a
manually signed facsimile of that document; and

- any other required documents.

For purposes of the offer, iNTELEFILM will be deemed to have accepted for
exchange Harmony shares validly tendered and not withdrawn, as, if and when
iNTELEFILM notifies the exchange agent of its acceptance of the tenders of those
Harmony shares pursuant to the offer. The exchange agent will deliver iNTELEFILM
shares in exchange for Harmony shares tendered pursuant to the offer, and cash
instead of fractional shares, as soon as practicable after receipt of such
notice. The exchange agent will act as agent for tendering stockholders for the
purpose of receiving iNTELEFILM shares and cash to be paid instead of fractional
shares from iNTELEFILM and transmitting such stock and cash to you. You will not
receive interest on any cash that iNTELEFILM pays you, even if there is a delay
in making the exchange.

If iNTELEFILM does not accept any tendered Harmony shares for exchange
pursuant to the terms and conditions of the offer for any reason, or if
certificates are submitted for more Harmony shares than are accepted, iNTELEFILM
will return certificates for such unexchanged Harmony shares without expense to
the tendering stockholder or, in the case of Harmony shares tendered by
book-entry transfer of such Harmony shares into the exchange agent's account at
DTC pursuant to the procedures set forth below under the caption "Procedure for
tendering," those Harmony shares will be credited to an account maintained
within DTC, as soon as practicable following expiration or termination of the
offer.

Because the number of iNTELEFILM shares you will receive in the offer is
fixed and because the market price of iNTELEFILM common stock may fluctuate
prior to the completion of the offer, the value of the iNTELEFILM shares that
you will receive in the offer may increase or decrease prior to and following
the offer.

CASH INSTEAD OF FRACTIONAL SHARES

iNTELEFILM will not issue certificates representing fractional shares of
its common stock pursuant to the offer. Instead, each tendering stockholder who
would otherwise be entitled to a fractional share will receive cash in an amount
equal to such fraction, expressed as a decimal and rounded to the nearest 0.01
of a share, multiplied by the closing price for one share of iNTELEFILM's common
stock on the Nasdaq National Market on the date that iNTELEFILM accepts those
Harmony shares for exchange.

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<PAGE> 37

WITHDRAWAL RIGHTS

You may withdraw Harmony shares tendered pursuant to the offer at any time
prior to the expiration date, and, unless iNTELEFILM previously accepted them
pursuant to the offer, you may also withdraw Harmony shares tendered pursuant to
the offer at any time after , 2000 [60 DAYS AFTER COMMENCEMENT OF
THE OFFER]. If iNTELEFILM elects to provide a subsequent offering period
pursuant to Rule 14d-11 under the Exchange Act, you will not have the right to
withdraw Harmony shares that you tender in the subsequent offering period.

For your withdrawal to be effective, the exchange agent must receive from
you a written notice of withdrawal at the appropriate address set forth on the
back cover of this document. Your notice must include your name, address, social
security number, the certificate number(s) and the number of Harmony shares to
be withdrawn as well as the name of the registered holder, if it is different
from that of the person who tendered those Harmony shares.

A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial institution
must be an eligible institution, namely one which participates in the Securities
Transfer Agents Medallion Program, unless those Harmony shares have been
tendered for the account of an eligible institution. If Harmony shares have been
tendered pursuant to the procedures for book-entry tender discussed under the
caption "Procedure for tendering," any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Harmony
shares and must otherwise comply with DTC's procedures. If certificates have
been delivered or otherwise identified to the exchange agent, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Harmony shares withdrawn must also be furnished to the exchange
agent, as stated above, prior to the physical release of such certificates.
iNTELEFILM will decide all questions as to the form and validity of any notice
of withdrawal, in iNTELEFILM's sole discretion, and its decision shall be final
and binding. Neither iNTELEFILM, the exchange agent, the information agent nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Harmony shares properly withdrawn
will be deemed not to have been validly tendered for purposes of iNTELEFILM's
offer. However, you may retender withdrawn Harmony shares by following one of
the procedures discussed under the captions "Procedure for tendering" or
"Guaranteed delivery" at any time prior to the expiration date.

PROCEDURE FOR TENDERING

For you to validly tender Harmony shares pursuant to the offer, you must do
either of the following:

(a) both (1) a properly completed and duly executed letter of transmittal,
or manually executed facsimile of that document, along with any
required signature guarantees, or an agent's message in connection with
a book-entry transfer, and any other required documents, must be
transmitted to and received by the exchange agent at one of its
addresses set forth on the back cover of this document, and (2)
certificates for tendered Harmony shares must be received by the
exchange agent at such address or those Harmony shares must be tendered
pursuant to the procedures for book-entry tender set forth below and a

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<PAGE> 38

confirmation of receipt of such tender received, in each case before
the expiration date; or

(b) you must comply with the guaranteed delivery procedures set forth
below.

The term "agent's message" means a message, transmitted by DTC to the
exchange agent and forming a part of a book-entry confirmation, which states (a)
that DTC has received an express acknowledgment from the participant in DTC
tendering the Harmony shares which are the subject of such book-entry
confirmation, (b) that such participant has received and agrees to be bound by
the terms of the letter of transmittal and (c) that iNTELEFILM may enforce that
agreement against such participant. The agent's message must be received by the
exchange agent to be valid.

The exchange agent will establish accounts with respect to the Harmony
shares at DTC for purposes of the offer within two business days after the date
of this document. Any financial institution that is a participant in DTC may
make book-entry delivery of Harmony shares by causing DTC to transfer such
Harmony shares into the exchange agent's account in accordance with DTC's
procedure for such transfer. However, although delivery of Harmony shares may be
effected through book-entry at DTC, (a) the guaranteed delivery procedures
described below must be followed or (b) either of the following must, in any
case, be transmitted to and received by the exchange agent at one or more of its
addresses set forth on the back cover of this document prior to the expiration
date: the letter of transmittal or a manually signed facsimile of the letter of
transmittal, with any required signature guarantees, or an agent's message in
connection with a book-entry transfer, and any other required documents.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which Harmony shares are tendered either by a
registered holder of Harmony shares who has not completed the section entitled
"Special Issuance Instructions" on the letter of transmittal or for the account
of an eligible institution.

If the certificates for Harmony shares are registered in the name of a
person other than the person who signs the letter of transmittal, or if
certificates for unexchanged Harmony shares are to be issued to a person other
than the registered holder(s), the certificates must be endorsed or accompanied
by appropriate stock powers. In either case the endorsement or appropriate stock
powers must be signed exactly as the name(s) of the registered owner(s) appear
on the certificates, with the signature(s) on the certificates or stock powers
guaranteed in the manner described above.

The method of delivery of Harmony share certificates and all other required
documents, including delivery through DTC, is at your option and risk, and the
delivery will be deemed made only when actually received by the exchange agent.
If delivery is by mail, we recommend registered mail with return receipt
requested, properly insured. In all cases, you should allow sufficient time to
ensure timely delivery.

To prevent backup federal income tax withholding with respect to any cash
received pursuant to the offer, you must provide the exchange agent with your
correct taxpayer identification number and certify whether you are subject to
backup withholding of federal income tax by completing the substitute Form W-9
included in the letter of transmittal. Some stockholders, including, among
others, all corporations and some foreign individuals, are not subject to these
backup withholding and reporting requirements. In order for a foreign individual
to qualify as an exempt recipient, the stockholder must submit a Form W-8,
signed under penalties of perjury, attesting to that individual's exempt status.

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GUARANTEED DELIVERY

If you wish to tender Harmony shares pursuant to iNTELEFILM's offer and
your certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to the
expiration date, or cannot complete the procedure for book-entry transfer on a
timely basis, your Harmony shares may nevertheless be tendered, so long as all
of the following conditions are satisfied:

(a) you make your tender by or through an eligible institution;

(b) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form made available by iNTELEFILM, is
received by the exchange agent, as provided below, on or prior to the
expiration date; and

(c) the following are received by the exchange agent within three
Nasdaq National Market trading days after the date of execution of such
notice of guaranteed delivery: (1) the certificates for all tendered
Harmony shares or a confirmation of a book-entry transfer of such
securities into the exchange agent's account at DTC as described above, in
proper form for transfer; (2) a properly completed and duly executed letter
of transmittal, or a manually signed facsimile of the letter of
transmittal, with any required signature guarantees, or, in the case of a
book-entry transfer, an agent's message, and (3) all other documents
required by the letter of transmittal.

You may deliver the notice of guaranteed delivery by hand, facsimile or
mail to the exchange agent and you must include a guarantee by an eligible
institution in the form set forth in that notice.

In all cases, iNTELEFILM will exchange Harmony shares tendered and accepted
for exchange pursuant to its offer only after timely receipt by the exchange
agent of (a) certificate(s) for Harmony shares or timely confirmation of a
book-entry transfer of such securities into the exchange agent's account at DTC,
(b) properly completed and duly executed letter(s) of transmittal, or manually
signed facsimile(s) of the letter of transmittal, or an agent's message in
connection with a book-entry transfer, and (c) any other required documents.

By executing a letter of transmittal as set forth above, you irrevocably
appoint iNTELEFILM's designees as your attorneys-in-fact and proxies, each with
full power of substitution, to the full extent of your rights with respect to
your Harmony shares tendered and accepted for exchange by iNTELEFILM and with
respect to any and all other Harmony shares and other securities issued or
issuable in respect of the Harmony shares on or after , 2000. That
appointment is effective, and voting rights will be affected, when and only to
the extent that iNTELEFILM deposits iNTELEFILM shares, along with any cash to be
paid for fractional shares, for Harmony shares that you have tendered with the
exchange agent. All such proxies shall be considered coupled with an interest in
the tendered Harmony shares and therefore shall not be revocable. Upon the
effectiveness of such appointment, all prior proxies that you have given will be
revoked, and you may not give any subsequent proxies. iNTELEFILM's designees
will, with respect to the Harmony shares for which the appointment is effective,
be empowered, among other things, to exercise all of your voting and other
rights as they, in their sole discretion, deem proper at any annual, special or
adjourned meeting of Harmony's stockholders or otherwise. iNTELEFILM requires
that, in order for Harmony shares to be deemed validly tendered, immediately
upon iNTELEFILM's exchange of those Harmony shares,

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iNTELEFILM must be able to exercise full voting rights with respect to such
Harmony shares.

iNTELEFILM will determine questions as to the validity, form, eligibility
and acceptance for exchange of any tender of Harmony shares, in its sole
discretion, and its determination shall be final and binding. iNTELEFILM
reserves the absolute right to reject any and all tenders of Harmony shares that
it determines are not in proper form or the acceptance of or exchange for which
may, in the opinion of its counsel, be unlawful. iNTELEFILM also reserves the
absolute right to waive any of the conditions of its offer, other than the
conditions relating to the absence of an injunction and the effectiveness of the
registration statement for iNTELEFILM shares to be issued in the offer, or any
defect or irregularity in the tender of any Harmony shares. No tender of Harmony
shares will be deemed to have been validly made until all defects and
irregularities in tenders of Harmony shares have been cured or waived. Neither
iNTELEFILM, the exchange agent, the information agent nor any other person will
be under any duty to give notification of any defects or irregularities in the
tender of any Harmony shares or will incur any liability for failure to give any
such notification. iNTELEFILM's interpretation of the terms and conditions of
its offer, including the letter of transmittal and instructions to such letter,
will be final and binding.

The tender of Harmony shares pursuant to any of the procedures described
above will constitute a binding agreement between iNTELEFILM and you upon the
terms and subject to the conditions of the offer.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of the material United States federal income
tax consequences to Harmony stockholders who exchange Harmony shares for
iNTELEFILM shares pursuant to the offer. This discussion presents the opinion of
Briggs and Morgan, Professional Association, counsel for iNTELEFILM, and is
based on provisions of the Internal Revenue Code of 1986, Treasury regulations
promulgated thereunder, and related administrative and judicial interpretations,
all as in effect as of the date of this document and all of which are subject to
change, possibly with retroactive effect. This discussion does not address all
aspects of United States federal income taxation that may be applicable to
Harmony stockholders in light of their particular circumstances or to Harmony
stockholders subject to special treatment under United States federal income tax
law, including, without limitation, (a) partnerships, (b) select foreign
persons, (c) financial institutions, (d) insurance companies, (e) tax-exempt
entities, (f) dealers in securities, (g) traders in securities that elect to
apply a mark-to-market method of accounting, (h) select U.S. expatriates, (i)
persons that hold Harmony common stock as part of a straddle, hedge, conversion
transaction or other integrated investment, (j) Harmony stockholders whose
functional currency is not the United States dollar and (k) Harmony stockholders
who acquired Harmony shares through the exercise of employee stock options or
otherwise as compensation. This discussion is limited to Harmony stockholders
that hold their Harmony shares as capital assets and does not consider the tax
treatment of Harmony stockholders that hold Harmony shares through a partnership
or other pass-through entity. Furthermore, this summary does not discuss any
aspect of state, local or foreign taxation.

The tender of shares by Harmony stockholders pursuant to the offer will
constitute a taxable transaction for federal income tax purposes under the
Internal Revenue Code of 1986 and may also constitute a taxable transaction
under applicable state, local and foreign

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income tax laws. In general, a stockholder will recognize gain or loss equal to
the difference between the tax basis of his or her Harmony shares and the fair
market value of the iNTELEFILM shares received on the date of the exchange, plus
the amount, if any, of cash received as a payment for a fractional share. For
federal income tax purposes, such gain or loss will be capital gain or loss if
the shares are capital assets in the hands of the stockholder at the effective
date of the tender. The capital gain or loss will be long-term gain or loss if
the holding period for the shares is more than 12 months as of the date of the
sale of such shares. The capital gain or loss will be short-term capital gain or
loss with respect to Harmony shares held for less than 12 months at that time.

A Harmony stockholder who tenders shares may be subject to backup
withholding unless the stockholder provides its taxpayer identification number
and certifies that such number is correct or an exemption applies. A Harmony
stockholder who does not furnish its taxpayer identification number may be
subject to a penalty imposed by the IRS.

The foregoing discussion is intended only as a summary and does not purport
to be a complete analysis or listing of all potential federal income tax
consequences of the offer. Harmony stockholders are urged to consult their tax
advisors concerning the United States federal, state, local and foreign tax
consequences of the offer to them.

EFFECT OF THE OFFER ON HARMONY REGISTRATION UNDER THE EXCHANGE ACT

Harmony shares are currently registered under the Exchange Act. Harmony can
terminate that registration upon application to the SEC if the outstanding
shares are not listed on a national securities exchange and if there are fewer
than 300 holders of record of Harmony shares. Termination of registration of the
Harmony shares under the Exchange Act would reduce the information that Harmony
must furnish to its stockholders and to the SEC and would make select provisions
of the Exchange Act, such as the short-swing profit recovery provisions of
Section 16(b), the requirement of furnishing a proxy statement in connection
with stockholder meetings pursuant to Section 14(a) and the related requirement
of furnishing an annual report to stockholders, no longer applicable with
respect to Harmony shares. Furthermore, the ability of "affiliates" of Harmony
and persons holding "restricted securities" of Harmony to dispose of such
securities pursuant to Rule 144 under the Securities Act may be impaired or
eliminated. If registration under the Exchange Act were terminated, Harmony
shares would no longer be eligible for OTC Bulletin Board trading.

PURPOSE OF THE OFFER; THE iNTELEFILM-HARMONY MERGER; APPRAISAL RIGHTS

iNTELEFILM is making the offer in order ultimately to acquire the entire
common equity interest in Harmony. You will not have appraisal rights as a
result of the offer. iNTELEFILM intends, as soon as practicable after
consummation of the offer, to seek to merge Harmony with and into iNTELEFILM or
a wholly-owned subsidiary. The purpose of the iNTELEFILM-Harmony merger is to
acquire all Harmony shares not tendered and exchanged pursuant to the offer. In
the iNTELEFILM-Harmony merger, each then outstanding Harmony share not already
owned by iNTELEFILM would be converted into the same number of iNTELEFILM shares
as is exchanged in the offer. The iNTELEFILM-Harmony merger may be consummated
pursuant to Section 253 of the Delaware General Corporation Law. Under Section
253 of the DGCL, a parent corporation owning at least 90% of the outstanding
shares of each class of a subsidiary corporation may merge the subsidiary
corporation into itself without the approval of the stockholders of the parent
corporation or of the board of directors or stockholders of the

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subsidiary corporation. If iNTELEFILM increases its ownership of Harmony common
stock to at least 90% of Harmony's outstanding shares, iNTELEFILM would have
sufficient voting power to effect the iNTELEFILM-Harmony merger under Section
253 of the DGCL without the vote of any other stockholder of Harmony.

Although stockholders do not have appraisal rights as a result of the
offer, Harmony stockholders at the time of the iNTELEFILM-Harmony merger who do
not wish to accept iNTELEFILM shares in a short-form merger under Section 253 of
the DGCL will have the right under the DGCL to dissent and demand appraisal of
their Harmony shares in accordance with Section 262 of the DGCL. Under Section
262, dissenting stockholders who comply with the applicable statutory procedures
will be entitled to receive a judicial determination of the fair value of their
Harmony shares and to receive payment of such fair value in cash, together with
a fair rate of interest, if any.

In Cede & Co. and Cinerama, Inc. v. Technicolor, Inc., the Supreme Court of
the State of Delaware construed Section 262 of the DGCL and held that the
"accomplishment or expectation" exclusion from the calculation of fair value set
forth in the preceding sentence is narrow and is designed to eliminate use of
pro forma data and projections of a speculative variety relating to the
completion of a merger. The court held that it is appropriate to include in the
calculation of fair value any known elements of value, including those elements
of value which exist on the date of the merger because of a majority acquiror's
interim action in a two-step cash-out transaction. We cannot assure you as to
the methodology a court would use to determine fair value or how a court would
select which of the elements of value are to be included in such a
determination. Any such judicial determination of the fair value of Harmony
shares could be based upon factors other than, or in addition to, the price per
Harmony share to be paid in the iNTELEFILM-Harmony merger or the market value of
the Harmony shares. The value so determined could be more or less than the value
of the consideration per Harmony share to be paid in the iNTELEFILM-Harmony
merger.

Rule 13e-3 under the Exchange Act, which iNTELEFILM does not believe would
apply to the iNTELEFILM-Harmony merger if such merger occurred within one year
of consummation of its offer, would require, among other things, that financial
information concerning Harmony, and information relating to the fairness of the
proposed transaction and the consideration offered to Harmony stockholders
therein, be filed with the SEC and disclosed to you prior to consummation of the
iNTELEFILM-Harmony merger.

Upon consummation of the offer, iNTELEFILM (a) intends to take appropriate
actions to optimize the combined entities' assets, operations, management,
personnel, general and administrative functions and corporate structure and (b)
may also elect or seek the election of nominees of its choice to Harmony's board
of directors. Except as otherwise discussed elsewhere in this document,
iNTELEFILM does not have any current plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, or sale of a material amount of assets, involving Harmony or any of
its subsidiaries, or any material changes in Harmony's corporate structure or
business, or any change in its management.

CONDITIONS OF THE OFFER

Notwithstanding any other provision of iNTELEFILM's offer, iNTELEFILM shall
not be required to accept for exchange or exchange any Harmony shares, may
postpone the acceptance for exchange of or exchange for tendered Harmony shares,
and may, in its sole discretion, terminate or amend the offer as to any Harmony
shares not then

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exchanged if, on or after the date of this document and at or prior to the
expiration date of the offer, whether or not any Harmony shares have theretofore
been accepted for exchange or exchanged pursuant to the offer, any of the
following conditions are not satisfied:

- The iNTELEFILM shares to be issued to Harmony stockholders in the offer
have been authorized for listing on the Nasdaq National Market, subject
to official notice of issuance;

- The registration statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
registration statement shall have been issued nor shall there have been
proceedings for that purpose initiated or threatened by the SEC and
iNTELEFILM shall have received all necessary state securities law or
"blue sky" authorizations;

- No temporary restraining order, preliminary or permanent injunction or
other order or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the offer or any of the other transactions contemplated
by this document shall be in effect; no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any court, administrative agency or commission or other
governmental authority or instrumentality which prohibits, restricts or
makes illegal the consummation of iNTELEFILM's offer; nor shall there
have been a failure to obtain any required consent or approval under
foreign laws or regulations which would prohibit the consummation of the
offer or would have a material adverse effect on iNTELEFILM or Harmony;

- There shall not be pending any suit, action or proceeding by any
governmental entity (a) challenging the offer, seeking to restrain or
prohibit the consummation of the offer or seeking to obtain from Harmony
or iNTELEFILM any damages that are material in relation to Harmony and
its subsidiaries taken as a whole or iNTELEFILM and its subsidiaries
taken as a whole, (b) seeking to prohibit or limit the ownership or
operation by Harmony or iNTELEFILM or any of their subsidiaries of any
material portion of the business or assets of Harmony or iNTELEFILM or
any of their subsidiaries or to compel Harmony or iNTELEFILM or any of
their subsidiaries to dispose of or hold separate any material portion of
the business or assets of Harmony or iNTELEFILM or any of their
subsidiaries as a result of the offer, (c) seeking to prohibit iNTELEFILM
from effectively controlling in any material respect the business or
operations of Harmony, or (d) which otherwise is reasonably likely to
have a material adverse effect on iNTELEFILM or Harmony; and

- Harmony shall not have entered into or effectuated any other agreement or
transaction with any person or entity having the effect of impairing
iNTELEFILM's ability to acquire Harmony or otherwise diminishing the
expected economic value to iNTELEFILM of the acquisition of Harmony.

The foregoing conditions are solely for iNTELEFILM's benefit and iNTELEFILM
may assert them in its sole discretion. Other than the conditions relating to
the absence of an injunction and the effectiveness of the registration
statement, iNTELEFILM may waive these conditions in whole or in part. The
determination as to whether any condition has been satisfied shall be in
iNTELEFILM's reasonable judgment and will be final and binding on all parties.
The failure by iNTELEFILM at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall

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<PAGE> 44

be deemed a continuing right which may be asserted at any time and from time to
time. Notwithstanding the fact that iNTELEFILM reserves the right to assert the
failure of a condition following acceptance for exchange in order to postpone,
terminate or amend its obligation to exchange properly tendered Harmony shares,
iNTELEFILM will either promptly exchange such Harmony shares or promptly return
such Harmony shares.

RELATIONSHIPS WITH HARMONY

As of the date of this document iNTELEFILM beneficially owned for its own
account 4,139,562 Harmony shares. Three members of iNTELEFILM's board of
directors, Christopher T. Dahl, Richard W. Perkins and William E. Cameron, are
members of Harmony's board of directors. For further information please refer to
"Material Contacts between iNTELEFILM and Harmony."

FEES AND EXPENSES

iNTELEFILM has retained Georgeson Shareholder Communications, Inc. to act
as the information agent in connection with the offer. The information agent may
contact holders of Harmony shares by mail, telephone, facsimile, telegraph and
personal interview and may request brokers, dealers and other nominee
stockholders to forward iNTELEFILM's offer materials to beneficial owners of
Harmony shares. The information agent will be paid a customary fee for such
services, plus reimbursement of out-of-pocket expenses, and iNTELEFILM will
indemnify the information agent against liabilities and expenses in connection
with the offer, including liabilities under federal securities laws. If you
tender your shares, you will not be obligated to pay any charges or expenses of
the exchange agent. However, iNTELEFILM will not pay any fees or commissions to
any broker, dealer or other persons, other than the information agent, for
soliciting tenders of Harmony shares pursuant to the offer.

ACCOUNTING TREATMENT

iNTELEFILM has historically accounted for the acquisition of its existing
55% ownership interest of Harmony as a purchase and accordingly, shares acquired
pursuant to the offer will also be accounted for as a "purchase," as such term
is used under GAAP, for accounting and financial reporting purposes. Harmony has
been and will continue to be treated as the acquired corporation for such
purposes. The proportionate share of Harmony's assets, liabilities and other
items will be adjusted to their estimated fair value on the closing date of the
offer and combined with the historical book values of the assets and liabilities
of iNTELEFILM. Applicable income tax effects of such adjustments will be
included as a component of the combined company's deferred tax asset or
liability. The difference between the estimated fair value of the assets,
liabilities and other items, adjusted as discussed above, and the purchase price
will be recorded as an intangible asset and amortized against the combined
company's earnings over a seven-year period following completion of the offer.

iNTELEFILM has prepared the unaudited pro forma financial information
contained in this document using the purchase accounting method to account for
the offer and the merger. For further information please refer to "Pro Forma
Condensed Combined Financial Statements" on page 49.

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<PAGE> 45

NASDAQ NATIONAL MARKET LISTING

iNTELEFILM's common stock is listed on the Nasdaq National Market.
iNTELEFILM will make an application to list on the Nasdaq National Market the
shares that it will issue pursuant to the offer.

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<PAGE> 46

MATERIAL CONTACTS BETWEEN INTELEFILM AND HARMONY

**6 Several executive officers and directors of iNTELEFILM also serve as
executive officers or directors of Harmony. Christopher T. Dahl serves as
the Chairman of the Board, President and Chief Executive Officer of both
iNTELEFILM and Harmony. James G. Gilbertson and Steven C. Smith serve as
the Chief Operating Officer and Chief Financial Officer, respectively,
of both iNTELEFILM and Harmony. Jill J. Theis serves as the Secretary and
General Counsel of both iNTELEFILM and Harmony. Richard W. Perkins and
William E. Cameron are directors of both iNTELEFILM and Harmony.

Since August 1998, iNTELEFILM has received administrative, legal and
accounting services from MMLLC, an entity owned by Mr. Dahl, Chairman of
the Board, President and Chief Executive Officer of both iNTELEFILM and
Harmony, and Mr. Perkins, a non-employee member of the board of directors
of both iNTELEFILM and Harmony. iNTELEFILM currently pays a set monthly
fee of $125,000 for such services. All outside services directly
attributable to iNTELEFILM are billed directly to iNTELEFILM. Employees
of MMLLC also provide similar services to Harmony for which Harmony
currently pays a set monthly fee of $55,000. The following information
provides additional detail regarding the relationships between
iNTELEFILM, Harmony and MMLLC:

- iNTELEFILM paid MMLLC an aggregate of $745,000 for services during 1998,
$370,000 of which was paid in conjunction with expenses incurred in the
sale of iNTELEFILM's radio stations.

- iNTELEFILM paid MMLLC an aggregate of $1,095,000 for services during
1999, $550,000 of which was paid in conjunction with expenses incurred in
the sale of iNTELEFILM's radio stations.

- Harmony paid MMLLC an aggregate of $463,720 for such services during its
fiscal year ended June 30, 1999.

- The salaries of three officers of iNTELEFILM, Messrs. Gilbertson and
Smith and Ms. Theis, are paid by MMLLC. The services of Chief Operating
Officer, Chief Financial Officer and General Counsel are rendered by
Messrs. Gilbertson and Smith and Ms. Theis, respectively, on a shared
basis with Harmony.

- In August 1998, MMLLC entered into a consulting arrangement with Mr.
Perkins pursuant to which Mr. Perkins provided consulting services to
iNTELEFILM in connection with the restructuring of iNTELEFILM following
its sale of radio stations. Mr. Perkins was not paid for such services
during 1998. Through MMLLC, iNTELEFILM paid Mr. Perkins $170,000 for such
services during 1999. MMLLC terminated the foregoing consulting
arrangement effective December 31, 1999.

- MMLLC also has a consulting arrangement with Mr. Cameron, a non-employee
member of the board of directors of both iNTELEFILM and Harmony, pursuant
to which Mr. Cameron provides consulting services to iNTELEFILM and
Harmony in connection with the ongoing business strategies of such
entities. Through MMLLC, Harmony paid Mr. Cameron $36,000 and $45,061 for
such services during 1998 and 1999, respectively.

In connection with the July 1997 acquisition by iNTELEFILM of Harmony
shares, iNTELEFILM borrowed an aggregate of $1.25 million from three parties:
Rodney P. Burwell,

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<PAGE> 47

a former director of iNTELEFILM, Pyramid Partners, L.P., an entity of which
Perkins Capital Management, Inc. is the managing partner, and William M. Toles,
a shareholder of iNTELEFILM and a director of Harmony. Mr. Perkins, a director
of both iNTELEFILM and Harmony, is President and Chief Executive Officer of
Perkins Capital Management. Their loans were evidenced by notes bearing interest
at 10% per annum, initially payable in July 1998, and amended in June 1998 to be
payable in October 1998. Warrants to purchase an aggregate of 125,000 iNTELEFILM
shares at $4.00 per share were issued to those lenders in July 1997. In
connection with the June 1998 amendment to such notes, (a) the interest rate on
the note issued to Mr. Burwell was increased to 20% per annum effective July
1998, (b) an additional warrant to purchase 25,000 iNTELEFILM shares at $3.0625
per share was issued to Pyramid Partners, L.P., and (c) an additional warrant to
purchase 12,500 iNTELEFILM shares at $3.0625 per share was issued to Mr. Toles.
In November 1998, iNTELEFILM repaid Messrs. Perkins, Toles and Burwell in full.

Messrs. Dahl, Perkins and Cameron are directors of both iNTELEFILM and
Harmony. In January 1998, iNTELEFILM received proceeds of $611,000 and paid debt
issuance costs of $39,000 through the issuance of a note payable to Harmony on
face amount of $650,000. The note payable bore interest at 15% per annum, was
unsecured and was due upon demand. In May 1998, iNTELEFILM repaid $322,863 of
principal on the note and $36,062 of interest which had accrued through May
1998. iNTELEFILM repaid the entire note along with accrued interest in June
1998.

In April 1998, iNTELEFILM assigned to Pyramid Partners, L.P., Perkins &
Partners, Inc., Profit Sharing Plan & Trust, and Christopher T. Dahl and State
Bank of New Prague Joint Account all of its right to purchase 225,000 Harmony
shares at $2.50 per share from Glenn B. Laken, a shareholder of Harmony. Pyramid
Partners, L.P. is an entity of which Perkins Capital Management is the managing
partner. Mr. Perkins, a director of both iNTELEFILM and Harmony, is President
and Chief Executive Officer of Perkins Capital Management. Mr. Perkins is also
President of Perkins & Partners, Inc. Mr. Dahl is President, Chief Executive
Officer and Chairman of both iNTELEFILM and Harmony. In October 1998, iNTELEFILM
repurchased the 225,000 Harmony shares at $2.75 from Pyramid Partners, L.P.;
Perkins & Partners, Inc., Profit Sharing Plan & Trust; and Christopher T. Dahl
and State of New Prague Joint Account.

From November 1998 to March 2000, iNTELEFILM advanced Harmony operating
funds under notes receivable, of which approximately $3.2 million remained
outstanding as of March 1, 2000. The notes receivable bear an interest rate of
14%. The Related Party Transaction Committee of Harmony's Board approved these
transactions. On March 22, 2000, iNTELEFILM called these notes. As a result of
Harmony's inability to repay the notes within the 30-day demand period, on May
1, 2000, iNTELEFILM granted Harmony a temporary forebearance of the default to
allow Harmony time to consider its alternatives.

On June 30, 1998, iNTELEFILM exercised its stock options to purchase
750,000 Harmony shares for $1.50 per share. These options were purchased from
third parties by iNTELEFILM in previous transactions for consideration totaling
$790,000. Additionally, 550,000 of such options were purchased from Harvey
Bibicoff, Harmony's former Chief Executive Officer concurrent with iNTELEFILM's
initial investment in Harmony.

Effective as of August 1, 1999, iNTELEFILM purchased the option agreement
entered into by Harmony and the four principal executives of Curious Pictures
Corporation, dated December 15, 1996, from Curious management. Under the option
agreement, Curious management could earn the right to purchase 50% of the
outstanding

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<PAGE> 48

stock of Curious Pictures from Harmony upon the achievement of specified
financial goals. Pursuant to iNTELEFILM's purchase agreement and based on the
results of operations of Curious Pictures, it was agreed by all parties that
Curious management's rights to purchase the 50% equity interest in Curious
Pictures had fully vested and were exercisable for consideration totaling $50.
Following its purchase of the option agreement, iNTELEFILM acquired 50% of
Curious Pictures through the exercise of stock options granted under the option
agreement. iNTELEFILM also acquired a 1% equity interest in Curious Pictures
owned by Curious management that was initially conveyed to Curious management
upon signing the option agreement. The consideration paid to Curious management
by iNTELEFILM for the aforementioned acquisitions aggregated $3.0 million,
consisting of $1.5 million in cash and a $1.5 million note receivable bearing an
interest rate of 8%, which was paid on May 31, 2000. As a result of the
aforementioned transaction, iNTELEFILM came to own 51% of the outstanding stock
of Curious Pictures and Harmony came to own 49% of the outstanding stock of
Curious Pictures.

In addition, as of January 1, 1999, Curious Pictures entered into new
five-year employment agreements with each of the four members of Curious
management. As part of the compensation to be paid to Curious management, at the
end of each employment year, each member of Curious management was granted the
right to purchase from Harmony, one share of Curious Pictures, representing 1%
of the capital stock of Curious Pictures. As a result, if all of the members of
Curious management exercise all of their new options over the five-year term of
their employment agreements, iNTELEFILM will own 51% of the Curious Pictures
stock, Curious management will own 20%, and Harmony will own the remaining 29%.
Additionally, iNTELEFILM granted Curious management warrants to purchase 300,000
iNTELEFILM shares for approximately $1.92 per share.

iNTELEFILM, Harmony, and Curious management also entered into a stock
agreement effective as of August 1, 1999. Under this agreement, the members of
Curious management were granted the right to sell to iNTELEFILM the shares of
Curious Pictures that they earn from Harmony, and iNTELEFILM obtained the right
to purchase such shares from Curious management. The price to be paid by
iNTELEFILM to Curious management under such put or call is $96,774 per share.
These options have been valued at $54,000 per option, their intrinsic value as
of August 1, 1999. The related compensation expense will be recognized ratably
over the employment agreement service period and reflected as a minority
interest on iNTELEFILM's balance sheet. Further, the minority interest will be
ratably accreted to the value of management's put right over the time period
from the option vesting date to the date that the put right may be exercised.
During the three month period ended March 31, 2000, iNTELEFILM recognized
compensation expense of $84,952, resulting in a minority interest valuation
aggregating $333,477 at March 31, 2000 and $139,947 at December 31, 1999.

DESCRIPTION OF INTELEFILM CAPITAL STOCK

iNTELEFILM's Articles of Incorporation authorize it to issue 50,000,000
shares, with a par value of $0.02 per share. As of August 2, 2000, iNTELEFILM
had 6,511,366 shares issued and outstanding, and also had warrants and options
outstanding to purchase an additional 3,529,903 shares. The remaining shares are
undesignated.

COMMON STOCK

No share of iNTELEFILM common stock is entitled to preference over any
other share and each share of common stock is equal to every other share in all
respects. The

42
<PAGE> 49

holders of common stock, other than non-voting shares, are entitled to one vote
for each share held of record at each meeting of shareholders. The non-voting
shares may become shares with full voting rights at such time as they are
transferred by the current holder. In any distribution of assets, whether
voluntary or involuntary, holders are entitled to receive pro rata the assets
remaining after creditors have been paid in full and after any liquidation
preference of any other class of stock has been satisfied.

The board of directors of iNTELEFILM has the authority to issue the
remaining unissued authorized shares and to fix the powers, preferences, rights
and limitations of such shares or any class or series of such shares, without
shareholder approval. Persons acquiring such shares could have preferential
rights with respect to voting, liquidation, dissolution or dividends over
existing shareholders. Shares could also be issued to deter or delay a takeover
or other change in control of iNTELEFILM.

Holders of iNTELEFILM common stock have no preemptive rights to purchase
additional securities which may be offered by iNTELEFILM. There is no cumulative
voting for the election of directors. Accordingly, the owners of a majority of
outstanding voting shares may elect all of the directors if they choose to do
so. All iNTELEFILM shares are entitled to participate equally in all dividends
when, as and if declared by the board of directors out of funds legally
available therefor.

NON-VOTING COMMON STOCK

iNTELEFILM issued 189,041 shares of non-voting common stock to Russell
Cowles, a former director of iNTELEFILM, in April 1992. All non-voting stock was
issued in order to avoid attribution of interests under FCC regulations, and all
non-voting stock is convertible to voting stock on a share for share basis if
such conversion would not result in FCC attribution of interests.

PREFERRED STOCK

iNTELEFILM's Articles of Incorporation authorize iNTELEFILM's board of
directors, without further shareholder action, to issue shares of preferred
stock in one or more series and to fix the voting rights, liquidation
preferences, dividend rights, repurchase rights, conversion rights, redemption
rights and terms, including sinking fund provisions and other rights and
preferences of the preferred stock.

Although there is no current intention to do so, the board of directors of
iNTELEFILM may, without shareholder approval, issue additional shares of a class
or series of preferred stock with voting and conversion rights which could
adversely affect the voting power or dividend rights of the holders of common
stock and may have the effect of delaying, deferring or preventing a change in
control of iNTELEFILM.

SHAREHOLDER RIGHTS PLAN

In February 1998, iNTELEFILM's board of directors declared a dividend of
one common share purchase right for each share of iNTELEFILM common stock
outstanding as of the close of business on February 27, 1998. Each right will
entitle the registered holder to purchase from iNTELEFILM, after the
distribution date of the rights, that number of shares of iNTELEFILM common
stock having a market value of two times the purchase price of the rights at an
initial purchase price of $18.00, subject to adjustment. The board of directors
of iNTELEFILM further directed the issuance of one right, subject to adjustment,
with respect to each common share that shall become outstanding between the
record date and the earliest of the distribution date of the rights, the
redemption date

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<PAGE> 50

of the rights or the final expiration date of the rights. The rights may be
issued with respect to common shares that become outstanding after the
distribution date and prior to the earlier of the redemption date or the final
expiration date. The rights will be issued upon the terms and subject to the
conditions set forth in a rights agreement dated as of February 19, 1998,
between iNTELEFILM and Norwest Bank Minnesota, N.A., as rights agent.

The rights become exercisable at any time after the distribution date. The
distribution date is defined as the close of business on the earlier to occur of
(a) the fifteenth business day, or such later date as may be determined by
action of the board of directors of iNTELEFILM, after the date of the
commencement by any person or group of affiliated or associated persons, or the
first public announcement of the intention of any person or group of affiliated
or associated persons to commence, a tender or exchange offer, the consummation
of which would result in beneficial ownership by a person or group of affiliated
or associated persons of 20% or more of the common shares of iNTELEFILM, or (b)
the fifteenth business day, or such later date as may be determined by action of
the board of directors of iNTELEFILM, after the first date of public
announcement by iNTELEFILM or an acquiring person that any person or group of
affiliated or associated persons intends to commence a tender or exchange offer,
the consummation of which would result in beneficial ownership by a person or
group of affiliated or associated persons of 20% or more of the common shares
then outstanding, not including:

- iNTELEFILM;

- any subsidiary of iNTELEFILM;

- any person holding common shares acquired by that person in a transaction
occurring after the record date and approved in advance in writing by a
majority of disinterested directors of iNTELEFILM's board of directors to
the extent, but only to the extent, of the common shares so held;

- any employee benefit plan of iNTELEFILM or of any subsidiary of
iNTELEFILM;

- any person holding common shares for or pursuant to the terms of any
employee benefit plan of this sentence to the extent, but only to the
extent, of the common shares so held;

- any person who or which, together with all affiliates and associates of
such person, becomes the beneficial owner of 20% or more of the then
outstanding common shares as a result of the acquisition of common shares
directly from iNTELEFILM; or

- any person who or which, together with all affiliates and associates of
such person, is the beneficial owner of 20% or more of the common shares
outstanding on the twentieth business day preceding the record date. A
person is deemed to be an acquiring person, however, upon becoming the
beneficial owner, together with all affiliates and associates of such
person, of any additional common shares representing an incremental
increase of 20% or more of the common shares then outstanding, which were
acquired at any time after the twentieth business day preceding the
record date.

The rights will expire at the close of business on February 13, 2008,
unless the rights are earlier redeemed or exchanged by iNTELEFILM, in each case
as described below.

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<PAGE> 51

The purchase price, the number and the kind of shares covered by each right
are subject to adjustment from time to time to prevent dilution. The number of
outstanding rights and the number of common shares issuable upon exercise of
each right are also subject to adjustment in the event of a stock split or a
stock dividend on the common shares or consolidations or combinations of the
common shares occurring prior to the distribution date. Common shares
purchasable upon exercise of the rights will not be redeemable.

If any person or group of affiliated or associated persons becomes an
acquiring person, each holder of a right, other than the rights that are or were
acquired or beneficially owned by the acquiring person, which will thereupon
become null and void, will thereafter have the right to receive, upon exercise
of the right at the then-current exercise price of the right, that number of
common shares having a market value of two times the exercise price of the
right. If, on or after the share acquisition date, iNTELEFILM is, in effect,
acquired in a merger or other business combination transaction, or 50% or more
of its consolidated assets or earning power is sold, proper provisions will be
made so that each holder of a right, other than rights owned by that person or
group which will have become null and void, will thereafter have the right to
receive, upon exercise of the right at the then-current exercise price of the
right, that number of shares of capital stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the right.

At any time after any person or group becomes an acquiring person and
before the earlier of one of the events described in the previous paragraph, the
board of directors of iNTELEFILM may exchange the rights, other than rights
owned by that person or group which will have become null and void, in whole or
in part, at an exchange ratio of one common share per right, subject to
adjustment. As described in the rights agreement, rights issued to any person
who becomes an acquiring person become null and void.

In general, no adjustment in the purchase price will be required unless
such cumulative adjustments require an adjustment of at least 1% in the purchase
price. iNTELEFILM is not required to issue fractional common shares. In lieu of
issuing fractional shares, an adjustment in cash will be made based on the
market price of the common shares on the last trading day prior to the date of
exercise.

At any time prior to the earlier of (a) the close of business on the tenth
business day after the first date of public announcement by iNTELEFILM or an
acquiring person that an acquiring person has become such, or (b) the final
expiration date, iNTELEFILM may redeem all but not less than all of the then
outstanding rights at a redemption price of $0.01 per right, subject to
adjustment, in cash, with common shares, or other consideration deemed
appropriate by iNTELEFILM. Immediately upon the action of the board of directors
of iNTELEFILM ordering the redemption of the rights, the right to exercise the
rights will terminate.

For so long as the rights are then redeemable, iNTELEFILM in its sole and
absolute discretion may from time to time rescind, change, supplement or amend
the rights agreement in any respect without the approval of any holders of
rights certificates. At any time when the rights are no longer redeemable,
iNTELEFILM may supplement or amend the rights agreement without the approval of
any holders of rights certificates in order to cure ambiguities, correct or
supplement defective or inconsistent provisions, shorten or lengthen time
periods, or otherwise change, delete or supplement provisions, so long as any
such change, deletion or amendment does not adversely affect the interests of
the holders

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<PAGE> 52

of the rights, other than an acquiring person or an affiliate or associate of an
acquiring person, in whose hands all rights are null and void.

Until a right is exercised, the holder of such right, as such, will have no
rights as a shareholder of iNTELEFILM pursuant to such right, including, without
limitation, the right to vote or to receive dividends.

The rights have anti-takeover effects. The rights will cause substantial
dilution to a person or group that attempts to acquire iNTELEFILM without
conditioning the offer on a substantial number of rights being acquired or
redeemed. The rights should not interfere with any merger or other business
combination approved by the board of directors of iNTELEFILM since the board of
directors may, at its option and in its sole and absolute discretion, redeem the
rights as provided in the rights agreement.

The rights agreement between iNTELEFILM and the rights agent specifying the
terms of the rights, which includes the form of right certificate and the form
of summary of rights to purchase common shares as exhibits, has been filed as an
exhibit to iNTELEFILM's Registration Statement on Form 8-A/A. See "Where You Can
Find More Information" on page 5. This summary description of the rights does
not purport to be complete and is qualified in its entirety by reference to the
rights agreement, which is incorporated by reference into this document.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

INTELEFILM

iNTELEFILM common stock is listed on the Nasdaq National Market and traded
under the symbol "FILM." The following table sets forth, for the calendar
periods indicated, the high and low reported sales prices per share of
iNTELEFILM common stock on the Nasdaq National Market.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
1998
First Quarter............................................. $4.313 $3.188
Second Quarter............................................ 4.063 3.000
Third Quarter............................................. 3.375 2.875
Fourth Quarter............................................ 3.688 2.813
1999
First Quarter............................................. 3.063 1.719
Second Quarter............................................ 2.188 1.594
Third Quarter............................................. 2.563 1.500
Fourth Quarter............................................ 5.250 1.625
2000
First Quarter............................................. 5.125 3.375
Second Quarter............................................ 3.188 2.063
Third Quarter through August 2, 2000...................... 2.500 2.000
</TABLE>

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<PAGE> 53

HARMONY

Harmony common stock is listed on the OTC Bulletin Board and traded under
the symbol "HAHO." The following table sets forth, for the calendar periods
indicated, the high and low reported sales prices per share of Harmony common
stock on the OTC Bulletin Board reporting system. Such over-the-counter market
quotations reflect interdealer prices without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
------------------
HIGH LOW
------- -------
<S> <C> <C>
1998
First Quarter............................................ $2.0625 $1.3125
Second Quarter........................................... 1.8125 1.3125
Third Quarter............................................ 1.6875 1.0000
Fourth Quarter........................................... 1.4375 1.1875
1999
First Quarter............................................ 1.5000 1.0000
Second Quarter........................................... 1.0625 0.8750
Third Quarter............................................ 1.1250 0.3125
Fourth Quarter........................................... 0.4375 0.1250
2000
First Quarter............................................ 0.3000 0.1250
Second Quarter........................................... 0.2600 0.1300
Third Quarter through August 2, 2000..................... 0.1590 0.1100
</TABLE>

DIVIDEND POLICY OF INTELEFILM AND HARMONY

The holders of iNTELEFILM and Harmony common stock receive dividends if and
when declared by their respective board of directors out of funds legally
available therefor. The declaration and payment of dividends by iNTELEFILM after
completion of the offer will depend upon business conditions, operating results,
capital and reserve requirements and the consideration of other relevant factors
by iNTELEFILM's board of directors. iNTELEFILM and Harmony have historically not
paid dividends and iNTELEFILM intends to retain future earnings, if any, to fund
the development and growth of its business.

COMPARISON OF SECURITY HOLDER RIGHTS

iNTELEFILM is incorporated under the laws of the State of Minnesota.
Harmony is incorporated under the laws of the State of Delaware. Upon an
exchange of shares by tendering Harmony stockholders, or upon a subsequent
short-form merger of Harmony with iNTELEFILM, Harmony stockholders, whose rights
are currently governed by the DGCL, the certificate of incorporation of Harmony
and the amended and restated bylaws of Harmony, will become shareholders of
iNTELEFILM, and their rights as such will be governed by the Minnesota Business
Corporation Act (the "MBCA"), the iNTELEFILM articles of incorporation and the
bylaws of iNTELEFILM. The material differences between the rights of Harmony
stockholders and the rights of iNTELEFILM shareholders, resulting from the
differences in their governing documents, are summarized below.

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<PAGE> 54

The following summary enumerates material differences between the rights of
iNTELEFILM shareholders and Harmony stockholders, but is qualified in its
entirety by reference to the DGCL, the MBCA and the governing corporate
instruments of iNTELEFILM and Harmony, to which Harmony stockholders are
referred. Copies of the governing corporate instruments of iNTELEFILM and
Harmony are available, without charge, to any person, including any beneficial
owner to whom this prospectus is delivered, by following the instructions listed
under "Where You Can Find More Information" on page 5.

NUMBER OF DIRECTORS

The DGCL requires that Harmony's board consists of one or more directors,
the number of Harmony directors is to be fixed by or in the manner provided in
Harmony's bylaws, unless Harmony's certificate of incorporation fixes the number
of directors. Harmony's certificate of incorporation does not address the number
of directors to serve on its board. Harmony's bylaws require that its board
consist of between one and [SIX] directors. Harmony's board currently consists
of five directors. The MBCA requires that iNTELEFILM's board consist of one or
more directors, the number to be fixed by or in the manner provided in
iNTELEFILM's articles of incorporation or bylaws. iNTELEFILM's bylaws require
that its board consist of at least one or more directors, as shall be determined
by iNTELEFILM shareholders. iNTELEFILM's board currently consists of four
directors.

ELECTION OF DIRECTORS

The DGCL permits a board of directors to be divided into classes without
regard to the size of the board of directors. Harmony's board is not classified.
Under the DGCL, cumulative voting in the election of directors does not exist
unless specified in the certificate of incorporation. Harmony's certificate of
incorporation allows Harmony stockholders, at their own option, to cumulate
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the stockholder's
shares are entitled. Harmony's bylaws require directors be elected by the
affirmative vote of a majority of stockholders present at each annual
stockholder meeting, or at a special meeting of stockholders in the event no
annual meeting occurs.

The MBCA permits a board of directors to be divided into classes without
regard to the size of the board of directors. iNTELEFILM's board is not
classified. Under the MBCA, cumulative voting in the election of directors is
mandatory unless the articles of incorporation provide there shall be no
cumulative voting. iNTELEFILM's articles of incorporation contain a provision
eliminating cumulative voting. INTELEFILM's bylaws require directors be elected
by the affirmative vote of a majority of shareholders present at the regular
shareholder meeting to be held on an annual or other less frequent periodic
basis.

REMOVAL OF DIRECTORS

The DGCL provides that any director or all directors may be removed at any
time, with or without cause, by the affirmative vote of the holders of a
majority of the voting power of all shares entitled to vote at an election of
directors. Because Harmony stockholders are entitled to cumulative voting, if
less than the entire board is to be removed, no director may be removed without
cause if the votes cast against such director's removal would be sufficient to
elect the director if then cumulatively voted at an

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<PAGE> 55

election of the entire board of directors. Harmony's certificate of
incorporation does not alter these provisions.

The MBCA provides that unless otherwise provided in the articles of
incorporation or bylaws, directors may be removed at any time, with or without
cause, by the affirmative vote of the holders of a majority of the voting power
of all shares entitled to vote at an election of directors. iNTELEFILM's bylaws
allow any or all of the directors to be removed with or without cause (a) at any
meeting of the shareholders called for that purpose by a majority of the
iNTELEFILM common stock represented and entitled to vote at the meeting or (b)
so long as the director was named by the board to fill a vacancy and iNTELEFILM
shareholders have not elected directors in the interval between the time of the
appointment to fill a vacancy and the time of the removal, by the affirmative
vote of a majority of the remaining directors.

VACANCIES ON THE BOARD OF DIRECTORS

The DGCL provides that, unless otherwise provided in the certificate of
incorporation or bylaws, vacancies and newly created directorships resulting
from an increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum. Harmony's
certificate of incorporation provides that board vacancies may be filled by the
vote of a majority of the remaining directors, even if the remaining directors
do not constitute a quorum or if only one director remains on the board, and
that any director so elected will hold office until the next annual meeting and
until the director's successor is elected and qualified. Harmony's bylaws
provide that Harmony stockholders may elect a director or directors at any time
to fill any vacancy not filled by the directors, so long as the stockholders act
by written consent of a majority of the outstanding shares entitled to vote.

iNTELEFILM's bylaws provide that vacancies in the board resulting from the
death, resignation, removal or disqualification of a director shall be filled by
the affirmative vote of a majority of the remaining directors, even though less
than a quorum, or by iNTELEFILM shareholders. The MBCA and iNTELEFILM's bylaws
provide that vacancies in the board may be filled by the affirmative vote of a
majority of the remaining directors, even though less than a quorum, or existing
directors at the time of an increase. The MBCA and iNTELEFILM's bylaws also
provide that a director elected to fill a vacancy serves until the next regular
or special meeting of shareholders and until the director's successor is elected
and qualified.

SHAREHOLDER ACTION BY WRITTEN CONSENT

Harmony's bylaws provide that any action required or permitted to be taken
at a stockholder meeting may be taken without a meeting and without prior notice
if a consent in writing is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
such action at a meeting. iNTELEFILM'S bylaws provide that any action required
or permitted to be taken at a shareholder meeting may be taken without a meeting
if the action is taken by all the shareholders entitled to vote on the action
and evidenced by written consent signed by all the shareholders.

AMENDMENT TO INCORPORATING INSTRUMENTS

The DGCL permits Harmony's certificate of incorporation to be altered,
amended, or repealed upon the board's recommendation and by a vote of a majority
of the stock

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<PAGE> 56

outstanding and entitled to vote. Harmony's certificate of incorporation does
not alter these provisions.

The MBCA provides that amendments to iNTELEFILM's article of incorporation
may be recommended to the iNTELEFILM shareholders by the majority of the board
or a shareholder or shareholders holding three percent or more of the voting
power of the shares entitled to vote. Proposed amendments to iNTELEFILM's
articles must be approved by the affirmative vote of the holders of a majority
of the shares present and entitled to vote on such amendment, except that a
proposed amendment to cause the Minnesota control share acquisition statute at
MBCA Section 302A.671 to be inapplicable may also be approved by a committee of
the board of directors comprised solely of directors who (a) are, nor have been
during the past five years, neither officers nor employees, (b) are neither
"acquiring persons" nor affiliates or associates of an "acquiring persons," (c)
were not nominated for election as directors by an "acquiring persons" or an
affiliate or associate of an "acquiring persons," and (d) were directors at the
time an acquiring person became an "acquiring persons" or were nominated,
elected, or recommended for election as directors by a majority of those
directors.

AMENDMENT TO BYLAWS

The DGCL provides that, unless otherwise designated in the certificate of
incorporation, bylaws may be amended or repealed by the stockholders entitled to
vote. Harmony's certificate of incorporation provides that the board may amend
or repeal the bylaws. Harmony's bylaws also provide for amendment or repeal by
the vote of a majority of the holders of outstanding shares or by the approval
of the board.

The MBCA provides that the board has the power to amend or repeal bylaws
unless (a) such power is reserved by the articles of incorporation to the
shareholders or (b) a shareholder or shareholders holding three percent or more
of the voting power of the shares entitled to vote propose a resolution for
action by the shareholders to adopt, amend, or repeal the bylaws. iNTELEFILM's
bylaws provide that they may be amended or repealed by the board, except that
amendments affecting the qualifications, classifications, number, term,
procedures for removal or filling of vacancies on the board of directors, or
fixing a quorum for shareholder meetings, may only be made by a majority vote of
shareholders. A proposed amendment to cause the Minnesota control share
acquisition statute at MBCA Section 302A.671 to be inapplicable, however, may be
approved by a committee of the board of directors comprised solely of directors
who (a) are, nor have been during the past five years, neither officers nor
employees, (b) are neither "acquiring persons" nor affiliates or associates of
an "acquiring persons," (c) were not nominated for election as directors by an
"acquiring persons" or an affiliate or associate of an "acquiring persons," and
(d) were directors at the time an acquiring person became an "acquiring persons"
or were nominated, elected, or recommended for election as directors by a
majority of those directors.

CALLING OF SPECIAL MEETING OF SECURITY HOLDERS

The DGCL provides that special meetings of stockholders may be called by
the board or by such persons or persons as may be authorized by the certificate
of incorporation or bylaws. Harmony's bylaws authorize the board, the chairman
of the board, the chief executive officer, or the holders of not less than 10
percent of the outstanding shares entitled to vote at the meeting. Stockholders
must receive written notice of a special meeting no less than 10 days and no
more than 60 days before the date of the meeting.

50
<PAGE> 57

The MBCA provides that special meetings of shareholders may be called by
the chief executive officer, the chief financial officer, two or more directors,
any person authorized in the articles or bylaws to call special meetings or a
shareholder or shareholders holding 10 percent or more of the voting power of
all shares entitled to vote, except that any special meeting for the purpose of
considering any action to directly or indirectly facilitate or effect a business
combination must be called by 25 percent or more of the voting power of all
shares entitled to vote. iNTELEFILM's bylaws provide that special meetings of
shareholders may be called by the president, treasurer, two or more directors or
a shareholder or shareholders holding 10 percent or more of the voting power of
all shares entitled to vote at the meeting. Shareholders must receive written
notice of a special meeting at least three days and not more than 60 days before
the date of the meeting.

ANTI-TAKEOVER MEASURES

Both Delaware and Minnesota law contain provisions intended to protect
security holders from individuals or companies attempting a takeover of a
corporation in limited circumstances. The anti-takeover provisions of the DGCL
and the MBCA differ in a number of respects, and the following is a summary of
material differences. As a general rule, an interested shareholder in Minnesota
is one who owns 10 percent of the outstanding shares while an interested
stockholder in Delaware is one who owns 15 percent of the outstanding stock. An
interested shareholder must wait four years in Minnesota to engage in prohibited
business combinations, while the waiting period is only three years in Delaware.
Minnesota law has a potentially broader definition of a business combination
which encompass a larger variety of transactions.

Security holder rights plans

iNTELEFILM adopted a shareholder rights plan in February 1998. Rights may
become exercisable, entitling holders of such rights to purchase iNTELEFILM
common stock, as a result of acquisitions of, and tender or exchange offers for,
iNTELEFILM common stock. iNTELEFILM's shareholder rights plan may have the
effect of discouraging unsolicited mergers or acquisitions of iNTELEFILM common
stock. For a more detailed description of such plan see "Description of
iNTELEFILM capital stock -- Shareholders rights plan." Harmony has not adopted a
stockholder rights plan.

Control share acquisitions

The Minnesota "control share acquisition" statute establishes various
disclosure and shareholder approval requirements to be met by individuals or
entities attempting a takeover. Delaware has no comparable provision. The
Minnesota statute applies to an issuing public corporation. An "issuing public
corporation" is one which is incorporated under or governed by Minnesota law and
has at least 50 stockholders. iNTELEFILM is subject to the statute. Harmony,
because it is a Delaware corporation, is not subject to the statute.

The Minnesota statute requires disinterested shareholder approval for any
acquisition of shares of an "issuing public corporation" which results in the
"acquiring person" owning any of the following ranges of the outstanding shares
of such corporation: (a) at least 20 percent but less than 33 - 1/3 percent; (b)
at least 33 - 1/3 percent but less than or equal to 50 percent; or (c) over 50
percent. Shareholders which exceed this threshold without shareholder approval
lose their voting rights and are subject to redemption privileges of the
corporation. These shares regain their voting rights only if the acquiring
person discloses information to the corporation and these voting rights are
granted by the

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<PAGE> 58

shareholders at a special or annual meeting of the shareholders. The Minnesota
control share acquisition statute applies unless the "issuing public
corporation" opts out of the statute in its articles of incorporation or bylaws.
Neither the articles of incorporation nor the bylaws of iNTELEFILM contain such
an opt out provision.

Business combinations

While there is no Delaware statute comparable to the Minnesota control
share acquisition statute, both Minnesota and Delaware have business combination
statutes that are intended primarily to deter highly leveraged takeover bids
which propose to use the target's assets as collateral for the offeror's debt
financing and to liquidate the target, in whole or in part, to satisfy financing
obligations.

In general, the MBCA states that an issuing public corporation may not
engage in business combinations with any person that acquires beneficial
ownership of ten percent or more of the voting stock of that corporation for a
period of four years following the date that the person became a ten percent
shareholder unless, prior to that share acquisition date, a committee of the
corporation's disinterested directors approve either the business combination or
the acquisition of shares.

In contrast to the Minnesota provisions, the DGCL Section 203 generally
provides that any person, including a corporation, acquiring 15 percent of more
of the voting stock of a Delaware corporation is designated as an interested
stockholder and the corporation may not engage in business combinations with
such person for a period of three years unless one of the following conditions
is met: (a) prior to the date the person became an interested stockholder, the
board of directors approved either the business combination or the transaction
which resulted in such person becoming an interested stockholder; (b) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, such person owned at least 85% of the voting stock of
the corporation, excluding those shares owned by directors who are also officers
and shares owned by select employee stock ownership plans; or (c) the business
combination is approved by the board and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
two-thirds of the outstanding voting shares held by disinterested stockholders.
The Delaware provisions also do not apply to any business combination in which
the corporation, with the support of a majority of those directors who were
serving as directors before any person became an interested stockholder,
proposes a merger, sale, lease, exchange or other disposition of at least 50
percent of its assets, or supports, or does not oppose, a tender offer for at
least 50 percent of its voting stock. In that case, all interested stockholders
are released from the three-year prohibition and may compete with the
corporation sponsored transaction.

DGCL Section 203 differs from Minnesota's control share acquisition
provisions in that under the DGCL, an otherwise prohibited business combination
may be permitted by board approval, by stockholder approval, or by an
acquisition of 85 percent of the outstanding shares of voting stock. Under the
MBCA, a prohibited transaction is only permitted by advance board committee
approval. In addition, the Delaware statute states that if the corporation
proposes a merger or sale of assets, or does not oppose a tender offer, all
interested stockholders are released from the three-year prohibition and may
compete with the company-sponsored transaction in limited circumstances.
Minnesota law does not have a comparable provision.

Both the MBCA and the DGCL permit a corporation to opt out of the business
combination statute by electing to do so in its articles or certificate of
incorporation or

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<PAGE> 59

bylaws. Neither the certificate of incorporation nor the bylaws of Harmony
contain such an opt out provision. Similarly, neither the articles of
incorporation nor the bylaws of iNTELEFILM contain such an opt out provision.

DGCL Section 203 does not apply to iNTELEFILM's offer because prior to the
date iNTELEFILM became an interested stockholder of Harmony, Harmony's board of
directors approved of the transactions which resulted in iNTELEFILM becoming an
interested stockholder.

Other anti-takeover provisions

The MBCA includes three special provisions relating to takeovers that are
not included in the DGCL. Minnesota law contains a provision prohibiting a
publicly-held corporation from entering into or amending agreements that
increase current or future compensation of any officer or director during any
tender offer or request or invitation for tenders. Minnesota law also prohibits
a publicly-held corporation from purchasing or agreeing to purchase any shares
from a person who beneficially owns more than five percent of the voting power
of the corporation if the shares had been beneficially owned by that person for
less than two years, and if the purchase price would exceed the market value of
those shares. However, a purchase will not violate the statute if it is approved
at a meeting of the shareholders by a majority of the voting power of all shares
entitled to vote or if the corporation's offer is of at least equal value per
share and is made to all holders of shares of the class or series and to all
holders of any class or series into which the securities may be converted.
Minnesota law also authorizes the board of directors, in considering the best
interests of the corporation in a proposed acquisition of an interest in the
corporation, to consider the interest of the corporation's employees, customers,
suppliers and creditors, the economy of the state and nation, community and
social considerations and the long-term as well as short-term interests of the
corporation and its shareholders, including the possibility that these interests
may best be served by the continued independence of the corporation.

INDEMNIFICATION

Delaware law permits a corporation to indemnify officers, directors,
employees or agents and expressly provides that such indemnification shall not
be deemed exclusive of any indemnification right provided under any bylaw, vote
of stockholders or disinterested directors or otherwise. The DGCL permits
indemnification against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any legal action,
suit or proceeding brought or threatened against such persons for their conduct
on behalf of the corporation. Indemnification is available provided the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and, in the case of
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful. Delaware law does not allow indemnification for officers, directors,
employees or agents in the case of an action by, or in the right of, the
corporation, including stockholder derivative suits, as to which such person is
adjudged to be liable to the corporation, unless indemnification is ordered by a
court. Harmony's certificate of incorporation and bylaws require indemnification
to the full extent permitted by Delaware law, except that the certificate of
incorporation provides that no director shall be liable to Harmony or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) for
unlawful

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payment of a dividend or unlawful stock purchase or redemption under Section 174
of the DGCL, or (d) for any transaction from which the director derived an
improper personal benefit. Harmony's certificate of incorporation and bylaws
permit it to maintain insurance on behalf of officers, directors, employees or
agents against any liability which may be asserted against them.

Minnesota law generally provides for mandatory indemnification of persons
made or threatened to be made a party to a proceeding by reason of a former or
present official capacity of the person against judgments, penalties, fines,
taxes assessed against the person, settlements and reasonable expenses,
including attorneys' fees and disbursements. Indemnification is available
provided the person has not been indemnified by another organization or employee
benefit plan for the same action, acted in good faith, received no improper
personal benefit, acted in a manner the person reasonably believed to be in or
not opposed to the best interest of the corporation and, in the case of criminal
proceeding, had no reasonable cause to believe that the conduct was unlawful. If
a person is made or threatened to be made a party to a proceeding, the person is
entitled, upon written request to the corporation, to payment or reimbursement
by the corporation of reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in advance of the final disposition of the
proceeding. iNTELEFILM's articles of incorporation and bylaws provide for
indemnification to the full extent provided by Minnesota law and the articles of
incorporation eliminate indemnification for (a) any breach of the director's
duty of loyalty to the corporation or its stockholders, (b) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (c) improper payment of a dividend or improper repurchase of iNTELEFILM
stock under Section 302A.559 of the MBCA or a violation of federal or state
securities laws, (d) any transaction from which the director derived an improper
personal benefit, or (e) any act or omission occurring prior to the date the
articles of incorporation became effective. Minnesota law permits iNTELEFILM to
maintain insurance on behalf of persons in their official capacity against any
liability which may be asserted against them.

DISSENTERS' RIGHTS AND APPRAISAL RIGHTS IN CONNECTION WITH CORPORATE
REORGANIZATIONS AND OTHER ACTIONS

Under Minnesota law and Delaware law, security holders have the right, in
some circumstances, to dissent from corporate transactions by demanding payment
in cash for their shares equal to the fair value as determined by agreement with
the corporation or by a court in an action timely brought by the dissenters.
Delaware law in general allows for rights of appraisal only in select mergers or
consolidations, including any short-form merger under DGCL Section 253 involving
iNTELEFILM and Harmony. Minnesota law in general affords dissenters' rights upon
amendments to the articles of incorporation that materially and adversely affect
the rights or preferences of the shares of the dissenting shareholder, upon the
sale, lease, transfer or other disposition of substantially all corporate assets
and upon a plan of merger or exchange. Delaware law eliminates rights of
appraisal in connection with certain mergers or consolidations, but not in
connection with a short-form merger, where stockholders receive either one or a
combination of the following: (a) shares of stock of the surviving corporation
in a merger; (b) shares of stock that will be listed on a national securities
exchange or designated as a national market system security on Nasdaq or held of
record by more than 2,000 holders; or (c) cash in lieu of fraction al shares.
Minnesota law affords dissenters' rights regardless of whether the shares of the
corporation are listed on a national securities exchange or widely held.

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<PAGE> 61

Although no appraisal rights exist in connection with the tender offer,
Harmony stockholders who do not wish to accept iNTELEFILM shares in a short-form
merger which follows the offer will have the right under Delaware law to dissent
and demand appraisal of their Harmony shares. Rights of appraisal under Delaware
law entitle dissenting Harmony stockholders to receive a judicial determination
of, and receive payment for, the fair value of their shares. The procedures for
asserting rights of appraisal in Delaware impose most of the initial costs of
assertion on the dissenting stockholder, whereas the Minnesota procedures pose
little financial risk to the dissenting shareholder in demanding payment in
excess of the amount the corporation determined to be the fair value of the
dissenter's shares. Therefore, Harmony stockholders will have expanded
dissenters' rights under Minnesota law upon becoming iNTELEFILM shareholders.

LEGAL MATTERS

The validity of the common stock offered by iNTELEFILM will be passed upon
for iNTELEFILM by Briggs and Morgan, Professional Association, Minneapolis,
Minnesota.

EXPERTS

The consolidated financial statements of iNTELEFILM incorporated by
reference in this prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report, incorporated herein by reference, in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.

The consolidated financial statements of Harmony incorporated by reference
in this prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in their report,
which contains an explanatory paragraph regarding Harmony's ability to continue
as a going concern, incorporated herein by reference, in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

This unaudited pro forma financial information sets forth the impact of the
offer of one share of iNTELEFILM common stock for every 13.75 shares of Harmony
common stock. The unaudited pro forma statements of operations and balance sheet
do not purport to present iNTELEFILM's consolidated results of operations and
financial position as they might have been, or as they may be in the future, had
the transaction occurred on the assumed dates.

The pro forma adjustments are based upon information currently available.
The pro forma financial statements should be read in conjunction with the
historical consolidated financial statements of iNTELEFILM and Harmony for the
fiscal year ended December 31 and June 30, 1999, respectively, and for the
interim period ended March 31, 2000. However, the pro forma financial statements
are not necessarily indicative of the

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<PAGE> 62

financial position that would have been attained by iNTELEFILM had the
transaction occurred earlier.

The objective of the pro forma financial statements is to show what the
significant effects on the historical consolidated financial statements might
have been had the transaction occurred on January 1, 1999, for the statements of
operations presented, and as of March 31, 2000, for the balance sheet presented.
The pro forma financial statements assume that the 3,367,098 shares of Harmony
common stock not currently owned by iNTELEFILM are completely acquired for
244,880 shares of iNTELEFILM common stock. Additionally, iNTELEFILM anticipates
that the transaction will result in financial benefits to the consolidated
company, including reduced operating expenses and enhanced opportunities to
increase revenue. The pro forma financial statements, while helpful in
illustrating the financial characteristics of the consolidated company under one
set of assumptions, do not reflect these anticipated financial benefits.

This information is for illustrative purposes only. The companies would
likely have performed differently had they always been combined. The information
set forth should not be relied upon as being indicative of the future results
that the consolidated company will experience as a result of the transaction.

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<PAGE> 63

PRO FORMA STATEMENTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1999

(UNAUDITED)

<TABLE>
<CAPTION>
REVERSE iNTELEFILM
INTELEFILM HARMONY EQUITY LOSS PRO FORMA FOR
YEAR ENDED QUARTER ENDED IN HARMONY TENDER OFFER YEAR ENDED
DECEMBER 31, MARCH 31, AND ADJUST (GOODWILL DECEMBER 31,
1999 1999(1) GOODWILL(2) AMORTIZATION)(3) 1999
------------ ------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues................ $67,342,653 $16,274,699 $ -- $ -- $83,617,352
Cost of production...... 56,488,737 13,889,304 -- -- 70,378,041
Operating expenses...... 17,271,403 3,511,348 725,900 166,333 21,674,984
----------- ----------- ---------- --------- -----------
Loss from operations.... (6,417,487) (1,125,953) (725,900) (166,333) (8,435,673)
Gain on sale of
assets................ 16,383,816 -- -- -- 16,383,816
Equity loss in
Harmony............... (1,930,942) -- 1,930,942 -- --
Interest income
(expense) net......... 406,082 (79,089) 326,993
Income taxes............ (1,101,892) -- -- -- (1,101,892)
----------- ----------- ---------- --------- -----------
Net income (loss)....... $ 7,339,577 $(1,205,042) $1,205,042 $(166,333) $ 7,173,244
Basic net income per
share................. $ 1.16 $ 1.09
=========== ===========
Diluted net income per
share................. $ 1.14 $ 1.07
=========== ===========
Weighted average number
of shares
outstanding........... 6,343,000 $ 6,587,880
=========== ===========
Weighted average number
of shares
outstanding --
assuming dilution..... 6,448,000 $ 6,692,880
=========== ===========
*7
</TABLE>

---------------

(1) Includes the revenue and operating expenses related to the operations of
Harmony for the quarter ended March 31, 1999. All subsequent quarters of
1999 have been consolidated with iNTELEFILM's results of operations as
reported.

(2) Eliminates the equity loss in Harmony recorded in the first quarter of 1999
and reclassifies the portion of that loss related to the amortization of
goodwill to amortization expense.

(3) Reflects an adjustment to amortization expense related to goodwill of
$1,164,337 recognized in the transaction, based on the March 22, 2000 share
price of $3.94 of 244,880 iNTELEFILM shares to be issued totaling $964,337,
including estimated transaction costs of $200,000. Amortization is
calculated on a straight-line basis over seven years.

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<PAGE> 64

PRO FORMA STATEMENTS OF OPERATIONS

FOR QUARTER ENDED MARCH 31, 2000
(UNAUDITED)

<TABLE>
<CAPTION>
**7
INTELEFILM
PRO FORMA FOR
INTELEFILM ADJUST QUARTER ENDED
QUARTER ENDED AMORTIZATION MARCH 31,
MARCH 31, 2000 OF GOODWILL(1) 2000
-------------- -------------- -------------
<S> <C> <C> <C>
Revenues.......................... $21,739,591 $ -- $21,739,591
Cost of production................ 18,497,237 -- 18,497,237
Operating expenses................ 4,819,962 41,583 4,861,545
----------- -------- -----------
Loss from operations.............. (1,577,608) (41,583) (1,619,191)
Gain on sale of assets............ -- -- --
Equity loss in Harmony............ -- -- --
Interest expense, net............. 62,941 -- 62,941
Income taxes...................... (4,549) -- (4,549)
----------- -------- -----------
Net loss.......................... $(1,519,216) $(41,583) $(1,560,799)
=========== ======== ===========
Basic and diluted net loss per
share........................... $ (0.24) $ (0.24)
=========== ===========
Basic and diluted weighted average
number of shares outstanding.... 6,336,000 6,581,000
=========== ===========
</TABLE>

---------------

(1) Reflects three months of amortization of the goodwill recognized in the
transaction.

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<PAGE> 65

PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
(UNAUDITED)

<TABLE>
<CAPTION>
TENDER OffER iNTELEFILM
INTELEFILM (GOOD WILL PRO FORMA
MARCH 31, 2000 COSTS)(1) MARCH 31, 2000
-------------- ------------ --------------
<S> <C> <C> <C>
Current assets...................... $19,753,733 $ (200,000) $19,553,733
Property and equipment, net......... 3,025,699 -- 3,025,699
Goodwill, net....................... 6,475,112 1,164,337 7,639,449
Other assets........................ 840,654 840,654
----------- ---------- -----------
Total assets...................... $30,095,198 $ 964,337 $31,059,535
=========== ========== ===========
Current liabilities................. $10,948,210 $ -- $10,948,210
Long-term debt...................... 654,283 -- 654,283
Minority interest................... 248,226 -- 248,226
Shareholders' equity................ 18,244,479 964,337 19,208,846
----------- ---------- -----------
Total liabilities and shareholders'
equity............................ $30,095,198 $ 964,337 $31,059,535
=========== ========== ===========
</TABLE>

-------------------------
(1) Reflect $1,164,337 of goodwill recognized in the transaction, including
payment of the transaction cost estimated at $200,000.

59
<PAGE> 66

EXCHANGE AGENT

The letter of transmittal, certificates for Harmony shares and any other
required documents should be sent or delivered by each Harmony stockholder or
his or her broker, dealer, commercial bank, trust company or other nominee to
the exchange agent at one of its addresses set forth below.

The exchange agent for the offer is:

WELLS FARGO BANK MINNESOTA, N.A.

<TABLE>
<CAPTION>
BY MAIL BY HAND
<S> <C>
Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A.
Attention: Neal Freese Attention: Neal Freese
161 North Concord Exchange 161 North Concord Exchange
South St. Paul, MN 55075 South St. Paul, MN 55075
</TABLE>

<TABLE>
<CAPTION>
BY OVERNIGHT, CERTIFIED OR
EXPRESS MAIL DELIVERY BY FACSIMILE TRANSMISSION
<S> <C>
Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A.
Attention: Neal Freese Attention: Neal Freese
161 North Concord Exchange (800) 468-9716 (phone)
South St. Paul, MN 55075 (651) 450-4033 (fax)
</TABLE>

INFORMATION AGENT

Any questions or requests for assistance or additional copies of the
prospectus, the letter of transmittal, the notice of guaranteed delivery and
related offer materials may be directed to the information agent at the
telephone number and location listed below. You may also contact your local
broker, commercial bank, trust company or nominee for assistance concerning the
offer.

The information agent for the offer is:

GEORGESON SHAREHOLDER COMMUNICATIONS, INC.
17 State Street, 10th Floor
New York, New York 10004

(800) 223-2064

60
<PAGE> 67

PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Minnesota Statutes Section 302A.521 provides that as a Minnesota business
corporation, iNTELEFILM shall indemnify any director, officer, employee or agent
of the corporation made or threatened to be made a party to a proceeding, by
reason of the former or present official capacity of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights.

Article 6.2 of iNTELEFILM's bylaws provides that iNTELEFILM will indemnify
its directors, officers, employees and agents, past or present, and persons
serving as such of another corporation or entity at iNTELEFILM's request, for
such expenses and liabilities, in such manner, under such circumstances, and to
such extent as permitted under Section 302A.521.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Articles of Incorporation of iNTELEFILM Corporation, as
amended and restated (incorporated by reference to
iNTELEFILM's Current Report on Form 8-K (File No. 000-21534)
filed October 1, 1999).
3.2 Bylaws of iNTELEFILM, as amended and restated (incorporated
by reference to iNTELEFILM's Registration Statement on Form
S-18 (File No. 33-44412) filed December 5, 1991).
5 Opinion of Briggs and Morgan, Professional Association.*
8 Opinion of Briggs and Morgan, Professional Association
regarding tax matters.*
23.1 Consent of Briggs and Morgan, Professional Association
(included in Exhibit 5 hereto).
23.2 Consent of BDO Seidman, LLP for iNTELEFILM.
23.3 Consent of BDO Seidman, LLP for Harmony.
24 Powers of Attorney.*
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
</TABLE>

---------------

* Previously filed

(b) Financial Statement Schedules.

None.

II-1
<PAGE> 68

ITEM 22. UNDERTAKINGS.

iNTELEFILM undertakes:

(A)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(B) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
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.

(C) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(D) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.

II-2
<PAGE> 69

Insofar as indemnification by the registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of 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.

II-3
<PAGE> 70

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Minneapolis, State of
Minnesota, on August 11, 2000.

iNTELEFILM CORPORATION

By /s/ CHRISTOPHER T. DAHL

----------------------------------------
Christopher T. Dahl

President, Chief Executive Officer

and Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ CHRISTOPHER T. DAHL President, Chief Executive August 11, 2000
--------------------------------------------------- Officer and Director
Christopher T. Dahl (Principal executive
officer)

/s/ STEVEN C. SMITH Chief Financial Officer August 11, 2000
--------------------------------------------------- (Principal accounting and
Steven C. Smith financial officer)

* Director
---------------------------------------------------
Richard W. Perkins

* Director
---------------------------------------------------
Michael R. Wigley

* Director
---------------------------------------------------
William E. Cameron

*By: /s/ CHRISTOPHER T. DAHL Director August 11, 2000
---------------------------------------------
Christopher T. Dahl
Attorney-in-fact
</TABLE>

II-4
<PAGE> 71

EXHIBIT INDEX

---------------

* Previously filed.

II-5